[Federal Register Volume 86, Number 172 (Thursday, September 9, 2021)]
[Notices]
[Pages 50564-50568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19422]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92868; File No. SR-IEX-2021-10]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Eliminate IEX Rule 11.420 (Order Audit Trail System (``OATS'') 
Requirements) To Reflect the September 1, 2021 Retirement of OATS

September 2, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 31, 2021, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) of the Act, and Rule 
19b-4 thereunder, IEX is filing with the Commission a proposed rule 
change to eliminate IEX Rule 11.420 (Order Audit Trail System 
(``OATS'') Requirements) to reflect that as of September 1, 2021, the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') will have 
retired OATS, and Industry Members will be effectively reporting to the 
consolidated audit trail (``CAT'') adopted pursuant to the National 
Market System Plan Governing the Consolidated Audit Trail (the ``CAT 
NMS Plan'' or ``Plan'').
    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
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 self-regulatory organization 
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
    IEX is filing with the Commission a proposed rule change to 
eliminate IEX Rule 11.420 to reflect that as of September 1, 2021, 
FINRA will have retired OATS, and Industry Members will be effectively 
reporting to the CAT adopted pursuant to the CAT NMS Plan.
I Background
    IEX, FINRA, and the other national securities exchanges 
(collectively, the ``Participants'') \3\ filed with the Commission, 
pursuant to Section 11A of the Exchange Act \4\ and Rule 608 of 
Regulation NMS thereunder,\5\ the CAT NMS Plan.\6\ The Participants 
filed the Plan to comply with Rule 613 of Regulation NMS under the 
Exchange Act.\7\ The Plan was published for comment in the Federal 
Register on May 17, 2016,\8\ and approved by the Commission, as 
modified, on November 15, 2016.\9\ On March 15, 2017, the Commission 
approved the new IEX Rule Series 11.600 \10\ to implement provisions of 
the CAT NMS Plan that are applicable to IEX Members.\11\
---------------------------------------------------------------------------

    \3\ For a complete list of Participants, see Exhibit A to the 
Limited Liability Company Agreement of Consolidated Audit Trail, 
LLC, available at www.catnmsplan.com/sites/default/files/2020-07/LLC-Agreement-of-Consolidated-Audit-Trail-LLC-as-of-7.24.20.pdf.
    \4\ 15 U.S.C. 78k-1.
    \5\ 17 CFR 242.608.
    \6\ 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.
    \7\ 17 CFR 242.613.
    \8\ See Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 
81 FR 30614 (May 17, 2016).
    \9\ See Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 
81 FR 84696 (Nov. 23, 2016).
    \10\ See Securities Exchange Act Rel. No. 80255 (March 15, 
2017), 82 FR 14563 (March 21, 2017).
    \11\ See IEX Rule 1.160(s).
---------------------------------------------------------------------------

    The CAT NMS Plan is intended to create, implement, and maintain a 
consolidated audit trail that will capture in a single consolidated 
data source 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.\12\ Among other things, the CAT NMS Plan, as modified by the 
Commission, requires each Participant to ``file with the SEC the 
relevant rule change filing to eliminate or modify its duplicative 
rules within six (6) months of the SEC's approval of the CAT NMS 
Plan.'' \13\ The Plan notes that ``the

[[Page 50565]]

elimination of such rules and the retirement of such systems [will] be 
effective at such time as CAT Data meets minimum standards of accuracy 
and reliability.'' \14\ Specifically, the Plan requires the rule filing 
to discuss the following:
---------------------------------------------------------------------------

    \12\ See, e.g., Securities Exchange Act Release No. 67457 (July 
18, 2012), 77 FR 45722, 45723 (August 1, 2012).
    \13\ See CAT NMS Plan, Appendix C, Section C.9. In compliance 
with this requirement, on May 15, 2017, IEX, alongside the other 
Participants, filed a proposed rule change to eliminate the OATS 
Rules and amend IEX Rule 8.220 (the Electronic Blue Sheets or 
``EBS'' rule). See Securities Exchange Act Release No. 80788 (May 
26, 2017), 82 FR 25400 (June 1, 2017) (SR-IEX-2017-18) (``original 
proposal''). IEX filed an amendment to the original proposal on 
August 24, 2017. See Letter from Claudia Crowley to Brent Fields 
dated August 24, 2017, available at https://www.sec.gov/comments/sr-iex-2017-18/iex201718-2243339-160872.pdf. The original proposal was 
subsequently withdrawn but provided similar views and mechanisms for 
eliminating the OATS rule as this proposed rule change does, and, as 
noted above, also proposed to amend the EBS rules. See Securities 
Exchange Act Release No. 82524 (January 17, 2018), 83 FR 3239 
(January 23, 2018) (Notice of Withdrawal of File No. SR-IEX-2017-
18). IEX notes that the current filing addresses only the 
elimination of the OATS rule. Proposed amendments to the EBS rules 
would be subject to a separate rule filing made in conjunction with 
SEC rulemaking to amend Rule 17a-25 under the Exchange Act. 17 CFR 
240.17a-25.
    \14\ See CAT NMS Plan, Appendix C, Section C.9.
---------------------------------------------------------------------------

     Specific accuracy and reliability standards that will 
determine when duplicative systems will be retired, including, but not 
limited to, whether the attainment of a certain Error Rate should 
determine when a system duplicative of the CAT can be retired;
     whether the availability of certain data from Small 
Industry Members \15\ two years after the Effective Date would 
facilitate a more expeditious retirement of duplicative systems; and
---------------------------------------------------------------------------

    \15\ ``Small Industry Member'' is defined in IEX Rule 11.610(pp) 
as an Industry Member that qualifies as a small broker-dealer as 
defined in Rule 0-10(c) of the Exchange Act. On April 20, 2020, the 
Commission granted exemptive relief from certain provisions of the 
CAT NMS Plan related to broker-dealers that do not qualify as Small 
Industry Members solely because such broker-dealers satisfy Rule 0-
10(i)(2) under the Exchange Act in that they introduce transactions 
on a fully disclosed basis to clearing firms that are not small 
businesses or small organizations (referred to as ``Introducing 
Industry Members''). Specifically, the Commission provided exemptive 
relief from requiring Introducing Industry Members to comply with 
the requirements of the CAT NMS Plan that apply to Industry Members 
other than Small Industry Members (``Large Industry Members''), 
provided that the Participants require such Introducing Industry 
Members to comply with the requirements of the CAT NMS Plan that 
apply to Small Industry Members. See Securities Exchange Act Release 
No. 88703 (April 20, 2020), 85 FR 23115 (April 24, 2020) (Order 
Granting Limited Exemptive Relief Related to Certain Introducing 
Brokers From the Requirements of the CAT NMS Plan) (the 
``Introducing Brokers Exemptive Order''). As used herein, the term 
``Small Industry Member'' includes Introducing Industry Members in 
accordance with the Introducing Brokers Exemptive Order.
---------------------------------------------------------------------------

     whether individual Industry Members can be exempted from 
reporting to duplicative systems once their CAT reporting meets 
specified accuracy and reliability standards, including, but not 
limited to, ways in which establishing cross-system regulatory 
functionality or integrating data from existing systems and the CAT 
would facilitate such Individual Industry Member exemptions.\16\
---------------------------------------------------------------------------

    \16\ See supra note 14.
---------------------------------------------------------------------------

    On November 30, 2020, the Commission approved a FINRA rule filing 
proposing to eliminate the FINRA OATS system once FINRA members are 
effectively reporting to the CAT and the CAT's accuracy and reliability 
meet certain standards.\17\ Specifically, FINRA proposed that before 
OATS could be retired, the CAT generally must achieve a sustained error 
rate for Industry Member reporting in five categories for a period of 
at least 180 days \18\ of 5% or lower on a pre-correction basis, and 2% 
or lower on a post-correction basis (measured at T+5). In addition to 
the maximum error rates and matching thresholds (hereafter the 
``threshold requirements''), FINRA's use of CAT Data must confirm that 
(i) there are no material issues that have not been corrected, (ii) the 
CAT includes all data necessary to allow FINRA to continue to meet its 
surveillance obligations, and (iii) the Plan Processor is sufficiently 
meeting its obligations under the CAT NMS Plan relating to the 
reporting and linkage in the initial phase of reporting (``Phase 2a'') 
of Industry Member Data.
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 90535 (November 30, 
2020), 85 FR 78395 (December 4, 2020) (SR-FINRA-2020-024) (``OATS 
Retirement Plan Order'').
    \18\ As set forth in the OATS Retirement Plan Order, the 180 day 
``applicable period'' ran from October 26, 2020 to April 26, 2021. 
October 26, 2020 was the date that Industry Members were required to 
begin correcting all errors for inter-firm linkages and exchange/
TFR/ORF match validations.
---------------------------------------------------------------------------

    In the OATS Retirement Plan Order, the Commission approved FINRA's 
proposal for how it would measure the CAT Data's accuracy and 
reliability. Specifically, the Commission endorsed FINRA's proposal 
that FINRA's review of CAT Data and error rates would be based on data 
and linkages in Phase 2a, which replicate the data in OATS today and 
thus are most relevant for OATS retirement purposes. Phase 2a Data 
includes all events and scenarios covered by OATS and applies only to 
equities. And FINRA would not consider options order events or Phase 2c 
data and validations, which are not in OATS today, for purposes of OATS 
retirement.\19\
---------------------------------------------------------------------------

    \19\ See supra note 17.
---------------------------------------------------------------------------

    On June 17, 2021, FINRA made an immediately effective filing 
setting forth the basis for its determination that the accuracy and 
reliability of the CAT met the standards approved by the Commission in 
the OATS Retirement Plan Order and designating September 1, 2021 as the 
date on which FINRA would retire OATS.\20\ Specifically, FINRA 
determined that the CAT met the threshold requirements endorsed by the 
Commission in the OATS Retirement Plan Order for Industry Member 
reporting in each of the following categories:
---------------------------------------------------------------------------

    \20\ See Securities Exchange Act Release No. 92239 (June 23, 
2021), 86 FR 34293 (June 29, 2021) (SR-FINRA-2021-017) (``OATS 
Retirement Filing'').
---------------------------------------------------------------------------

A. Rejection Rates and Data Validations
    As described in the OATS Retirement Filing, the Plan Processor must 
perform certain basic data validations, and if a record does not pass 
these basic data validations, it must be rejected and returned to the 
CAT Reporter to be corrected and resubmitted.\21\ FINRA determined that 
for the applicable period, aggregate rejection rates across all 
Industry Member Reporters were 0.03% pre-correction and 0.01% post-
correction, which far exceeds the threshold requirements of a 5% or 
lower pre-correction error rate and a 2% or lower post-correction error 
rate.
---------------------------------------------------------------------------

    \21\ Appendix D of the CAT NMS Plan, Section 7.2, for example, 
requires that certain file validations (e.g., file transmission and 
receipt are in the correct formats, confirmation of a valid SRO-
Assigned Market Participant Identifier, etc.), and syntax and 
context checks (e.g., format checks, data type checks, consistency 
checks, etc.) be performed on all submitted records.
---------------------------------------------------------------------------

B. Intra-Firm Linkages
    As described in the OATS Retirement Filing, the Plan Processor must 
be able to link all related order events from all CAT Reporters 
involved in the lifecycle of an order. At a minimum, this requirement 
includes the creation of an order lifecycle between all order events 
handled within an individual CAT Reporter, including orders routed to 
internal desks or departments with different functions (e.g., an 
internal ATS). FINRA determined that for the applicable period, the 
intra-firm linkage accuracy rates across all Industry Member Reporters 
were 99.07% pre-correction and 99.99% post-correction, which far 
exceeds the threshold requirements of 95% or higher pre-correction and 
98% or higher post-correction (in other words, the intra-firm linkages 
accuracy far exceeds the threshold requirement that there be less than 
5% inaccuracy pre-correction and less than 2% inaccuracy post-
correction).
C. Inter-Firm Linkages
    As described in the OATS Retirement Filing, the Plan Processor must 
be able to create the lifecycle between orders routed between broker-
dealers. FINRA determined that for the applicable period, the intra-
firm linkage accuracy rates across all Industry Member Reporters were 
99.08% pre-correction and 99.84% post-correction, which far exceed the 
threshold requirements of 95% or higher pre-correction and 98% or 
higher post-correction (in other words, the inter-firm linkages 
accuracy far exceeds the threshold requirement that there be less than 
5% inaccuracy pre-correction and less than 2% inaccuracy post-
correction).

[[Page 50566]]

D. Order Linkage Rates
    As described in the OATS Retirement Filing, in addition to creating 
linkages within and between broker-dealers, the Plan Processor must be 
able to create lifecycles to link various pieces of related orders. For 
example, the Plan requires linkages of order information to create an 
order lifecycle from origination or receipt to cancellation or 
execution. This category essentially combines all of the order-related 
linkages to capture an overall snapshot of order linkages in the 
CAT.\22\ FINRA determined that for the applicable period, the order-
related linkage accuracy rates across all Industry Member Reporters 
were 99.66% pre-correction and 99.93% post-correction, which far exceed 
the threshold requirements of 95% or higher pre-correction and 98% or 
higher post-correction (in other words, the order linkages accuracy far 
exceeds the threshold requirement that there be less than 5% inaccuracy 
pre-correction and less than 2% inaccuracy post-correction).
---------------------------------------------------------------------------

    \22\ See Letter from Lisa C. Horrigan, Associate General 
Counsel, FINRA, to Vanessa Countryman, Secretary, Commission, dated 
October 29, 2020.
---------------------------------------------------------------------------

E. Exchange and TRF/ORF Match Rates
    As described in the OATS Retirement Filing, an order lifecycle must 
be created to link orders routed from broker-dealers to exchanges and 
executed orders and trade reports. FINRA determined that for the 
applicable period, the match rate across all equity exchanges for 
orders routed from Industry Members to an exchange was 99.51% pre-
correction and 99.87% post-correction. This match rate far exceeds the 
threshold requirements of 95% or higher pre-correction and 98% or 
higher post-correction (in other words, the match rate accuracy far 
exceeds the threshold requirement that there be less than 5% inaccuracy 
pre-correction and less than 2% inaccuracy post-correction).
    Based upon the accuracy and reliability of the above five 
categories of CAT Data, FINRA determined that the CAT Data met the 
accuracy and reliability standards required for OATS retirement.\23\
---------------------------------------------------------------------------

    \23\ See supra note 20.
---------------------------------------------------------------------------

II. FINRA's Use of CAT Data
    Additionally, the OATS Retirement Plan Order set forth that before 
retiring OATS, FINRA's use of CAT data must confirm that (i) there are 
no material issues that have not been corrected (e.g., delays in the 
processing of data, issues with query functions, etc.); (ii) the CAT 
includes all data necessary to allow FINRA to continue to meet its 
surveillance obligations; \24\ and (iii) the Plan Processor is 
sufficiently meeting its obligations under the CAT NMS Plan relating to 
the reporting and linkage of Phase 2a Data.
---------------------------------------------------------------------------

    \24\ FINRA conducts surveillance on behalf of IEX pursuant to 
the Regulatory Service Agreement entered into by IEX and FINRA 
(``RSA''). Therefore, any references in this rule filing to FINRA 
surveillance include FINRA's use of either OATS or CAT Data in 
furtherance of the regulatory services it provides on behalf of IEX.
---------------------------------------------------------------------------

    As set forth in FINRA's OATS Retirement Filing, by September 1, 
2021, FINRA will be ready to retire its use of OATS data for cross-
market surveillance, and replace it with a newly created surveillance 
data mart, the Pattern Optimized Datamart (``POD''), which incorporates 
equities (and options) data submitted by both Participants such as IEX 
and Industry Members. IEX, like other Participants, transitioned from 
reporting to FINRA via the RSA specification, to reporting via the CAT 
technical specification as of April 26, 2021, and full Participant 
equities reporting and linkage validations commenced on June 1, 
2021.\25\ Successful completion of the transition to the CAT 
specification for Participants was a prerequisite for FINRA to retire 
the OATS-based cross market surveillance patterns and leverage CAT Data 
and linkages in POD for its surveillance patterns. FINRA has completed 
all planned activities on schedule, including substantially completing 
the process of integrating CAT Data into POD and successfully running 
large amounts of production CAT Data for the month of May through 
POD.\26\ FINRA anticipates completing additional activities before the 
proposed OATS retirement date of September 1, 2021, including planned 
user acceptance testing.\27\
---------------------------------------------------------------------------

    \25\ For example, according to the CAT Reporting Technical 
Specification for Participants (version 4.0.0-r4 dated April 20, 
2021), additional linkage error feedback for off-exchange trade 
reports was effective as of June 1, 2021. The Technical 
Specifications can be found on the CAT NMS Plan website at 
www.catnmsplan.com/sites/default/files/2021-04/04.20.2021-CAT-Reporting-Technical-Specifications-for-Participants-4.0.0-r4.pdf.
    \26\ See supra note 20.
    \27\ As noted in the FINRA OATS Retirement Filing, user 
acceptance testing is the final stage of any software development 
lifecycle and enables actual users to test the system to confirm it 
is able to carry out the required tasks it was designed to address 
in real-world situations.
---------------------------------------------------------------------------

    Additionally, FINRA has confirmed that all of the data required to 
support the transition from OATS to CAT is available in CAT.\28\ 
Specifically, FINRA, supported by the Participants, conducted a mapping 
of all OATS data to CAT data, and then completed a ``gap analysis'' to 
address any issues with the field-level mapping of OATS to CAT data. 
Furthermore, IEX, along with other Participants, has had a very high 
compliance rate in reporting CAT Data using the CAT specifications 
(both in the testing and production environments).\29\ Reviewing the 
Participant submitted CAT Data and matching it with Industry Member 
data, FINRA determined that the data linkages in CAT are ``comparable 
to the linkages between RSA exchange data and OATS data'' currently 
used by FINRA.\30\ Accordingly, the CAT NMS Plan Operating Committee 
approved the cutover from the RSA specification to the CAT 
specification as the official source of Participant data as of June 1, 
2021, and today, all Industry Member and Participant equities data 
reported via the CAT specification is linked in the CAT production 
environment.
---------------------------------------------------------------------------

    \28\ See supra note 20.
    \29\ For example, for the month of July 2021, IEX's compliance 
error rate for CAT Data reporting was 0.0435% (i.e., 99.9565% of 
records were successfully reported).
    \30\ See supra note 20.
---------------------------------------------------------------------------

    Thus, FINRA will use OATS data for surveillance patterns run 
through the end of the second quarter of 2021 and has already begun 
using CAT Data for its surveillance patterns for review periods 
beginning in the third quarter of 2021.\31\ As detailed in the OATS 
Retirement Filing, FINRA will continue to conduct regular reviews to 
ensure confidence in the completeness and accuracy of Industry Member 
reporting, along with the ability to remediate any issues in a timely 
manner.\32\
---------------------------------------------------------------------------

    \31\ See supra note 20.
    \32\ See supra note 20.
---------------------------------------------------------------------------

III. OATS May be Retired in Light of the Accuracy and Reliability of 
the CAT Data
    IEX, like FINRA, believes that the three additional standards set 
forth in the OATS Retirement Order for retiring OATS have been 
satisfied. With respect to the first factor, IEX, like FINRA, does not 
believe that there are any material issues that have not been corrected 
(or could not be corrected in the course of operation of CAT, as 
approved by the Operating Committee) that would impact FINRA's ability 
to incorporate and use CAT Data in FINRA's surveillance program, which 
it conducts on behalf of IEX pursuant to the RSA. For example, the Plan 
requires that raw unprocessed data that has been ingested by the Plan 
Processor must be available to Participant regulatory staff and the SEC 
prior to 12:00 p.m. Eastern Time on T+1, and access to all iterations 
of processed data must be available to

[[Page 50567]]

Participant regulatory staff and the SEC between 12:00 p.m. Eastern 
Time on T+1 and T+5.\33\ The Plan Processor also must ensure that 
regulators have access to corrected and linked order data by 8:00 a.m. 
Eastern Time on T+5.\34\ Additionally, after ingestion by the Central 
Repository, the raw unprocessed data must be transformed into a format 
appropriate for data querying and regulatory output.\35\ The user-
defined direct queries and bulk extracts must provide authorized users 
with the ability to retrieve CAT Data via a query tool or language that 
allows users to query all available attributes and data sources.\36\ 
FINRA's use of the CAT Data has not uncovered any processing delays or 
other material issues impacting the availability of, and FINRA's access 
to, the data.\37\
---------------------------------------------------------------------------

    \33\ See CAT NMS Plan, Appendix D, Section 6.2.
    \34\ See CAT NMS Plan, Appendix C, Section A.2(a).
    \35\ See CAT NMS Plan, Appendix C, Section A.1(b).
    \36\ See CAT NMS Plan, Section 6.10(c).
    \37\ See supra note 20.
---------------------------------------------------------------------------

    With respect to the second factor, IEX, like FINRA, believes that 
the CAT includes all data necessary for FINRA to meet its surveillance 
obligations after the retirement of OATS. FINRA must ensure that the 
CAT, as the single source of order and trade data, can enable FINRA to 
conduct accurate and effective market surveillance in accordance with 
its regulatory obligations. As noted above, Phase 2a Data includes all 
events and scenarios covered by OATS and is the most relevant for OATS 
retirement purposes. FINRA's testing, analysis and use of the CAT Data 
(including integration into POD), as described above, has confirmed 
that the CAT includes all data necessary for FINRA to meet its 
surveillance obligations and that CAT is a reliable substitute for 
OATS. In addition, based on its qualitative data reviews, FINRA has 
concluded that Industry Member CAT Data, in the aggregate, is a 
sufficient replacement for OATS for purposes of FINRA's surveillance 
program.
    With respect to the third factor, IEX, like FINRA, believes that 
the Plan Processor is sufficiently meeting its obligations under the 
CAT NMS Plan relating to the reporting and linkage of Phase 2a Data. As 
detailed in the Implementation Plan and Quarterly Progress Reports 
submitted by the Plan Participants, the Plan Processor has met its 
targeted completion dates for the milestones for Phase 2a, including, 
for example, production Go-Live for Equities 2a file submission and 
data integrity validation (Large Industry Members and Small OATS 
Reporters) on June 22, 2020; Production Go-Live for Equities 2a 
Intrafirm Linkage validations on July 27, 2020; and production go-live 
for firm-to-firm linkage validations for equities (Large Industry 
Members and Small OATS Reporters) and exchange and TRF/ORF linkage 
validations for equities (Large Industry Members and Small OATS 
Reporters) on October 26, 2020.\38\
---------------------------------------------------------------------------

    \38\ The Implementation Plan and Quarterly Progress Reports are 
available at www.catnmsplan.com/implementation-plan.
---------------------------------------------------------------------------

    Based on the foregoing, IEX agrees with FINRA's determination that 
the CAT meets the accuracy and reliability standards approved by the 
Commission in the OATS Retirement Order for purposes of eliminating 
OATS. FINRA has determined to retire OATS effective September 1, 
2021.\39\ Firms must continue to report to OATS all order events that 
occur on or prior to August 31, 2021. Reports submitted to OATS for 
order events that occur after August 31, 2021 will be rejected. In 
other words, August 31, 2021 will be the last ``OATS Business Day,'' as 
defined under FINRA Rule 7450(b)(3), for which OATS will accept order 
events and perform routine processing (including incorporation of 
corrections and repairs of rejections) occurring within the normal OATS 
timeframe for such activities. OATS will continue to accept reports for 
order events that occur on or prior to August 31, 2021 (including, but 
not limited to, late and corrected reports for such order events) 
through September 16, 2021. Firms must ensure that their OATS reporting 
is accurate and complete for all order events that occur on or prior to 
August 31, 2021. IEX Rule 11.420, like the FINRA OATS Rules, will be 
deleted from the IEX rulebook effective September 1, 2021.\40\
---------------------------------------------------------------------------

    \39\ See FINRA Regulatory Notice 21-21 (June 2021).
    \40\ In the unlikely event that FINRA determines it is unable to 
retire OATS effective September 1, 2021, IEX will delay the 
retirement of IEX Rule 11.420 pending the actual retirement of FINRA 
OATS.
---------------------------------------------------------------------------

    In light of the foregoing, IEX, like FINRA, believes that retiring 
OATS as of September 1, 2021 is appropriate, particularly given the 
potential risks of continuing to run OATS and CAT in parallel for an 
additional period of time. Such potential risks may include, for 
example, on an industry-wide basis: (1) Processing and storage capacity 
issues from operating two systems (particularly in the event of 
extraordinary market volume); (2) cybersecurity risks from having data 
flow through two separate systems for a longer time period; (3) systems 
issues from reporting infrastructure that is near end-of-life; and (4) 
the expense and burden on CAT Reporters of dual reporting, particularly 
in the event of systems issues requiring correction and/or resubmission 
of data and competing resource priorities between OATS and CAT 
reporting and repair activities.
    IEX has filed the proposed rule change for immediate effectiveness 
and is seeking a waiver of the 30 day operative delay to allow its OATS 
rules to be retired concurrent with the September 1, 2021 retirement of 
FINRA's OATS Rules. IEX will also announce the retirement of OATS via a 
trader alert to its Members.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with the 
provisions of Section 6(b)(5) of the Act,\41\ which require, among 
other things, that IEX's 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. IEX believes that the proposed retirement of IEX Rule 
11.420 fulfills the obligation in the CAT NMS Plan for IEX to submit a 
proposed rule change to eliminate or modify duplicative rules, and that 
the CAT NMS Plan has achieved the accuracy and reliability standards 
required by the Commission in the OATS Retirement Order.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Additionally, as discussed in the Purpose section, IEX believes 
that the use of CAT Data, whether by IEX directly, or by FINRA pursuant 
to the RSA, will continue to allow for accurate and effective 
surveillance of market activity on IEX. Therefore, IEX will continue to 
be able to fulfill its statutory obligation to protect investors and 
the public interest after the retirement of OATS.

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

    IEX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. IEX notes that the proposed 
rule change implements provisions of the CAT NMS Plan, facilitates the 
retirement of certain existing regulatory systems, and is designed to 
assist the Exchange in meeting its regulatory obligations pursuant to 
the Plan. IEX also notes that the proposed rule change will apply 
equally to all firms that trade NMS Securities. In addition, all 
national securities exchanges and FINRA are

[[Page 50568]]

proposing substantially similar rule filings. Therefore, this is not a 
competitive rule filing, and, therefore, it does not impose a burden on 
competition.
    Furthermore, IEX notes that FINRA undertook an economic impact 
assessment of the potential costs and benefits associated with OATS 
retirement and determined that CAT meets or exceeds the OATS standards.

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

    Written comments were neither solicited nor received.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \42\ and Rule 19b-4(f)(6) thereunder.\43\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \44\ and Rule 19b-
4(f)(6)(iii) thereunder.\45\
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \43\ 17 CFR 240.19b-4(f)(6).
    \44\ 15 U.S.C. 78s(b)(3)(A).
    \45\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \46\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\47\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative by September 1, 2021, the first day on which FINRA 
will no longer accept OATS data (unless FINRA delays the OATS 
retirement past that date.) \48\ As discussed above, IEX believes that 
it is appropriate for FINRA to retire OATS as of September 1, 2021. IEX 
states that the use of CAT Data, whether by IEX directly, or by FINRA 
pursuant to IEX's RSA with FINRA, will continue to allow for accurate 
and effective surveillance of market activity on IEX. In addition, 
August 31, 2021, will be the last ``OATS Business Day,'' as defined 
under FINRA Rule 7450(b)(3), and reports submitted to OATS for order 
events that occur after August 31, 2021, will be rejected. The 
Commission believes that it is consistent with the protection of 
investors and the public interest for IEX to delete its OATS reporting 
rules at the same time that FINRA retires OATS. Accordingly, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative on September 1, 2021.\49\
---------------------------------------------------------------------------

    \46\ 17 CFR 240.19b-4(f)(6).
    \47\ 17 CFR 240.19b-4(f)(6)(iii).
    \48\ See supra note 40.
    \49\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of this proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
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-IEX-2021-10 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-IEX-2021-10. 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 website (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 website 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 will also be available for inspection 
and copying at the IEX's principal office and on its internet website 
at www.iextrading.com. All comments received will be posted without 
change. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-IEX-2021-10, and should be 
submitted on or before September 30, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
---------------------------------------------------------------------------

    \50\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19422 Filed 9-8-21; 8:45 am]
BILLING CODE 8011-01-P