[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Notices]
[Pages 26983-26998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07967]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99938; File No. 4-698]


Joint Industry Plan; Notice of Filing of Amendment to the 
National Market System Plan Governing the Consolidated Audit Trail 
Regarding Cost Savings Measures

April 10, 2024.

I. Introduction

    On March 27, 2024, the Consolidated Audit Trail, LLC (``CAT LLC''), 
on behalf of the following parties to the National Market System Plan 
Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or 
``Plan''):\1\ BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX 
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., 
Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock 
Exchange, Inc., MEMX, LLC, Miami International Securities Exchange LLC, 
MIAX Emerald, LLC, MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq GEMX, LLC, 
Nasdaq ISE, LLC, Nasdaq MRX, LLC, Nasdaq PHLX LLC, The NASDAQ Stock 
Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, 
Inc., NYSE Chicago, Inc., and NYSE National, Inc. (collectively, the 
``Participants,'' ``self-regulatory organizations,'' or ``SROs'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 
(``Exchange Act''),\2\ and Rule 608 thereunder,\3\ a proposed amendment 
to the CAT NMS Plan to amend existing requirements for the consolidated 
audit trail (``CAT'') regarding costs saving measures for operating the 
CAT (the ``Cost Savings Amendments'').\4\ Set forth in Section II is 
the statement of purpose and summary of the amendment, along with 
information required by Rules 608(a)(4) and 608(a)(5) under the 
Exchange Act,\5\ and Exhibit A, which contains the proposed revisions 
to the CAT NMS Plan, all substantially as prepared and submitted by the 
Participants to the Commission.\6\ The Commission is publishing this 
notice to solicit comments from interested persons on the amendment.\7\
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    \1\ The CAT NMS Plan is a national market system plan approved 
by the Commission pursuant to Section 11A of the Exchange Act and 
the rules and regulations thereunder. See Securities Exchange Act 
Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23, 
2016). The full text of the CAT NMS Plan is available at 
www.catnmsplan.com.
    \2\ 15 U.S.C 78k-1(a)(3).
    \3\ 17 CFR 242.608.
    \4\ See Letter from Brandon Becker, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated 
March 27, 2024 (the ``Transmittal Letter'').
    \5\ See 17 CFR 242.608(a)(4) and 17 CFR 242.608(a)(5).
    \6\ See Transmittal Letter, supra note 4. Unless otherwise 
defined herein, capitalized terms used herein are defined as set 
forth in the CAT NMS Plan.
    \7\ 17 CFR 242.608.
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II. Description of the Plan

    As described further below, the Cost Savings Amendments are 
expected to result in approximately $23.0 million in new annual cost 
savings in the first year with limited impact on the regulatory 
function of the CAT.\8\ Specifically, the Cost Savings Amendment would:
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    \8\ All cost and savings projections are estimates only and 
reflect the current state and costs of CAT operations, including the 
current number of exchanges. Cost savings estimates are based on, 
among other factors: current CAT NMS Plan requirements; reporting by 
Participants, Industry Members and market data providers; observed 
data rates and volumes; current discounts, reservations and cost 
savings plans; and associated cloud fees. Actual future savings 
could be more or less than estimated due to changes in any of these 
variables. S3 Intelligent Tier storage fees in production are 
allocated at a ratio of 1 (S3 Frequent Access): 1 (S3 Infrequent 
Access): 8 (S3 Archive Instant Access) based on current operations 
and regulatory usage. Savings projections are primarily based on 
production environments, which represent approximately two-thirds of 
all cloud fees. For additional information on the cost savings 
estimates relevant to each proposal, see infra notes 20, 24, 29 and 
30.

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[[Page 26984]]

    (1) optimize processing and storage requirements for Options Market 
Maker \9\ quotes in Listed Options \10\ (``Options Market Maker 
Quotes''), without eliminating them entirely from the CAT;
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    \9\ Section 1.1 of the CAT NMS Plan defines an ``Options Market 
Maker'' as ``a broker-dealer registered with an exchange for the 
purpose of making markets in options contracts on the exchange.''
    \10\ Section 1.1 of the CAT NMS Plan defines a ``Listed Option'' 
as having ``the meaning set forth in Rule 600(b)(35) of Regulation 
NMS.'' Rule 600(b)(35) has since been redesignated as Rule 
600(b)(43), which defines a ``Listed Option'' as ``any option traded 
on a registered national securities exchange or automated facility 
of a national securities association.''
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    (2) permit the Plan Processor to move raw unprocessed data and 
interim operational copies of CAT Data older than 15 days to a more 
cost-effective storage tier; and
    (3) permit the Plan Processor to provide an interim CAT-Order-ID on 
an ``as requested'' basis rather than each day.
    In addition, the Cost Savings Amendments would incorporate into the 
CAT NMS Plan the Commission's recent exemptive order providing that 
data from industry testing for both Industry Members and Participants 
may be deleted after three months, which is estimated to result in 
additional cost savings of approximately $1 million per year, and would 
extend such relief to include test data related to the customer account 
and information system.\11\
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    \11\ Exchange Act Release No. 99023 (Nov. 27, 2023), 88 FR 84026 
(Dec. 1, 2023).
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    The proposed changes to the CAT NMS Plan to implement the Cost 
Savings Amendments are set forth in Exhibit A to this filing.\12\ CAT 
LLC continues to explore further changes to the CAT NMS Plan and 
expects to file future amendments that would result in additional cost 
savings without compromising the regulatory goals of the CAT.
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    \12\ Because the Commission has acknowledged that Appendix C was 
not intended to be continually updated once the CAT NMS Plan was 
approved, CAT LLC is not proposing to update Appendix C to reflect 
the proposed amendments. See Exchange Act Release No. 89632 (Aug. 
21, 2020), 85 FR 65990 (Oct. 16, 2020).
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Requirements Pursuant to Rule 608(a)

A. Description of the Proposed Amendments to the CAT NMS Plan

1. Optimize Processing and Storage Requirements for Options Market 
Maker Quotes
(a) Overview
    Options Market Maker Quotes are the single largest data source for 
the CAT, comprising approximately 98% of all options exchange events 
and approximately 75% of all transaction volume stored in the CAT.\13\ 
Under the CAT NMS Plan, Options Exchanges are required to report 
Options Market Maker Quotes to the CAT, and such quotes must be 
processed and assembled to create a complete order lifecycle. The 
number of quotes that result in an execution is extremely low; as a 
result, the vast majority of Options Market Maker Quote lifecycles 
consist of just two events--the quote and its subsequent cancellation.
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    \13\ Under Section 1.1 of the CAT NMS Plan, a ``Reportable 
Event'' ``includes, but is not limited to, the original receipt or 
origination, modification, cancellation, routing, execution (in 
whole or in part) and allocation of an order, and receipt of a 
routed order.'' Section 1.1 of the CAT NMS Plan states that an 
``order'' ``has, with respect to Eligible Securities, the meaning 
set forth in SEC Rule 613(j)(8).'' SEC Rule 613(j)(8), in turn, 
states that ``[t]he term order shall include: (i) Any order received 
by a member of a national securities exchange or national securities 
association from any person; (ii) Any order originated by a member 
of a national securities exchange or national securities 
association; or (iii) Any bid or offer.'' Accordingly, the 
definition of an ``order'' includes Options Market Maker Quotes, and 
Reportable Events include events related to Options Market Maker 
Quotes.
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    The costs associated with processing and storing Options Market 
Maker Quotes under the CAT NMS Plan are significant--approximately $30 
million in 2023.\14\ CAT LLC has been focused on reducing these costs. 
In November 2023, the Commission granted exemptive relief that would 
allow the Plan Processor to create options quote lifecycles only once; 
this options quotes ``single pass'' proposal is expected to result in 
annual savings of approximately $5.4 million upon implementation in 
April 2024.\15\ Even with these savings, the costs related to Options 
Market Maker Quotes continue to far outweigh the regulatory benefit.
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    \14\ Although Options Market Maker Quotes are the single largest 
data source for the CAT, there is not a linear relationship between 
volume and costs; rather, a combination of volume and processing 
complexity drive costs. While Options Market Maker Quotes represent 
a significant percentage of data volume, life-cycling this data is 
less compute intensive because the vast majority of quotes have just 
two events and involve only a single venue. Despite this relatively 
limited processing complexity, the cost impact of storing and 
processing Options Market Maker Quotes remains a significant 
percentage of overall CAT costs.
    \15\ Exchange Act Release No. 98848 (Nov. 2, 2023); 88 FR 77128 
(Nov. 8, 2023). The exemption order allows the Plan Processor to 
create lifecycle linkages for Options Market Maker Quotes only once 
by T+2 at 8 a.m. ET (as opposed to requiring both an interim 
lifecycle by T+1 at 9 p.m. ET and a final lifecycle by T+5 at 8 a.m. 
ET). To the extent the proposed amendments are approved, the Plan 
Processor would no longer be required to create any lifecycle 
linkages for Options Market Maker Quotes.
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    Under the proposed amendments, Options Market Maker Quotes in 
Listed Options and related Reportable Events will be subject to 
ingestion only and will not be subject to any linkage requirements. 
These changes would result in approximately $20.0 million in additional 
annual savings, without eliminating Options Market Maker Quotes 
entirely from the CAT. Options Exchanges will continue to report 
Options Market Maker Quotes in the same manner they do today, but the 
Plan Processor will only ingest and store them. Options Market Maker 
Quotes will no longer be subject to validation, feedback, linkage and 
lifecycle processing, or Plan Processor enrichments (e.g., next event 
timestamp, lifecycle sequence number, CAT-Lifecycle-ID). The 
elimination of linkage and feedback processes will remove Options 
Market Maker Quotes from Options Market Replay, OLA Viewer, and All-
Related Lifecycle Event queries. Executions that result from Options 
Market Maker Quotes will identify the quoteId of the quote that 
resulted in an execution, but will appear as orphaned lifecycle events. 
Options Market Maker Quotes will no longer be accessible via DIVER, but 
will remain accessible through BDSQL and Direct Read interfaces.
    These changes would significantly reduce the costs of the CAT with 
limited impact on the regulatory function of the CAT. As noted, the 
vast majority of Options Market Maker Quote lifecycles do not involve 
any execution or allocation and usage data demonstrates that such data 
is very rarely accessed by regulators. Under the proposed amendments, 
regulators will still have access to unlinked Options Market Maker 
Quotes data by T+1 at 12:00 p.m. ET. All necessary information for the 
eliminated enrichments would be available to regulators, but regulators 
would need to derive the enrichments themselves; upon request, the Plan 
Processor would provide regulators with the code required in order to 
do so. As a result of these changes, the cost impact of Options Market 
Maker Quotes on the CAT would be reduced from approximately $24.4 
million (inclusive of anticipated savings resulting from the

[[Page 26985]]

implementation of the options quotes ``single pass'' proposal 
referenced above) to approximately $4.0 million annually.
    The Participants believe that the anticipated savings associated 
with this proposal substantially outweigh the limited regulatory impact 
on the CAT.\16\
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    \16\ The Participants continue to evaluate additional cost 
savings measures and alternatives, which may include in the future 
continuing to evaluate eliminating Options Market Maker Quotes 
entirely from the CAT. Any such changes would require the submission 
of a proposed Plan amendment or exemption request to the SEC for 
consideration and approval.
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(b) Current CAT NMS Plan Requirements
    The CAT NMS Plan contains broad requirements relating to the 
current reporting of, linkage and lifecycle processing of, and 
regulator access to Options Market Maker Quotes and related Reportable 
Events.
    First, Section 6.3(d) of the CAT NMS Plan requires each Participant 
to record and electronically report to the Central Repository details 
for each order and each Reportable Event, including all Options Market 
Maker Quotes and related Reportable Events.\17\ Under Section 
6.4(d)(iii) of the CAT NMS Plan, ``[w]ith respect to the reporting 
obligations of an Options Market Maker with regard to its quotes in 
Listed Options, Reportable Events required pursuant to Section 
6.3(d)(ii) and (iv) shall be reported to the Central Repository by an 
Options Exchange in lieu of the reporting of such information by the 
Options Market Maker.'' Section 6.4(d)(iii) also requires that, 
pursuant to the Compliance Rules of the Options Exchanges, Options 
Market Makers are required to report to the Options Exchange the time 
at which a quote in a Listed Option is sent to the Options Exchange 
(and, if applicable, any subsequent quote modifications and/or 
cancellation time when such modification or cancellation is originated 
by the Options Market Maker). Such time information shall be reported 
to the Central Repository by the Options Exchange in lieu of reporting 
by the Options Market Maker.
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    \17\ See supra note 13.
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    Second, CAT NMS Plan broadly requires all CAT Data reported to the 
Central Repository to be processed and assembled to create the complete 
lifecycle of each Reportable Event. The Plan Processor uses a ``daisy 
chain approach'' to link all Reportable Events and create a complete 
lifecycle of each order. Under this approach, ``a series of unique 
order identifiers assigned to all order events handled by CAT Reporters 
are linked together by the Central Repository and assigned a single 
CAT-generated CAT-Order-ID that is associated with each individual 
order event and used to create the complete lifecycle of an order.'' 
\18\ Data processing timelines are described in Section 6.1 and Section 
6.2 of Appendix D of the CAT NMS Plan.
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    \18\ Appendix D, Section 3 of the CAT NMS Plan at D-8.
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    Finally, the CAT NMS Plan provides that regulators will have access 
to processed CAT Data through an online-targeted query tool and user-
defined direct queries and bulk extracts. These requirements are 
described in Section 8.1 and Section 8.2 of Appendix D of the CAT NMS 
Plan.
(c) Estimated Cost Savings
    As described above, the proposed changes would result in 
approximately $20.0 million in annual cost savings in the first year 
with limited impact on the regulatory function of the CAT.\19\ Given 
that the vast majority of Options Market Maker Quotes do not involve 
any execution or allocation and are used for limited regulatory 
purposes, the current cost associated with processing and storing such 
quotes--approximately $30 million in 2023--far outweighs the regulatory 
value. Although they will no longer be subject to validation, feedback, 
linkage and lifecycle processing, or Plan Processor enrichments (e.g., 
next event timestamp, lifecycle sequence number, CAT-Lifecycle-ID), 
Options Market Maker Quotes will continue to be reported and ingested 
in the same manner they are today, and unlinked data will remain 
accessible to regulators by T+1 at 12:00 p.m. through BDSQL and Direct 
Read interfaces.
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    \19\ For a discussion of how cost savings estimates are 
calculated, see supra note 8. This estimate represents additional 
savings to be achieved following the implementation of the options 
quotes ``single pass'' proposal targeted for the end of April 2024. 
This estimate assumes an approximate 65% reduction in compute 
runtime associated with options exchange events, and an approximate 
80% reduction in storage footprint through the elimination of 
versioned options quote data (e.g., interim, final, DIVER-optimized, 
OLA copies).
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(d) Proposed Revisions to CAT NMS Plan
    Given the scope of requirements relating directly or indirectly to 
the current reporting of, linkage and lifecycle processing of, and 
regulator access to Options Market Maker Quotes and related Reportable 
Events that currently appear throughout the CAT NMS Plan, CAT LLC 
proposes to add a general provision to Appendix D that would expressly 
override any inconsistency with respect to Options Market Maker Quotes. 
The effect of this provision will be to override any requirements that 
generally apply to Reportable Events in the specific circumstance of 
Options Market Maker Quotes.
New Section 3.4 of Appendix D would be entitled ``Requirements for 
Options Market Maker Quotes in Listed Options'' and would state the 
following:

    ``3.4 Requirements for Options Market Maker Quotes in Listed 
Options
    The provisions of this section shall govern the processing and 
storage of Options Market Maker Quotes in Listed Options and related 
Reportable Events and shall override any conflicting provisions in 
the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a-1.
    Options Market Maker Quotes in Listed Options must be reported 
to the Central Repository as provided under Section 6.4(d)(iii) of 
the CAT NMS Plan. This data will undergo ingestion only and such 
unlinked data will be made available to regulators by T+1 at 12:00 
p.m. Eastern Time. Options Market Maker Quotes in Listed Options 
will not be subject to any requirement to link and create an order 
lifecycle, and will not undergo any validation, feedback, linkage, 
or enrichment processing. Options Market Maker Quotes in Listed 
Options will be accessible through BDSQL and Direct Read interfaces 
only and will not be accessible through the online targeted query 
tool.''

    In addition, CAT LLC proposes to amend certain provisions of 
Appendix D to include cross-references to new Section 3.4. First, CAT 
LLC proposes to amend Section 3 of Appendix D of the CAT NMS Plan to 
add the following statement: ``As described in Section 3.4 of Appendix 
D, Options Market Maker Quotes in Listed Options and related Reportable 
Events will be subject to ingestion only and will not be subject to any 
linkage requirements.'' Second, CAT LLC proposes to amend Section 6.1 
of Appendix D of the CAT NMS Plan to add the following statement: ``For 
the avoidance of doubt, processing and storage of Options Market Maker 
Quotes in Listed Options and related Reportable Events shall be 
governed by Section 3.4 of Appendix D.'' Finally, CAT LLC proposes to 
amend Section 8.1.1 of Appendix D of the CAT NMS Plan to add the 
following statement: ``As described in Section 3.4 of Appendix D, 
Options Market Maker Quotes in Listed Options and related Reportable 
Events will be accessible through BDSQL and Direct Read interfaces only 
and will not be accessible through the online targeted query tool.''

[[Page 26986]]

2. Move Raw Unprocessed Data and Interim Operational Copies of CAT Data 
Older Than 15 Days to a More Cost-Effective Storage Tier
(a) Overview
    Under the current CAT NMS Plan, CAT Data must be ``directly 
available and searchable electronically without manual intervention for 
at least six years,'' and within certain query tool response times.\20\ 
This requirement applies not only to the final corrected data version 
that is delivered to regulators by T+5 at 8 a.m. ET, but also to raw 
unprocessed data and the various types of interim operational data that 
do not provide any value to CAT Reporters or to regulators after T+5, 
as well as copies of all submission and feedback files provided to CAT 
Reporters as part of the correction process (collectively, 
``Operational Data'').
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    \20\ CAT Data is available to the Participants' regulatory staff 
and to the SEC for regulatory purposes only.
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    Specifically, interim operational data includes all processed, 
validated and unlinked data made available to regulators by T+1 at 
12:00 p.m. ET, and all iterations of processed data made available to 
regulators between T+1 and T+5 (i.e., the interim data version 
available at T+1 at 9:00 p.m. ET). Under the CAT NMS Plan, the Plan 
Processor is required to make such data directly available and 
searchable electronically by regulators without any manual 
intervention. When a regulator queries CAT data, the CAT provides the 
latest, most current version to the user. Interim operational data is 
supplanted in all CAT query tools by the final version of corrected 
data that is made available at T+5 at 8:00 a.m. ET, but remains 
available to regulators after T+5 ``without manual intervention'' in 
accordance with the CAT NMS Plan via the use of CAT data management 
APIs. Regulators generally access the latest, corrected version of CAT 
data; accordingly, interim operational data generally does not provide 
any regulatory value after the final corrected data version is 
delivered by T+5 at 8 a.m. ET. After four years of operation, the Plan 
Processor has not seen any regulatory usage of this interim operational 
data.
    Subject to the Commission's approval, significant cost savings 
could be achieved by archiving Operational Data older than 15 days to a 
more cost-effective storage tier that is optimized for infrequent 
access. Operational Data not older than 15 days, as well as all final, 
corrected data, would remain accessible ``without manual intervention'' 
within required query tool response times.
    In each case, it would require some ``manual intervention'' by the 
Plan Processor to obtain such archived data for regulators. Under 
Section 10.3 of Appendix D of the CAT NMS Plan, the Plan Processor 
maintains a CAT Help Desk to, among other things, assist Participants' 
regulatory staff and the SEC with questions and issues regarding 
obtaining and using CAT Data for regulatory purposes. Upon request by 
the SEC or one of the Participants to the CAT Help Desk, archived data 
would be restored by the Plan Processor to an accessible storage tier, 
at which point it would be available and searchable electronically by 
regulatory users in the same manner it is today. The Plan Processor 
will develop policies and procedures to ensure the confidentiality of 
any regulator requests to obtain Operational Data. Archived data will 
be restored generally within several hours or business days of a 
request, depending on the volume and size of the date range of the 
requested data restore. For example, a request to restore a single day 
of data may take less than 24 hours, whereas a request to restore a 
year's worth of data may take several days. To put this in context, 
when the Commission adopted the CAT NMS Plan, it noted that ``[m]ost 
current data sources do not provide direct access to most regulators, 
and data requests can take as long as weeks or even months to 
process.'' \21\
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    \21\ Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 
84696, 84833 (Nov. 23, 2016) (emphasis added). See also Exchange Act 
Release No. 67457, 77 FR 45722, 45729 (Aug. 1, 2012) (noting that 
obtaining audit trail data ``can take days or weeks, depending on 
the scope of the information requested,'' and that the Commission 
``must commit a significant amount of time and resources to process 
and cross-link the data from the various formats used by different 
SROs before it can be analyzed and used for regulatory purposes'').
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    Accordingly, the Participants believe that the anticipated savings 
associated with optimizing storage costs as described herein 
substantially outweigh the minimal impact on regulatory access to CAT 
Data.
(b) Current CAT NMS Plan Requirements
    Generally, Section 1.4 of Appendix D of the CAT NMS Plan provides 
that the Plan Processor must ``[m]ake data directly available and 
searchable electronically without manual intervention for at least six 
years.'' Section 6.5(b)(i) of the CAT NMS Plan provides that, 
``[c]onsistent with Appendix D, Data Retention Requirements, the 
Central Repository shall retain the information collected pursuant to 
paragraphs (c)(7) and (e)(7) of SEC Rule 613 in a convenient and usable 
standard electronic data format that is directly available and 
searchable electronically without any manual intervention by the Plan 
Processor for a period of not less than six (6) years.''
    In addition, with respect to raw unprocessed data and interim 
operational copies of data created between T+1 and T+5, Section 6.2 of 
Appendix D of the CAT NMS Plan provides that, ``[p]rior to 12:00 p.m. 
Eastern Time on T+1, raw unprocessed data that has been ingested by the 
Plan Processor must be available to Participants' regulatory staff and 
the SEC,'' and ``[b]etween 12:00 p.m. Eastern Time on T+1 and T+5, 
access to all iterations of processed data must be available to 
Participants' regulatory staff and the SEC.''
    Under the current CAT NMS Plan, CAT Data must be accessible to 
regulatory users without ``manual intervention.'' Obtaining data from 
archive storage initially would require some manual intervention by the 
Plan Processor (i.e., via request to the FINRA CAT Help Desk). Upon 
request, data would be restored by the Plan Processor to an accessible 
storage tier, at which point it would be available and searchable 
electronically by regulatory users in the same manner it is today.
    In addition, Section 8.1.2 of Appendix D of the CAT NMS Plan sets 
forth certain performance requirements for the OTQT, including 
timeframes in which results must be returned for various types of 
queries.\22\
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    \22\ See also Exchange Act Release No. 98848 (Nov. 2, 2023), 88 
FR 77128 (Nov. 8, 2023) (granting conditional exemptive relief from 
certain performance requirements related to the online targeted 
query tool).
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(c) Estimated Cost Savings
    Based on current data volumes, archiving Operational Data older 
than 15 days is expected to result in approximate annual cost savings 
of approximately $1.0 million.\23\ CAT LLC believes that these cost 
savings substantially outweigh the minimal impact on regulatory access 
to CAT Data.
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    \23\ For a discussion of how cost savings estimates are 
calculated, see supra note 8. This estimate represents additional 
savings to be achieved following the implementation of the options 
quotes ``single pass'' proposal targeted for the end of April 2024, 
which eliminates interim operational copies of options quotes.
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(d) Proposed Revisions to CAT NMS Plan
    CAT LLC proposes to amend the CAT NMS Plan to permit the Plan 
Processor

[[Page 26987]]

to move Operational Data older than 15 days to a more cost-effective 
storage tier. Specifically, CAT LLC proposes to add new Section 6.3 to 
Appendix D of the CAT NMS Plan. New Section 6.3 would be entitled 
``Exceptions to Data Availability Requirements'' and would state the 
following:

``6.3 Exceptions to Data Availability Requirements

    Notwithstanding any other provision of the CAT NMS Plan, this 
Appendix D, or Exchange Act Rule 17a-1, the following types of data 
may be retained in an archive storage tier, in which case they will 
be made available upon request by Participant regulatory staff or 
the SEC to the CAT Help Desk. Archived data is not directly 
available and searchable electronically without manual intervention 
and will not be subject to any query tool performance requirements 
until it is restored to an accessible storage tier.
     All raw unprocessed data (i.e., as submitted data) and 
interim operational data older than 15 days. Interim operational 
data includes all processed, validated and unlinked data made 
available to regulators by T+1 at 12:00 p.m. ET, and all iterations 
of processed data made available to regulators between T+1 and T+5, 
but excludes the final version of corrected data that is made 
available at T+5 at 8:00 a.m. ET.
     All submission and feedback files older than 15 days.

    In addition, CAT LLC proposes to add references to new Section 6.3 
of Appendix D throughout the CAT NMS Plan. Specifically, CAT LLC 
proposes to add the phrase ``subject to the exceptions in Section 6.3 
of Appendix D'' to Section 6.5(d)(i) and Section 1.4 of Appendix D.
3. Provide an Interim CAT-Order-ID on an ``As Requested'' Basis
(a) Overview
    CAT LLC proposes to amend the CAT NMS Plan to provide for delivery 
of an interim CAT-Order-ID on an ``as requested'' basis, rather than on 
a regular ongoing basis. Specifically, where there is an immediate 
regulatory need (for example, in the case of a major market event), 
upon request of a senior officer of the Division of Trading and 
Markets, the Division of Enforcement, or the Division of Examinations 
to CAT LLC, the Plan Processor would be directed create an interim CAT-
Order-ID and make it available to regulators by T+1 at 9 p.m. ET if the 
request is received prior to T+1 at 8 a.m. ET, or generally within 14 
hours of receiving the request if such request was received after T+1 
at 8 a.m. ET. This would preserve the SEC's ability to obtain an 
interim CAT-Order-ID on an as needed basis, while avoiding the 
substantial cost of delivering an interim CAT-Order-ID on a regular 
ongoing basis.
    Subject to the proposals described above with respect to Options 
Market Maker Quotes, there would be no change to any other aspect of 
the CAT NMS Plan requirements for the processing of data, error 
feedback, and final delivery of data to regulators by T+5 at 8 a.m. ET, 
and no impact to Industry Members. Consistent with current CAT NMS Plan 
requirements, prior to 12:00 p.m. ET on T+1, regulators will continue 
to have access to raw unprocessed data that has been ingested by the 
Plan Processor, and between 12:00 p.m. on T+1 and T+5, regulators will 
continue to have access to all iterations of unlinked, processed data.
    This change is estimated to result in approximately $2 million in 
annual compute savings, with minimal regulatory impact. Based on 
current data volumes, the estimated cost of an ad hoc interim CAT-
Order-ID delivery is approximately $10,000 to $12,000 per request.\24\ 
CAT LLC would add a separate line item to its budget to reflect costs 
related to any SEC requests to generate an interim CAT-Order-ID.
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    \24\ This cost savings estimate has been calculated assuming the 
Plan Processor's implementation of functionality to provide a final 
CAT-Order-ID and lifecycle linkage for options quotes by T+2 at 8 
a.m. ET (in lieu of T+5 at 8 a.m. ET), which is expected in April 
2024.
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    The Participants believe that the anticipated savings associated 
with this change substantially outweigh the minimal regulatory impact.
(b) Current CAT NMS Plan Requirements
    Appendix D, Section 6.1 of the CAT NMS Plan states that ``Noon 
Eastern Time T+1 (transaction date + one day)'' is the deadline for 
``initial data validation, lifecycle linkages and communication of 
errors to CAT Reporters.'' The CAT NMS Plan further explains that the 
Plan Processor must ``link and create the order lifecycle'' using a 
``daisy chain approach,'' in which, ``a series of unique order 
identifiers assigned to all order events handled by CAT Reporters are 
linked together by the Central Repository and assigned a single CAT-
generated CAT-Order-ID that is associated with each individual order 
event and used to create the complete lifecycle of an order.'' \25\
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    \25\ Appendix D, Section 3 of the CAT NMS Plan at D-8.
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    Pursuant to a Commission exemptive order, the Plan Processor 
assigns an interim CAT-Order-ID by T+1 at 9 p.m. ET, rather than by the 
T+1 at noon Eastern Time deadline set forth in the CAT NMS Plan.\26\ 
The Plan Processor subsequently provides a final CAT-Order-ID at T+5 at 
8 a.m. ET, pursuant to the following timeline:
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    \26\ Exchange Act Release No. 98848 (Nov. 2, 2023), 88 FR 77128 
(Nov. 8, 2023). See also Exchange Act Release No. 97530 (May 18, 
2023), 88 FR 33655 (May 24, 2023); Exchange Act Release No. 95234 
(July 8, 2022), 87 FR 42247 (July 14, 2022); Exchange Act Release 
No. 90688 (Dec. 16, 2020), 85 FR 83634 (Dec. 22, 2020).

T+1 @8 a.m. ET: Initial submissions due
T+1 @12 p.m. ET: Initial data validation, communication of errors to 
CAT Reporters; unlinked data available to regulators
T+1 @9 p.m. ET: Interim CAT-Order-ID available \27\
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    \27\ The Commission's exemptive order provides that the Plan 
Processor will no longer be required to provide an interim CAT-
Order-ID for Options Quotes once it has developed and implemented 
the functionality to provide a final CAT-Order-ID and lifecycle 
linkage for Options Quotes by T+2 at 8 a.m. ET, including all 
enrichments currently provided for such order events at T+5 at 8 
a.m. ET. When late or corrected data is received for Options Quotes 
between T+1 at 8 a.m. ET and T+4 at 8 a.m. ET, the Plan Processor 
must run, on an ad hoc basis, a second processing cycle such that 
lifecycle linkage and all enrichments currently provided for such 
order events are performed by T+5 at 8 a.m. ET. See Exchange Act 
Release No. 98848 (Nov. 2, 2023), 88 FR 77128, 77130 (Nov. 8, 2023). 
To the extent the proposed amendments are approved, the Plan 
Processor would no longer be required to create any lifecycle 
linkages for Options Market Maker Quotes.
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T+3 @8 a.m. ET: Resubmission of corrected data
T+4 @8 a.m. ET: Final lifecycle assembly begins, reprocessing of late 
submissions and corrections
T+5 @8 a.m. ET: Corrected data available to Participant regulatory 
staff and the SEC

    CAT LLC proposes to clarify that the Plan does not require 
assignment of interim CAT-Order-IDs on a regular ongoing basis; rather, 
interim CAT-Order-IDs shall be provided on an ``as requested'' basis. 
Specifically, upon request of a senior officer of the Division of 
Trading and Markets, the Division of Enforcement, or the Division of 
Examinations to CAT LLC, the Plan Processor would be directed create an 
interim CAT-Order-ID and make it available to regulators by T+1 at 9 
p.m. ET if the request is received prior to T+1 at 8 a.m. ET, or 
generally within 14 hours of receiving the request if such request was 
received after T+1 at 8 a.m. ET. There would be no change to any other 
aspect of the processing timeline.
(c) Estimated Cost Savings
    Based on current data volumes, providing for delivery of an interim 
CAT-Order-ID on an ``as requested'' basis, rather than on a regular 
ongoing basis, is estimated to result in approximately $2 million in 
annual

[[Page 26988]]

savings.\28\ CAT LLC believes that these cost savings are readily 
justified given the minimal impact on regulatory access to CAT Data.
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    \28\ For a discussion of how cost savings estimates are 
calculated, see supra note 8. This estimate represents additional 
savings to be achieved following the implementation of the options 
quotes ``single pass'' proposal targeted for the end of April 2024, 
which eliminates options quotes from the interim lifecycle 
processing. The average typical daily compute costs for interim 
lifecycle processing (Linker and ETL data processing) is estimated 
to be approximately $8,000/day to $10,000/day for a typical day 
based on current data volumes (including savings attributable to the 
daily ODCR and Compute Savings Plans), which totals approximately $2 
million per year based on 252 trading days per year.
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    Based on current data volumes, the estimated cost of an ad hoc 
interim CAT-Order-ID delivery is approximately $10,000 to $12,000 per 
request.\29\ CAT LLC would add a separate line item to its budget to 
reflect costs related to any SEC requests to generate an interim CAT-
Order-ID.
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    \29\ This estimate includes compute and storage costs for a 
daily ad hoc interim lifecycle processing, assuming the 
implementation of the options quotes ``single pass'' proposal, and 
is based on on demand rates for a typical day with average data 
volumes, less options quotes data volumes and their associated 
storage needs. The estimated number of authorized ad hoc runs per 
year that would be requested by the SEC cannot be predicted by CAT 
LLC or the Plan Processor.
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    While CAT LLC believes it would be reasonable and appropriate to 
incur such cost to address a pressing regulatory need on an as needed 
basis, such as in the event of a market event, the substantial cost of 
delivering an interim CAT-Order-ID on a continuous basis outweighs any 
regulatory benefit.
(d) Proposed Revisions to CAT NMS Plan
    CAT LLC proposes to amend the CAT NMS Plan to eliminate the 
requirement to provide an interim CAT-Order-ID on a regular ongoing 
basis. Specifically, CAT LLC proposes to delete the phrase ``lifecycle 
linkages'' from the following bullet in Section 6.1 of Appendix D of 
the CAT NMS Plan: ``Noon Eastern Time T+1 (transaction date + one 
day)--Initial data validation, lifecycle linkages and communication of 
errors to CAT Reporters.'' Similarly, CAT LLC proposes to delete the 
phrase ``Life Cycle Linkage'' from the second box in Figure A in 
Section 6.1 of Appendix D of the CAT NMS Plan. The box currently states 
the following: ``12:00 p.m. ET T+1 Initial Validation, Life Cycle 
Linkage, Communication of Errors.'' With the change, this box would 
state ``12:00 p.m. ET T+1 Initial Validation, Communication of 
Errors.''
    CAT LLC also proposes to amend the CAT NMS Plan to require CAT LLC 
to provide an interim CAT-Order-ID on an ``as requested'' basis. 
Specifically, CAT LLC proposes to add the following provision to 
Section 6.1 of Appendix D of the CAT NMS Plan: ``Where there is an 
immediate regulatory need (for example, in the case of a major market 
event), upon request of a senior officer of the Division of Trading and 
Markets, the Division of Enforcement, or the Division of Examinations 
to CAT LLC, the Plan Processor shall be directed to create an interim 
CAT-Order-ID and make it available to regulators by T+1 at 9 p.m. ET if 
the request is received prior to T+1 at 8 a.m. ET, or generally within 
14 hours of receiving the request if such request was received after 
T+1 at 8 a.m. ET.''
4. Incorporate Exemptive Relief Permitting Deletion of Industry Test 
Data Older Than Three Months and Include CAIS Data
(a) Overview; Prior Commission Exemptive Order
    CAT Reporters engage in testing related to the reporting of order 
and transaction data to the CAT, both pursuant to required testing and 
on a voluntary basis. In connection with this testing, CAT LLC, through 
the Plan Processor, retains the test data submitted by Industry Members 
and Participants, feedback files related to such data, and output files 
that hold the detailed transactions, referred to herein as ``Industry 
Test Data''.\30\
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    \30\ Separately, CAT LLC, through the Plan Processor, also 
retains operational metrics associated with industry testing for six 
years in accordance with the Plan. Specifically, Section 1.2 of 
Appendix D of the CAT NMS Plan requires that ``[o]perational metrics 
associated with industry testing (including but not limited to 
testing results, firms who participated, and amount of data reported 
and linked) must be stored for the same duration as the CAT 
production data.'' The proposed amendments do not affect such 
operational metrics.
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    On June 2, 2023, CAT LLC requested exemptive relief from Rule 17a-1 
under the Exchange Act and certain provisions of the CAT NMS Plan 
relating to the retention of Industry Test Data beyond three 
months.\31\ On November 27, 2023, the Commission granted the requested 
relief.\32\ The exemptive request and the Commission's order apply only 
to Industry Test Data related to the CAT order and transaction system, 
not to the customer account and information system (``CAIS'').
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    \31\ See Letter from Brandon Becker, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated 
June 2, 2023, https://catnmsplan.com/sites/default/files/2023-06/06.02.23-Exemptive-Request-Test-Data-Retention.pdf. As noted in the 
exemptive request, CAT LLC does not believe that Industry Test Data 
constitutes documents covered by Rule 17a-1 under the Exchange Act 
and adheres to its view that the specific three-month period for 
Industry Test Data supersedes the more general, longer retention 
periods in the CAT NMS Plan, but submitted the exemptive request to 
obtain regulatory clarity in light of the SEC staff's comments that 
the longer retention periods set forth in Rule 17a-1 under the 
Exchange Act and the CAT NMS Plan may apply to Industry Test Data.
    \32\ Exchange Act Release No. 99023 (Nov. 27, 2023), 88 FR 84026 
(Dec. 1, 2023).
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    CAT LLC is now proposing to incorporate the exemptive relief into 
the CAT NMS Plan to clarify that data from industry testing for both 
Industry Members and Participants may be deleted after three months. In 
addition, the amendments would apply to Industry Test Data related to 
both transaction system and CAIS data.
(b) Current CAT NMS Plan Requirements; Exchange Act Rule 17a-1
    Appendix D of the CAT NMS Plan specifically requires the retention 
of Industry Test Data for three months only.\33\ Specifically, Appendix 
D of the CAT NMS Plan states that ``[d]ata from industry testing must 
be saved for three months.'' \34\ Separate from this specific three-
month retention requirement in Appendix D of the CAT NMS Plan, Rule 
17a-1 under the Exchange Act and other more general recordkeeping 
provisions of the CAT NMS Plan set forth lengthier record retention 
periods of five and six years, respectively. Rule 17a-1 under the 
Exchange Act requires every national securities exchange and national 
securities association ``to keep and preserve at least one copy of all 
documents, including all correspondence, memoranda, papers, books, 
notices, accounts, and other such records as shall be made or received 
by it in the course of its business as such and in the conduct of its 
self-regulatory activity,'' \35\ and to keep all such documents ``for a 
period of not less than five years, the first two years in an easily 
accessible place, subject to the destruction and disposition provisions 
of Rule 17a-6.'' \36\ The CAT is a facility of each of the Participants 
to the CAT NMS Plan. In addition, Section 9.1 of the CAT NMS Plan, the 
general recordkeeping provision for the CAT NMS Plan, incorporates by 
reference the requirements of Rule 17a-1 under the Exchange Act. 
Specifically, Section 9.1 of the CAT NMS Plan states, in relevant part, 
that ``[t]he Company shall maintain

[[Page 26989]]

complete and accurate books and records of the Company in accordance 
with SEC Rule 17a-1.''
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    \33\ Ordinarily, specific provisions in a statute or regulation 
prevail over general provisions which might appear to the contrary. 
See, e.g., RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 
639, 645 (2012) (citing Morales v. Trans World Airlines, Inc., 504 
U.S. 374, 384 (1992)).
    \34\ Appendix D, Section 1.2 of the CAT NMS Plan at D-4.
    \35\ Rule 17a-1(a) under the Exchange Act.
    \36\ Rule 17a-1(b) under the Exchange Act.
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(c) Estimated Cost Savings
    Prior to the Commission's exemptive order, the Plan Processor had 
been retaining Industry Test Data beyond the three-month period 
prescribed by Appendix D of the CAT NMS Plan; eliminating Industry Test 
Data older than three months as permitted by the exemptive order is 
expected to achieve approximately $1 million per year in savings. The 
proposed amendments would not generate additional cost savings beyond 
those achievable pursuant to the exemptive order, but would incorporate 
the exemptive relief into the CAT NMS Plan itself.
Proposed Revisions to CAT NMS Plan
    CAT LLC proposes to amend the CAT NMS Plan to clarify that Industry 
Test Data related to both the CAT order and transaction system and to 
CAIS may be deleted after three months. Specifically, CAT LLC proposes 
to revise the following bullet in Section 1.2 of Appendix D of the CAT 
NMS Plan: ``Data from industry testing must be saved for three months. 
Operational metrics associated with industry testing (including but not 
limited to testing results, firms who participated, and amount of data 
reported and linked) must be stored for the same duration as the CAT 
production data.'' CAT LLC proposes to add the following as the second 
sentence of the bullet: ``Notwithstanding any other provision of the 
CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a-1, such test 
data (whether related to the CAT order and transaction system or the 
customer account and information system) may be deleted by the Plan 
Processor after three months.'' With this phrase, the bullet would 
state: ``Data from industry testing must be saved for three months. 
Notwithstanding any other provision of the CAT NMS Plan, this Appendix 
D, or Exchange Act Rule 17a-1, such test data (whether related to the 
CAT order and transaction system or the customer account and 
information system) may be deleted by the Plan Processor after three 
months. Operational metrics associated with industry testing (including 
but not limited to testing results, firms who participated, and amount 
of data reported and linked) must be stored for the same duration as 
the CAT production data.''

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of Amendment

    The Participants propose to implement the proposal upon approval of 
the proposed amendment to the CAT NMS Plan.

D. Development and Implementation Phases

    Not applicable.

E. Analysis of Impact on Competition

    CAT LLC does not believe that the proposed amendment would result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act. Indeed, CAT LLC 
believes that the proposed amendments will have a positive impact on 
competition, efficiency and capital formation. The proposed amendments 
will provide substantial savings in CAT costs while providing minimal 
impact on the regulatory use of CAT Data. Such substantial savings 
would inure to the benefit of all participants in the markets for NMS 
Securities and OTC Equity Securities, including Participants, Industry 
Members, and most importantly, the investors.

F. Written Understanding or Agreements Relating To Interpretation of, 
or Participation in Plan

    Not applicable.

G. Approval by Plan Sponsors in Accordance With Plan

    Section 12.3 of the CAT NMS Plan states that, subject to certain 
exceptions, the CAT NMS Plan may be amended from time to time only by a 
written amendment, authorized by the affirmative vote of not less than 
two-thirds of all of the Participants, that has been approved by the 
SEC pursuant to Rule 608 of Regulation NMS under the Exchange Act or 
has otherwise become effective under Rule 608 of Regulation NMS under 
the Exchange Act. In addition, the proposed amendment was discussed 
during Operating Committee meetings. The Participants, by a vote of the 
Operating Committee taken on March 26, 2024, have authorized the filing 
of this proposed amendment with the SEC in accordance with the CAT NMS 
Plan.

H. Description of Operation of Facility Contemplated by the Proposed 
Amendment

    Not applicable.

I. Terms and Conditions of Access

Not applicable.

J. Method of Determination and Imposition, and Amount of, Fees and 
Charges

    Not applicable.

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.
* * * * *

Exhibit A

Proposed Revisions to CAT NMS Plan

    Additions underlined; deletions [bracketed]
* * * * *
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III. Solicitation of Comments
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    \37\ Specific performance requirements will be included in the 
SLA.
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    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the amendment is 
consistent with the Exchange Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number 4-698 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 4-698. 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 (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed amendment that are filed with 
the Commission, and all written communications relating to the proposed 
amendment between the Commission and any person, other than those that 
may be withheld from the

[[Page 26998]]

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 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal offices of the Participants. Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to file number 4-698 and should be submitted on or before May 7, 
2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(85).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07967 Filed 4-15-24; 8:45 am]
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