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Food and Drug Administration, HHS.
Final amendment; final order.
The Food and Drug Administration (FDA, Agency, or we) is classifying the neuromuscular tongue muscle stimulator for the reduction of snoring and obstructive sleep apnea into class II (special controls). The special controls that apply to the device type are identified in this order and will be part of the codified language for the neuromuscular tongue muscle stimulator for the reduction of snoring and obstructive sleep apnea's classification. We are taking this action because we have determined that classifying the device into class II (special controls) will provide a reasonable assurance of safety and effectiveness of the device. We believe this action will also enhance patients' access to beneficial innovative devices.
This order is effective September 3, 2024. The classification was applicable on February 5, 2021.
Anita Belani, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. G236, Silver Spring, MD 20993-0002, 301-796-3944,
Upon request, FDA has classified the neuromuscular tongue muscle stimulator for the reduction of snoring and obstructive sleep apnea as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness.
The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as “postamendments devices” because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act).
FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).
FDA may also classify a device through “De Novo” classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (see also part 860, subpart D (21 CFR part 860, subpart D)). Section 207 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115) established the first procedure for De Novo classification. Section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144) modified the De Novo application process by adding a second procedure. A device sponsor may utilize either procedure for De Novo classification.
Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2).
Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act.
Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device.
When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application to market a substantially equivalent device (see section 513(i) of the FD&C Act, defining “substantial equivalence”). Instead, sponsors can use the 510(k) process, when necessary, to market their device.
On March 24, 2020, FDA received Signifier Medical Technologies' request for De Novo classification of the eXciteOSA without remote control, eXciteOSA with remote control device. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act.
We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable
Therefore, on February 5, 2021, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 872.5575.
FDA has identified the following risks to health associated specifically with this type of device and the measures required to mitigate these risks in table 1.
FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. For a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act.
The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.
This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in part 860, subpart D, regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR part 801, regarding labeling, have been approved under OMB control number 0910-0485.
Medical devices.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 872 is amended as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371.
(a)
(b)
(1) Performance testing must demonstrate the wireless compatibility, electrical safety, battery safety, and electromagnetic compatibility of the device in its intended use environment.
(2) Software verification, validation, and hazard analysis must be performed.
(3) The patient-contacting components of the device must be demonstrated to be biocompatible.
(4) Patient labeling must include:
(i) Information on device components, setup, and use of the device including placement of sensors and mouthpieces, and images or illustrations;
(ii) A summary of technical specifications;
(iii) Instructions on how to clean and maintain the device;
(iv) A statement that the patient should maintain regular follow up visits with dentist and sleep specialist; and
(v) A statement that patients should have a comprehensive dental examination prior to using this device.
(5) A human factors assessment must evaluate simulated use of the device to demonstrate that the user can correctly use device based on the labeling and instructions for use.
Food and Drug Administration, HHS.
Final amendment; final order.
The Food and Drug Administration (FDA or we) is classifying the digital therapy device for Attention Deficit Hyperactivity Disorder into class II (special controls). The special controls that apply to the device type are identified in this order and will be part of the codified language for the digital therapy device for Attention Deficit Hyperactivity Disorder's classification. We are taking this action because we have determined that classifying the device into class II (special controls) will provide a reasonable assurance of safety and effectiveness of the device. We believe this action will also enhance patients' access to beneficial innovative devices.
This order is effective September 3, 2024. The classification was applicable on June 15, 2020.
Tushar Bansal, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 4104, Silver Spring, MD 20993-0002, 240-402-4684,
Upon request, FDA has classified the digital therapy device for Attention Deficit Hyperactivity Disorder as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness.
The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as “postamendments devices” because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act).
FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).
FDA may also classify a device through “De Novo” classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (see also part 860, subpart D (21 CFR part 860, subpart D)). Section 207 of the Food and Drug Administration Modernization Act of 1997 established the first procedure for De Novo classification (Pub. L. 105-115). Section 607 of the Food and Drug Administration Safety and Innovation Act modified the De Novo application process by adding a second procedure (Pub. L. 112-144). A device sponsor may utilize either procedure for De Novo classification.
Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2).
Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act.
Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device.
When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application to market a substantially equivalent device (see section 513(i) of the FD&C Act, defining “substantial equivalence”). Instead, sponsors can use the 510(k) process, when necessary, to market their device.
On April 16, 2020, FDA received Akili Interactive Labs Inc.'s request for De Novo classification of the EndeavorRx device. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act.
We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device.
Therefore, on June 15, 2020, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 882.5803.
FDA has identified the following risks to health associated specifically with
FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. For a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act.
The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.
This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in part 860, subpart D, regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR part 801, regarding labeling, have been approved under OMB control number 0910-0485.
Medical devices.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 882 is amended as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371.
(a)
(b)
(1) Clinical performance testing must demonstrate and document the following under the labeled conditions for use, which include considerations for the ability of the device to:
(i) Use a validated measure to evaluate effectiveness of device to provide therapy for ADHD or any of its individual symptoms; and
(ii) Capture all adverse events.
(2) Software must be described and provided in a clear and detailed manner to include all features and functions of the software implementing the digital therapy. Software verification, validation, and hazard analysis must also be provided.
(3) The labeling must include the following items:
(i) Patient and physician labeling must include instructions for use, including images that demonstrate how to interact with the device;
(ii) Patient and physician labeling must list the minimum operating system (OS) requirements that support the software of the device;
(iii) Patient and physician labeling must include a warning that the digital therapy device is not intended for use as a standalone therapeutic device;
(iv) Patient and physician labeling must include a warning that the digital therapy device does not represent a substitution for the patient's medication; and
(v) Physician labeling must include a summary of the clinical performance testing conducted with the device.
Food and Drug Administration, HHS.
Final amendment; final order.
The Food and Drug Administration (FDA, Agency, or we) is classifying the intervertebral body graft containment device into class II (special controls). The special controls that apply to the device type are identified in this order and will be part of the codified language for the intervertebral body graft containment device's classification. We are taking this action because we have determined that classifying the device into class II (special controls) will provide a reasonable assurance of safety and effectiveness of the device. We believe this action will also enhance patients' access to beneficial innovative devices.
This order is effective September 3, 2024. The classification was applicable on September 18, 2020.
Aakash Jain, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 4566, Silver Spring, MD 20993-0002, 240-402-7531,
Upon request, FDA has classified the intervertebral body graft containment device as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness.
The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as “postamendments devices” because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act).
FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).
FDA may also classify a device through “De Novo” classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (see also part 860, subpart D (21 CFR part 860, subpart D)). Section 207 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115) established the first procedure for De Novo classification. Section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144) modified the De Novo application process by adding a second procedure. A device sponsor may utilize either procedure for De Novo classification.
Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2).
Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act.
Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device.
We believe this De Novo classification will enhance patients' access to beneficial innovation, in part by reducing regulatory burdens. When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application to market a substantially equivalent device (see 513(i) of the FD&C Act, defining “substantial equivalence”). Instead, sponsors can use the 510(k) process, when necessary, to market their device.
On February 19, 2020, FDA received Spineology, Inc.'s request for De Novo classification of the Spineology Interbody Fusion System. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act.
We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device.
Therefore, on September 18, 2020, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 888.3085.
FDA has identified the following risks to health associated specifically with
FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. For a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act.
The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.
This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in part 860, subpart D, regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR part 801, regarding labeling, have been approved under OMB control number 0910-0485.
Medical devices.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 888 is amended as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371.
(a)
(b)
(1) Clinical performance testing must include an assessment of any adverse events observed during clinical use, as well as intervertebral body fusion, and compare this to a clinically acceptable fusion rate.
(2) Non-clinical performance testing must demonstrate the mechanical function and durability of the implant, as well as the ability of the device to be inserted, deployed, and filled with bone graft consistently.
(3) Device must be demonstrated to be biocompatible.
(4) Validation testing must demonstrate the cleanliness and sterility of, or the ability to clean and sterilize, the device components, and device-specific instruments.
(5) Design characteristics of the device, including engineering schematics, must ensure that the geometry and material composition are consistent with the intended use.
(6) Labeling must bear all information required for the safe and effective use of the device, specifically including the following:
(i) A clear description of the technological features of the device including identification of device materials, compatible components in the fusion construct, and the principles of device operation;
(ii) Intended use and indications for use, including levels of fixation;
(iii) Identification of magnetic resonance (MR) compatibility status;
(iv) Cleaning and sterilization instructions for devices and instruments that are provided nonsterile to the end user; and
(v) Detailed instructions of each surgical step, including device removal.
Food and Drug Administration, HHS.
Final amendment; final order.
The Food and Drug Administration (FDA or we) is classifying the external compression device for internal jugular vein compression into class II (special controls). The special controls that apply to the device type are identified in this order and will be part of the codified language for the external compression device for internal jugular vein compression's classification. We are taking this action because we have determined that classifying the device into class II (special controls) will provide a reasonable assurance of safety and effectiveness of the device. We believe this action will also enhance patients' access to beneficial innovative devices.
This order is effective September 3, 2024. The classification was applicable on February 26, 2021.
Kenneth Morabito, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 4240, Silver Spring, MD 20993-0002, 301-796-3807,
Upon request, FDA has classified the external compression device for internal jugular vein compression as class II (special controls), which we have determined will provide a reasonable assurance of safety and effectiveness.
The automatic assignment of class III occurs by operation of law and without any action by FDA, regardless of the level of risk posed by the new device. Any device that was not in commercial distribution before May 28, 1976, is automatically classified as, and remains within, class III and requires premarket approval unless and until FDA takes an action to classify or reclassify the device (see 21 U.S.C. 360c(f)(1)). We refer to these devices as “postamendments devices” because they were not in commercial distribution prior to the date of enactment of the Medical Device Amendments of 1976, which amended the Federal Food, Drug, and Cosmetic Act (FD&C Act).
FDA may take a variety of actions in appropriate circumstances to classify or reclassify a device into class I or II. We may issue an order finding a new device to be substantially equivalent under section 513(i) of the FD&C Act (see 21 U.S.C. 360c(i)) to a predicate device that does not require premarket approval. We determine whether a new device is substantially equivalent to a predicate device by means of the procedures for premarket notification under section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).
FDA may also classify a device through “De Novo” classification, a common name for the process authorized under section 513(f)(2) of the FD&C Act (see also part 860, subpart D (21 CFR part 860, subpart D)). Section 207 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115) established the first procedure for De Novo classification. Section 607 of the Food and Drug Administration Safety and Innovation Act (Pub. L. 112-144) modified the De Novo application process by adding a second procedure. A device sponsor may utilize either procedure for De Novo classification.
Under the first procedure, the person submits a 510(k) for a device that has not previously been classified. After receiving an order from FDA classifying the device into class III under section 513(f)(1) of the FD&C Act, the person then requests a classification under section 513(f)(2).
Under the second procedure, rather than first submitting a 510(k) and then a request for classification, if the person determines that there is no legally marketed device upon which to base a determination of substantial equivalence, that person requests a classification under section 513(f)(2) of the FD&C Act.
Under either procedure for De Novo classification, FDA is required to classify the device by written order within 120 days. The classification will be according to the criteria under section 513(a)(1) of the FD&C Act. Although the device was automatically placed within class III, the De Novo classification is considered to be the initial classification of the device.
When FDA classifies a device into class I or II via the De Novo process, the device can serve as a predicate for future devices of that type, including for 510(k)s (see section 513(f)(2)(B)(i) of the FD&C Act). As a result, other device sponsors do not have to submit a De Novo request or premarket approval application to market a substantially equivalent device (see section 513(i) of the FD&C Act, defining “substantial equivalence”). Instead, sponsors can use the 510(k) process, when necessary, to market their device.
On March 19, 2020, FDA received Q30 Sports Science's request for De Novo classification of the Q-Collar. FDA reviewed the request in order to classify the device under the criteria for classification set forth in section 513(a)(1) of the FD&C Act.
We classify devices into class II if general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but there is sufficient information to establish special controls that, in combination with the general controls, provide reasonable assurance of the safety and effectiveness of the device for its intended use (see 21 U.S.C. 360c(a)(1)(B)). After review of the information submitted in the request, we determined that the device can be classified into class II with the establishment of special controls. FDA has determined that these special controls, in addition to the general controls, will provide reasonable assurance of the safety and effectiveness of the device.
Therefore, on February 26, 2021, FDA issued an order to the requester classifying the device into class II. In this final order, FDA is codifying the classification of the device by adding 21 CFR 890.3050.
FDA has identified the following risks to health associated specifically with this type of device and the measures required to mitigate these risks in table 1.
FDA has determined that special controls, in combination with the general controls, address these risks to health and provide reasonable assurance of safety and effectiveness. For a device to fall within this classification, and thus avoid automatic classification in class III, it would have to comply with the special controls named in this final order. The necessary special controls appear in the regulation codified by this order. This device is subject to premarket notification requirements under section 510(k) of the FD&C Act.
The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.
This final order establishes special controls that refer to previously approved collections of information found in other FDA regulations and guidance. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). The collections of information in part 860, subpart D, regarding De Novo classification have been approved under OMB control number 0910-0844; the collections of information in 21 CFR part 814, subparts A through E, regarding premarket approval, have been approved under OMB control number 0910-0231; the collections of information in part 807, subpart E, regarding premarket notification submissions, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 820, regarding quality system regulation, have been approved under OMB control number 0910-0073; and the collections of information in 21 CFR part 801, regarding labeling, have been approved under OMB control number 0910-0485.
Medical devices.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 890 is amended as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 360l, 371.
(a)
(b)
(1) The patient-contacting components of the device must be demonstrated to be biocompatible.
(2) Performance testing must demonstrate that the device performs as intended under anticipated conditions of use for the duration of the labeled use life.
(3) Human factors and usability testing must demonstrate that users can correctly use the device, including the user's ability to correctly determine device size and confirm the proper fit of the device. Users must understand product limitations, warnings, and precautions, including the warning that the device does not prevent head injury and medical treatment should be sought following head injury.
(4) Labeling must include the following:
(i) A warning that the device does not replace, and should be worn with, other protective sports equipment associated with specific sports activities, such as helmets and shoulder pads;
(ii) A warning that the device should not be worn if it interferes with other existing protective equipment;
(iii) A warning that users should avoid head and neck impacts to the extent possible;
(iv) A warning that serious harm can result from persistent, excessive pressure on the neck due to incorrect device size and fit; and
(v) A warning that the device has not been demonstrated to prevent long-term cognitive function deficits, and the ultimate impact on clinical outcomes has not been evaluated.
Bureau of Ocean Energy Management, Interior.
Final rule.
The Department of the Interior (the Department or DOI), acting through the Bureau of Ocean Energy Management (BOEM), is finalizing regulatory amendments to require lessees and operators to submit an archaeological report with any oil and gas exploration or development plan they submit to BOEM for approval of proposed activities on the Outer Continental Shelf (OCS). The previous
This final rule is effective October 3, 2024. You may make comments on the information collection (IC) burden in this rulemaking and the Office of Management and Budget (OMB) and BOEM must receive such comments on or before October 3, 2024. The IC burden comment opportunity does not affect the final rule effective date.
BOEM has established a docket for this action under Docket No. BOEM-2023-0012. All documents in the docket are listed on the
You may submit comments on the IC to OMB's desk officer for the Department of the Interior through
Karen Thundiyil, Chief, Office of Regulations, BOEM, 1849 C Street NW, Washington, DC 20240, at email address
The purpose of this rule is to address concerns regarding BOEM's regulatory requirements for protecting marine archaeological resources; specifically, BOEM's inability to accurately identify the location of such potential resources and BOEM's long term historic policy of requiring archaeological surveys only in cases where there is evidence that a resource exists. This rule amends the existing provisions to require lessees and operators to submit an archaeological report with any oil and gas exploration or development plan they submit to BOEM for approval of proposed activities on the OCS.
The two major provisions finalized in this rule are: (1) the replacement of the “reason to believe” standard in the current regulations with the requirement that all proposed exploration or development plans that would result in seabed disturbance must be accompanied by an archaeological report, and (2) the codification of minimum requirements for any new high-resolution geophysical (HRG) surveys. The standards for new HRG surveys are generally defined in performance terms based on scientific standards, rather than using specific parameters. This provision allows lessees and operators greater flexibility in determining how to conduct their surveys and how to produce the resulting archaeological reports.
BOEM estimates that the changes will increase total OCS archaeology survey costs over the next 20 years by $5.9 million (at a 3 percent discount rate). The majority of the revisions in this final rule will have no or negligible cost impacts for lessees and operators. All expected incremental costs of the rule are due to the requirement for HRG archaeological surveys in water depths of less than or equal to 100 meters and for a magnetometer, gradiometer, or the equivalent towed at an altitude and line spacing sufficient to detect ferrous metals or other magnetically susceptible materials of at least 1,000 pounds.
Entities potentially affected by this final action are holders of oil, gas, and sulfur leases on the OCS and associated operators.
In addition to being available in the docket, BOEM will post an electronic copy of the documents related to this final action at:
Section 5 of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. 1334, authorizes the Secretary of the Interior (Secretary) to issue regulations to administer OCS leasing for mineral development. Section 5(a) of OCSLA (43 U.S.C. 1334(a)) authorizes the Secretary to “prescribe such rules and regulations as may be necessary to carry out [provisions of OCSLA]” related to leasing on the OCS. Section 5(b) of OCSLA (43 U.S.C. 1334(b)) provides that “compliance with regulations issued under” OCSLA must be a condition for “[t]he issuance and continuance in effect of any lease, or of any assignment or other transfer of any lease, under the provisions of” OCSLA. Section 18 of OCSLA (43 U.S.C. 1344) states that “[m]anagement of the [OCS] shall be conducted in a manner which considers economic, social, and environmental values of the renewable and nonrenewable resources contained in the [OCS].”
Secretary's Order 3299 (as amended) established BOEM and delegated to it the authority to carry out conventional (
Beginning in 1982, BOEM's predecessor agency, the Minerals Management Service (MMS), developed a predictive model to attempt to define where archaeological resources were “likely” to exist in the Gulf of Mexico. MMS, and later BOEM, used the predictive model to designate certain OCS lease blocks as possessing a high- or low-probability for containing archaeological resources. This model relied primarily on archival evidence of reported lost shipwrecks.
Prior to 2006, the Department's regulation at then 30 CFR 250.194, “What archaeological reports and surveys must I submit?” stated: “If it is likely that an archaeological resource exists in the lease area, the Regional Director will notify you in writing.” That regulation was revised in 2006 to clarify the basis for requiring an archaeological survey (
Because it cannot be determined whether it is “likely” that an archaeological resource exists on a specific lease area until the archaeological survey has first been conducted, the wording would be changed to state, “if the Regional Director has reason to believe that an archaeological resource may exist.” The “reason to believe” is established by a technical analysis of existing archaeological, geological, and other pertinent environmental data.
Under the regulations after 2006, if the Regional Director exercises the requirement for an archaeological survey on a lease area in accordance with 30 CFR 550.194(a), the lessee or operator must produce an archaeological report. If the archaeological report suggests that an archaeological resource may be present, then an operator or lessee must either: “(1) Locate the site of any operation so as not to adversely affect the area where the archaeological resource may be; or (2) Establish to the satisfaction of the Regional Director that an archaeological resource does not exist or will not be adversely affected by operations.” To meet this second option, further archaeological investigation must be conducted by a qualified marine archaeologist and a geophysicist, using survey equipment and techniques the Regional Director considers appropriate. Finally, for the Regional Director to confirm that an archaeological resource does not exist, the lessee and operator must submit the investigation report to the Regional Director for review.
The MMS tested the predictive model in 2003 and found that there was no significant difference in the likelihood of finding a shipwreck in lease blocks designated as high probability under the predictive model compared to lease blocks without that designation. That led BOEM's predecessor agency, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), to implement a new seabed disturbance survey procedure, which BOEMRE presented to operators during a workshop in March 2011. This procedure involved conducting an environmental assessment under NEPA for all new and revised exploration and development plans in deep water. BOEM currently applies this approach, when appropriate, to plans in lease areas outside of OCS lease blocks designated by its predictive model as highly probable for containing archaeological resources. As discussed in the preamble to the 2023 proposed rule (88 FR at 9800), since implementation of the pre-seabed disturbance survey policy in 2011, over 100 new confirmed or potential shipwrecks have been identified, most of which are located in lease blocks that would not have been surveyed if BOEM had relied only on the predictive model. This includes three of the most historically significant shipwrecks ever found in the Gulf of Mexico.
After evaluating over 40 years of empirical evidence collected through research conducted by and for the oil and gas industry, academic institutions, and Federal and State agencies, BOEM has concluded that the model was at times incomplete and inaccurate and, therefore, unhelpful. BOEM's predictive model, despite several attempts at updating it, has often failed to accurately predict the presence or absence of ship or plane wrecks. In many cases, archaeological resources have been discovered in lease blocks where the model had not “predicted” any, and, conversely, operators surveyed lease blocks where the historical evidence suggested that a shipwreck should be located and found nothing. This problem is compounded by the fact that the scarcity of historical and archival materials correlates to the age of the shipwreck or archaeological resource, such that the resources least likely to be accurately identified in the models are sometimes the oldest and most important for understanding our Nation's history. BOEM determined that it was possible that previously undiscovered ship or plane wrecks could be present in any OCS lease block in any BOEM region regardless of the model's results. Because the model's accuracy is dependent on the availability and adequacy of the underlying historical data, and because such data is often neither available nor adequate for the offshore environment, BOEM determined that a better approach is necessary.
BOEM's existing regulations require operators
With this rule, BOEM is finalizing regulatory amendments to remove the “reason to believe” standard and to require lessees and operators to submit an archaeological report with all plans that propose seabed disturbance. This report must be based on a site-specific HRG survey that effectively identifies potential archaeological resources; HRG surveys are already required to identify shallow hazards in 30 CFR 550.214(e) and 550.244(e). HRG surveys are routinely used in the offshore environment to identify the presence or absence of potential geological and man-made hazards, sensitive biological habitats, and archaeological resources. In keeping with professional standards that have evolved since the existing regulations were adopted, this revision would define the minimum level of survey information necessary to support the conclusions in the archaeological report. These changes would facilitate BOEM's obligation to undertake a “reasonable and good faith effort” to carry out our appropriate historic property identification efforts under the NHPA (see 36 CFR 800.4(b)(1)) and its analysis of appropriate mitigation measures to avoid damaging historic and archaeological resources under NEPA.
Additionally, during oil and gas operations on the OCS, a lessee or operator may find or unearth unanticipated “cultural items” as defined in the Native American Graves Protection and Repatriation Act (NAGPRA), 25 U.S.C. 3001-3013. Lessees and operators are subject to the marine archaeology requirements provided for in this rule during their OCS operations, and they may also be subject to other laws, such as NAGPRA, in the event they discover cultural or other items. NAGPRA has its own regulatory requirements separate and distinct from this final rule.
The purpose of this final rule is to address concerns that BOEM's existing regulatory requirements fail to adequately protect marine archaeological resources. This rule
On February 15, 2023, DOI published a notice of proposed rulemaking in the
The most important amendment made by this final rule to the Department's existing regulations is to eliminate the “reason to believe” standard from § 550.194, whereby lessees were required to conduct marine archaeological surveys only in cases where “the Regional Director has reason to believe that an archaeological resource may exist in the lease area.” Instead, the revised section of the regulations will require the submission, with all proposals for seabed disturbance in an EP, DOCD, or DPP, of an archaeological report based on a site-specific HRG survey designed in such a manner as to effectively identify potential archaeological resources.
This final rule, in § 550.194, provides for the following:
• Each HRG survey must be conducted using state-of-the-art instrumentation and methodology that meet or exceed scientific standards for conducting marine archaeological surveys.
• Lessees must comply with the outlined minimum scientific standards; however, BOEM recognizes that emerging technologies and methods may be used to achieve or exceed these standards. In these instances, BOEM may approve a departure from the standard provisions of the rule on a case-by-case basis if it meets the objectives specified in the regulations.
• The survey vessel's navigation system must continuously register its surface position, specify the logging position data, and specify the presentation of geodesy information.
• HRG surveys must use a total field magnetometer, gradiometer, or other similar instrument having equal or superior measurement capability for surveys conducted in waters of 100-meter depth or less. This rule also establishes the requirements for the collection of data necessary to assist in the identification of archaeological resources on the OCS. The sensor must be towed in such a manner that a magnetic field produced by ferrous metal associated with a historic shipwreck
• For geophysical surveys conducted in water depths of 140 meters (459 ft) or less, a sub-bottom profiler system must be used to identify potential areas of prior human occupation that may exist within the horizontal and vertical Area of Potential Effect (APE), taking into account the geomorphology of the operational area and the parameters of the proposed project (including the maximum depth of disturbance from the proposed activities).
• Every survey on the OCS subject to this rule must meet various performance standards to ensure that archaeological resources are not overlooked. The results of every survey must be collected and analyzed by a qualified marine archaeologist who meets the Secretary of the Interior's Standards and Guidelines
• In all water depths, a side-scan sonar or equivalent system must be used to provide continuous planimetric imagery of the seafloor to identify potential archaeological resources partly embedded in the seafloor. To provide sufficient resolution of seafloor features, this rule requires the use of a system that operates at as high a frequency as practicable based on the factors of line spacing, instrument range, and water depth.
• In all water depths, an echo-sounder or equivalent system must be used to measure accurate water depths across the area. Where swath bathymetry data are acquired, BOEM recommends that backscatter values from the seabed returns are logged and processed for use in seabed characterization to support and complement the side-scan sonar data. Single beam echo sounder data should be used to verify the results of swath bathymetry data to check for gross error.
• Existing lessees and operators may, during the first year after the effective date of this final rule, apply the prior regulations and standards to surveys conducted during that time. New lessees and operators will be required to apply the requirements of this rule from the effective date of the rule.
• An archaeological survey conducted prior to the effective date of this rule may be used in lieu of conducting a new survey, subject to BOEM approval, provided the lessee or operator can demonstrate that such survey was conducted in such a manner as to meet the performance requirements of this rule.
• If a lessee or operator discovers any unanticipated archaeological resource while conducting operations on the lease or right-of-way area, they must immediately halt seafloor disturbing operations within at least 305 meters (1,000 feet) of the area of the discovery and report the discovery to the BOEM Regional Director within 72 hours.
The standards described above are generally defined in this rule in performance terms based on scientific standards, rather than using specific parameters. This will allow lessees and operators greater flexibility in determining how to conduct their surveys and how to produce the resulting archaeological reports.
A total of 32 comments were received in response to the proposed rule. The majority of the comments (15) came from individual archaeologists and technical specialists. An additional 6 comments came from trade or cultural
The vast majority of the responses (28 out of 32) were supportive of the proposed rule. All of the comments submitted by individuals were supportive of the rule, and several included technical suggestions related to archaeological reports, data collection, and data analysis. The two Native American Tribes submitted supportive comments and noted that the proposed rule was an important step in ensuring that Tribal cultural heritage is protected for future generations, and that BOEM should fully evaluate a project's potential effects on Tribes. All archaeological associations and societies that submitted comments on the proposed rule expressed support and provided clarifying recommendations for implementing the final rule, as well as technical suggestions related to archaeological reports and data collection. One individual supported the proposed rule and supported collaboration between BOEM and the National Park Service (NPS) to further specify the submerged archaeological resources professional qualification standard in the Secretary of the Interior's Professional Qualification Standards for Archaeology and Historic Preservation. One advocacy group (The Ocean Foundation) expressed support for the proposed rule, particularly the amendment to include historic resources on the National Register of Historic Places (NRHP) into the definition of archaeological resources. Two offshore operators of surveying equipment (Echo Offshore and P&C Scientific) provided technical suggestions related to archaeological reports, equipment specifications, and data collection. Multiple state agencies (Alaska State Historic Preservation Office (AKSHPO), Texas Historical Commission (TXHC), and the Washington State Department of Archaeology and Historic Preservation (WADAHP)) expressed support for the rulemaking and provided clarifying recommendations for implementing the final rule, as well as technical suggestions related to archaeological reports and data collection.
Four comments were received that were generally not supportive of the proposed rule. These consisted of one state agency and three offshore energy trade associations. The three offshore energy trade associations (American Petroleum Institute (API), National Ocean Policy Coalition (NOPC), and Offshore Operators Committee (OOC)) commented that the rule is too burdensome and that BOEM did not accurately represent the cost of the rulemaking. They requested that BOEM re-propose the rule and associated regulatory impact analysis (RIA) to allow for adequate stakeholder assessment and the opportunity to provide additional comments. API asserted that it was unclear what activities would be covered by the proposed rule and that more certainty is needed to adequately assess potential impacts to operations. One state agency (Alaska Department of Natural Resources (AKDNR)) did not support the rulemaking and stated that BOEM may not have the authority to require “another expensive survey.” This conclusion contrasted with that of another agency in the same state, the AKSHPO, which strongly supported the proposed rule.
OOC indicated that BOEM's current information collection requirements underestimate the information collection burden. After considering this comment, BOEM is revising the information collection burden estimates with this rule to align with existing industry practice. As stated in the PRA section of the preamble, the new and revised information collections requirement for 30 CFR 550.194 and 550.195 would increase overall annual information submission burdens. BOEM plans to add the increases in annual burden hours to OMB approved Control Number 1010-0114, 30 CFR 550, subpart A, General and subpart K, Oil and Gas Production (expiration May 31, 2026), and not to OMB Control Number 1010-0151, 30 CFR 550, subpart B, Plans and Information.
Currently, OMB has approved 12 annual burden hours for preparation and submission of archaeological
BOEM finds that the method of quantifying burdens is dependent on the specific analysis and regulatory context. The cost factors associated with surveys in the RIA include the day rate of the survey vessel, the time required to complete the survey, and the resources spent processing and interpreting the survey results. While other documents may use hourly estimates, a dollar amount estimate was deemed appropriate for this analysis to capture an economic impact while taking into account various cost factors to fulfill the information collection. BOEM believes that this approach provides a sufficient evaluation of the incremental burdens resulting from this final rule.
ACUA, SAA, AAA, CAH, and SHA asserted that eliminating the “reason to believe” standard would reduce ambiguity surrounding survey requirements and would constitute a reasonable and good faith effort to identify archaeological resources. ACRA expressed support for the proposal to use HRG surveys in lieu of the predictive models and stated that “the predictive model approach does not provide detailed, site-specific survey or review for the potential of a lease area to contain ancient, submerged landform features.” WADAHP expressed support for the proposal and asserted that a more robust effort is necessary to ensure identification of historic shipwrecks and aircraft, due to the uncertainty of their locations on the seafloor. It stated that rapid technological advancements would allow for this more robust effort.
The TXHC provided supportive context for the proposal to move away from predictive models and stated that in the TXHC marine archaeology program's experience, “these predictability models do not work well in practice for any water depths, nearshore included, due to the unpredictable nature of shipwreck losses and wreck locations. Though the [TXHC] model is still helpful in defining areas that have a greater potential to contain underwater archeological resources, it is no longer used to preclude whole Texas State tracts from archeological remote-sensing survey, as had once been policy.” Additionally, two independent marine archaeologists expressed support for the use of surveys in lieu of the predictive model.
Sub-bottom profiler data can be used for various purposes, including locating potential areas of prior human occupation. BOEM has concluded that, in the Gulf of Mexico, the 140-meter cutoff best encompasses the furthest likely extent of prior human occupation. As discussed earlier in this preamble, this depth is based on information presented by submerged paleolandscape and submerged archaeological experts at the Paleo Workshop 2018: Reevaluating the Submerged Paleoindian Landscape of the Gulf of Mexico. Similarly, a recent study for the Alaska region also recommended using sub-bottom profilers during archaeological surveys in waters 140 meters or less. In the Pacific Region, studies have found that a 130-meter cutoff is appropriate. After careful review and analysis by BOEM subject matter experts, BOEM concluded that the findings and recommendations from these experts and studies were warranted and worthy of incorporation into this rule. These depths are based on current scientific understanding of sea-level rise and could change in the future as additional information becomes available.
Similarly, OOC commented that the proposed rule requires “the ability to `resolve an object 0.5 meters in length' with side-scan sonar.” It asserted that: “First, the language is unclear on what criteria are to be used for this (resolution vs detection, number of pings, along track/cross track, etc.). Second, depending on the answers to the criteria, this may result in the wide line spacing surveys using 100kHz class side-scans on [autonomous underwater vehicles] and in deeper towed scenarios becoming unusable. In order for survey companies to detect an object of that size, it may be necessary to run upwards of 50-meter line spacing in deeper water depth depending on [autonomous underwater vehicle] speed, ping rate, etc.” It also stated that there is no
Similarly, Echo Offshore addressed the proposed requirement that BOEM refer a discovery to BSEE to determine if the resource may have been adversely impacted by operations. It asked BOEM to clarify whether there was an agreement between BOEM and BSEE to ensure that both bureaus use the same set of rules for evaluating resources. It also noted that many of the projects in the Gulf of Mexico are under BSEE jurisdiction and the applicability of current requirements is unclear.
The costs and benefits of the final rule are compared against the baseline scenario. The baseline scenario, or status quo, represents BOEM's assessment of the current practices under the current regulatory framework, including current industry practices and standards that are consistent with that framework. To define the baseline, BOEM examined the best available information regarding the current regulatory requirements and industry standards for conducting an HRG survey, which is the procedure for identifying possible archaeological resources.
In 2011, BOEM's predecessor, BOEMRE, implemented a new pre-seabed disturbance survey policy, which BOEMRE presented to operators during a workshop held in March 2011. Those surveys were conducted, when appropriate, in lease areas that were not designated as highly probable for containing archaeological resource by the predictive model. BOEM advised that, prior to conducting any bottom-disturbing activity on the OCS that could damage archaeological resources, operators should perform a survey of the seafloor where the activities were to take place and prepare an archaeological assessment. Additionally, HRG surveys are already required to identify shallow hazards in 30 CFR 550.214(e) and 550.244(e).
Under the Gulf of Mexico region baseline scenario, HRG archaeological surveys are conducted, with very rare exceptions, using methods consistent with guidelines provided in NTL 2005-G07, titled, “Archaeological Resource Reports and Surveys,”
In the Alaska region, all HRG archaeological surveys completed since 2011 have been conducted using methods consistent with guidelines provided in NTL 2005-A01, titled, “Shallow Hazards Survey and Evaluation for OCS Exploration and Development Drilling,”
Most of the revisions in this final rule will have no or negligible cost impacts for operators. All expected incremental costs of the final rule are due to the requirement for HRG archaeological surveys in water depths of less than or equal to 100 meters and for a magnetometer, gradiometer, or the equivalent towed at an altitude and line spacing sufficient to detect ferrous metals or other magnetically susceptible materials of at least 1,000 pounds. This additional cost is expected to be from the tighter line spacing required for the surveys as compared to the existing NTL. BOEM has determined that the performance standard necessary to detect ferrous metal of at least 1,000 pounds is met by conducting archaeological surveys with a maximum line spacing of 30 meters.
BOEM estimates that the changes would increase total OCS archaeology survey costs over the next 20 years by $5.9 million (using a 3 percent discount rate). Most of the revisions in this final rule will have no or negligible cost impacts for lessees and operators. Table 1 presents a summary of the qualitative benefits and a quantitative estimate of the annualized and total costs for the rule. BOEM estimates that the changes would increase total OCS archaeology survey costs over the next 20 years by $5,925,770, using a 3 percent discount rate, or by $4,452,834, using a 7 percent discount rate.
The estimated benefits associated with this final rulemaking are qualitative benefits and are as follows:
• Assures compliance with NHPA and strengthens archaeological resource protections;
• Reduces the likelihood of disturbing shipwrecks or other historical sites;
• Provides regulatory clarity and certainty for operators; and
• Reduces risk and potential mitigation costs to offshore oil and gas operators.
The Department is finalizing, as proposed, amendments to the definition of the term “Archaeological resource” to clarify that any historic property described by the NHPA is considered an archaeological resource for the purpose of BOEM's regulations. The new definition of “Archaeological resource” reads as follows: “the material remains of human life or activities that are at least 50 years of age and that are of archaeological interest, including any historic property described by the National Historic Preservation Act, as defined in 36 CFR 800.16(l).”
As discussed in the preamble to the proposed rule at 88 FR 9803, this revised definition will encompass the historic properties as defined in 36 CFR 800.16(l). These properties include any prehistoric or historic district, site, building, structure, or object included in, or eligible for, inclusion in the NRHP maintained by the Secretary of the Interior. The term “historic property” also includes artifacts, records, and remains that are related to and located within such properties, and properties of traditional religious and cultural importance to an Indian Tribe or Native Hawaiian organization and that meet the National Register criteria.
The Department is finalizing, as proposed, the revision of the title of § 550.194 from “How must I protect archaeological resources?” to “How must I conduct my approved activities to protect archaeological resources?” to reflect that the response to a discovery of potential archaeological resources and the remediation process is no longer included in the content of § 550.194 but has been moved to a new section (
The Department is finalizing, as proposed, amendments to § 550.194(a) to remove the “reason to believe” standard with respect to individual leases, as discussed in section II.B of this preamble. This final rule requires operators to submit to BOEM an archaeological report, refer to a previously submitted report meeting the necessary standards, or submit evidence demonstrating that a reasonable and good faith identification effort has already been performed. Operators must include these submissions with any EP, DOCD, or DPP that proposes activities involving disturbance of the seafloor.
The Department is finalizing, as proposed, amendments to § 550.194(a)(1). The existing regulation requires operations to be located at a site that would not adversely affect an area containing an archaeological resource if an archaeological report suggests that a resource may be present. This final rule relocates the requirements for a response to a discovery of potential archaeological resource to a new section (
The Department is finalizing amendments to § 550.194(a)(2) to replace the text requiring an operator to establish that an archaeological resource does not exist in a proposed site of operation with text specifying that operators can submit a reference to an archaeological report based on an HRG survey of the APE that was previously submitted for the lease as a means to comply with the requirement in § 550.194. This amendment reflects the relocation of the requirements for a response to a discovery of potential archaeological resource to a new section (
Under § 550.194(a)(2) of the final rule, an operator may submit a reference to an archaeological report if the previously submitted survey complies with the parameters identified in the final rule and if the results of that previous survey reasonably remain valid, as determined by BOEM. This provision is designed to minimize duplicative surveys by allowing operators to use the data from previously conducted surveys, such as certain shallow hazard reports. The amendments in this final rule specify that BOEM may consider a previous survey and its associated report invalid if BOEM suspects that the seafloor environment has changed sufficiently to warrant a new HRG survey (
The Department is finalizing, as proposed, new § 550.194(a)(3), to allow operators to comply with the requirement in § 550.194 by demonstrating that a reasonable and good faith effort to identify archaeological resources within the APE has already been performed. This provision is designed to minimize duplicative surveys by allowing operators to use, for example, previously collected data from non-operator commissioned sources, such as NOAA coastal surveys. BOEM will allow the use of such data if BOEM determines these sources are sufficient to identify possible marine archaeological resources at a degree of certainty reasonably similar to or better than an HRG survey.
The Department is finalizing amendments in § 550.194(b) to replace the text stating that the Regional Director will notify an operator if they determine that an archaeological resource is likely to be present with the requirement that the archaeological report or evidence required by § 550.194(a) be prepared and signed by a qualified marine archaeologist. This amendment reflects the relocation of the requirements for a response to a discovery of potential archaeological resource to § 550.195. The requirement that the report or evidence must be prepared and signed by a qualified marine archaeologist applies regardless of which option described in § 550.194(a) is used as the basis of the archaeological report or evidence. As a result of public comment, this final rule further defines a qualified marine archaeologist as one who meets the Secretary of the Interior's “Standards and Guidelines for Historic Preservation Projects: Professional Qualification Standards” and any subsequent updates to those standards and guidelines and has experience in conducting or overseeing HRG surveys and processing and interpreting the resulting data for archaeological potential.
The Department is finalizing, as proposed, amendments to § 550.194(c) to replace the requirement to immediately halt operations if an archaeological resource is discovered while conducting operations with text establishing the minimum standards for conducting the geophysical survey upon
Section 550.194(c) of this final rule requires that geophysical surveys must be conducted using state-of-the-art instrumentation and methodology that meets or exceeds scientific standards for conducting marine archaeological surveys. While BOEM outlines the minimum scientific standards in paragraph (c), BOEM recognizes that emerging technologies and methods may be used to achieve or exceed these standards. In these instances, BOEM may approve a departure from the provisions of paragraph (c) of § 550.194 on a case-by-case basis if it meets the requirements in paragraph (d).
The Department is finalizing § 550.194(c)(1) to establish the requirements for the survey vessel's navigation system to continuously register its surface position, specify the logging position data, and specify the presentation of geodesy information. With this rulemaking, the regulatory text in § 550.194(c)(1) includes a statement added based on public comments that navigation systems meeting the criteria outlined in § 550.194 do not require prior approval by BOEM.
The Department is finalizing § 550.194(c)(2) to require the use of a total field magnetometer, gradiometer, or other similar instrument having equal or superior measurement capability for surveys conducted in waters of 100-meter depth or less. It also establishes the requirements for the collection of data necessary to assist in the identification of archaeological resources on the OCS. The sensor will be required to be towed in such a manner that a magnetic field produced by ferrous metal associated with a historic shipwreck (
The Department is finalizing § 550.194(c)(3) to require the use of a sub-bottom profiler system for surveys conducted to locate potential areas of prior human occupation. BOEM believes that in the Gulf of Mexico and the Alaska OCS, the 140-meter cutoff best encompasses the furthest likely extent of prior human occupation, as discussed in section III of this preamble. To establish a default water depth applicable to the requirement to use a sub-bottom profiler, this rule requires the sub-bottom profiler in water depths of 140 meters or less. The depths are based on current scientific understanding of sea-level rise and could change in the future as additional information becomes available.
The Department is finalizing § 550.194(c)(4) to require the use of a side-scan sonar or equivalent system in all water depths. It also establishes the technical requirements for the use of this equipment and for the post-processing of data. To ensure that the nadir is imaged, the sonar should have overlapping coverage between the right and left channels on adjacent survey transects. A 100 percent overlapping coverage of the seafloor (
The Department is finalizing § 550.194(c)(5) as proposed to require the use of an echo sounder or equivalent system in all water depths. This new provision also establishes the technical requirements for the use of this equipment and for the post-processing of data.
Bathymetric surveys are conducted using an echo sounder attached to or towed by a survey boat or sometimes mounted to an autonomous underwater vehicle. As the boat moves across the water, the echo sounder generates electrical signals. These are then converted into soundwaves by an under-water transducer. A single-beam sonar uses just one transducer to map the seafloor, while multibeam sonar sends out multiple, simultaneous sonar beams (or sound waves) at once in a fan-shaped pattern. This covers the space both directly under the ship and out to each side.
Bathymetry data must be acquired to measure accurate water depths across the area. Where swath bathymetry data are acquired, it is recommended that backscatter values from the seabed returns are logged and processed for use in seabed characterization to support and complement the side scan sonar data. Single beam echo sounder data (or data from the equivalent system) should be used to verify the results of swath bathymetry data to check for gross error.
The bathymetry systems must be set up to accurately record data across the range of water depths expected in the survey area. Care should be taken in selection of operating frequencies such that the individual systems do not interfere with each other. The bathymetry systems must be used in conjunction with an accurate motion sensor to compensate for vessel motion. Water column sound velocity should be determined as a minimum at the start and end of data acquisition, and at suitable intervals throughout the project, by use of a conductivity, salinity, and temperature depth probe or a direct reading sound-velocity probe suitable for use in the maximum water depths expected within the survey area. Water depths should be corrected for vessel draft, tidal level, and referenced to the appropriate vertical datum (LAT, MSL, etc.). The final processed digital terrain model data cell size covering the entire survey area, without gaps, should reflect the frequency of the system being used, data density, and altitude above seabed of the transducer head.
The Department is finalizing § 550.194(c)(6) as proposed to allow BOEM to accept the results of an archaeological survey conducted prior to the effective date of these regulations in lieu of conducting a new survey, provided the lessee or operator can demonstrate that such survey was conducted in such a manner as to meet the objectives of § 550.194(c). Some OCS lessees and operators have conducted OCS surveys using advanced techniques and technologies, such that any new survey would be highly unlikely to yield substantially different results. In those situations, subject to BOEM approval, a lessee or operator may be able to use an existing survey that meets
The Department is finalizing, as proposed, new § 550.194(d) to provide that the Regional Director may approve departures, on a case-by-case basis, from the performance standards outlined in § 550.194(c). The Regional Director will determine if the departure is necessary because ordinary application of those standards would be impractical or unduly burdensome; would be unnecessary to achieve the intended objectives of the marine archaeology program; would fail to conserve the natural resources of the OCS; would fail to protect life (including human and wildlife), property, or the marine, coastal, or human environment; or would fail to protect sites, structures, or objects of historical or archaeological significance.
The Department is finalizing, as proposed, new § 550.194(e) to provide that any departures approved under § 550.194(d) must be documented in writing and must be: consistent with OCSLA; protect the archaeological resources to the same degree as if there was no approved departure from the regulations; satisfy NHPA section 106 and achieve results for identifying archaeological resources as if there was no approved departure from the regulations; and not impair the rights of third parties. This will allow BOEM to ensure that its archaeological report requirements remain in compliance with the NHPA.
The Department is finalizing, as proposed, new § 550.194(f) to provide that BOEM may reject any archaeological report if the survey was not prepared in accordance with the requirements of § 550.194(c) or any BOEM-approved departure to the survey requirements. This final rule also provides that BOEM may reject any archaeological report if the results produced from the survey do not meet the data and resolution requirements specified in § 550.194(c), regardless of whether the survey was otherwise conducted appropriately. For more details, see the preamble to the proposed rule at 88 FR 9806.
The Department is finalizing, as proposed, new § 550.194(g) to provide specifications for what must be done if the archaeological report or evidence mentioned in § 550.194(a) suggests that an archaeological resource may be present. This final rule establishes the two courses of action for operators to proceed with operations if the archaeological report or evidence required by § 550.194(a) suggests that an archaeological resource may be present.
The Department is finalizing, as proposed, new § 550.194(g)(1) to provide operators the option of relocating operations so as not to adversely affect an area where known or suspected archaeological resources exist.
The Department is finalizing, as proposed, relocated § 550.194(a)(2) as § 550.194(g)(2) to provide an alternative to § 550.194(g)(1). This alternative provides operators the option of establishing, to the satisfaction of the Regional Director, that an archaeological resource does not exist or will not be affected by operations or that the operator will take measures determined by the Regional Director to protect the archaeological resource during operations. If the Regional Director requires additional investigations, the operator will be required to submit a report documenting the investigation to the Regional Director for review.
The Department is finalizing, as proposed in new § 550.194(g)(2)(i), that if further investigation cannot establish to the satisfaction of the Regional Director that an archaeological resource is not likely to be present at the operational site, the lessee or operator must demonstrate to the satisfaction of the Regional Director either that its operations will not adversely affect the suspected resource or else commit to undertaking the steps required in § 550.194(g)(2)(ii).
This final rule replaces the existing § 550.194(b) with § 550.194(g)(2)(ii), as proposed, and emphasizes that the operator must take no action that may adversely affect an archaeological resource until the Regional Director specifies measures the operator must take to protect the resource.
The Department is finalizing, as proposed in new § 550.194(g)(3), that if the Regional Director determines that an archaeological resource is likely to be present in the lease area and is likely to be adversely affected by operations, and if the Regional Director determines that there is no feasible means to avoid this adverse effect, the Regional Director will be allowed to prohibit operations in the APE.
The Department is finalizing, based on public comments discussed in section III of this preamble, a new § 550.194(h) to allow that any lessee or operator that has an existing lease executed prior to the effective date of this final rule to apply the regulations in effect prior to the effective date with respect to the provisions of this section for a period of time not to exceed 365 days after the effective date of this final rule. The intent of this new provision is to avoid forcing lessees and operators to renegotiate existing agreements with companies that will be providing archaeological surveys where a survey contract has already been negotiated for future survey activities.
The Department is finalizing, as proposed, amendments to move existing 30 CFR 550.194(c) to a new section at 550.195, titled “What must I do if I discover a potential archaeological resource while conducting operations on the lease or right-of-way area?” Moving the provisions to a separate section will improve the overall organization of the regulations. In addition to moving the provision to a stand-alone section, BOEM is expanding on the specificity of the requirements. The existing regulations require that operations be halted immediately within the area of the discovery and that the discovery be reported to the BOEM Regional Director.
The Department is finalizing, as proposed, new § 550.195(a) to require the operator to immediately halt seafloor disturbing operations within at least 305 meters (1,000 feet) of the area of the discovery and report the discovery to the Regional Director within 72 hours. This final rule establishes these requirements to minimize the potential for risk to the resource.
The Department is finalizing, as proposed, new § 550.195(b) to clarify that if BOEM determines that the resource is eligible for listing on the NRHP in accordance with the applicable regulations, the Regional Director will specify measures that the lessee and operator must take to protect the resource during operations and activities. The final regulations in § 550.194(g) state that if the resource is present, the Regional Director will determine how to protect it. If BOEM were to determine that the resource is eligible for listing on the NRHP, and the operations and activities are under the jurisdiction of BSEE, BOEM will inform the BSEE Regional Director that the resource has been determined to be historically significant and advise BSEE on the appropriate means to protect it.
The Department is finalizing, as proposed, new § 550.195(c) that provides, for activities and operations under BSEE jurisdiction, that BOEM will refer the discovery to BSEE to determine if the resource may have been adversely impacted by operations. The BSEE Regional Director will specify measures the lessee or operator must take either to demonstrate that no adverse impacts have occurred or to document the adverse impacts. BSEE may specify additional measures that it determines are necessary to remediate adverse impacts to any archaeological resources resulting from operations that have been discovered and will relay to BOEM both the results of its investigation and any further measures it has imposed to remediate the adverse impacts that may have occurred.
Executive Order (E.O.) 12866, as amended by E.O. 14094, provides that the Office of Information and Regulatory Affairs (OIRA) in OMB will review all significant rules. OIRA has determined that this final rule is not a significant action under E.O. 12866.
E.O. 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the Nation's regulatory system to promote predictability, reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. E.O. 13563 directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. BOEM has developed this rule in a manner consistent with these requirements.
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires agencies to analyze the economic impact of regulations when a significant economic impact on a substantial number of small entities is likely and to consider regulatory alternatives that will achieve the agency's goals while minimizing the burden on small entities. When an agency issues a notice of rulemaking, the RFA requires the agency to “prepare a final regulatory flexibility analysis” that will give “a description of and an estimate of the number of small entities to which the rule will apply” (5 U.S.C. 604(a)).
BOEM has determined that this rule will affect a substantial number of small entities. Operators under this rule primarily fall under the Small Business Administration's (SBA) North American Industry Classification System (NAICS) codes 211120 (crude petroleum extraction) and 211130 (natural gas extraction). For NAICS classifications 211120 and 211130, SBA defines a small business as one with fewer than 1,251 employees. All 70 OCS operating companies would be impacted by the rule if they engage in activities disturbing the seafloor in areas that have not been previously surveyed and that would require an HRG survey and an archaeological report under the rule. BOEM estimates that of the 70 OCS lease operators, 21 are large and 49 are small.
The regulatory changes in this rule are primarily clarifications, codifications of existing practice, or reflections of NHPA regulations. Most operators have been conducting HRG surveys and the archaeological analysis consistent with the regulatory requirements in this rule since at least 2011. Therefore, BOEM does not anticipate that these regulatory updates will have a significant economic impact on small or large operators. The expected incremental compliance costs of the rule derive from the requirement that HRG archaeological surveys in water depths less than or equal to 100 meters have a magnetometer, gradiometer, or the equivalent towed at an altitude and line spacing sufficient to detect ferrous metals or other magnetically susceptible materials of at least 1,000 pounds. This performance standard typically can be met by operators conducting archaeological surveys with a maximum line spacing of 30 meters at a height of no more than 6 meters from the seafloor.
BOEM estimates that the changes would increase OCS archaeology survey costs by $7,595,000 over the next 20 years. The Gulf of Mexico archaeological survey costs are estimated to increase by $2,520,000, while the Alaska costs increase by $5,075,000, depending on activity and cost factors discussed in section II of the Benefit-Cost Analysis.
BOEM's estimate of the rule's economic impact on small entities would vary depending on the OCS region where the archaeological surveys occur. Typically, the increased compliance cost would impact operators conducting activities in water depths of 100 meters or less. Small entity operators account for the vast majority of activity in the Gulf of Mexico OCS's shallow water depths. Therefore, BOEM estimates that up to 100 percent of the increased Gulf of Mexico compliance cost for survey line spacing of 30 meters would be borne by operators that are small entities. In the Alaska region, all archaeological surveys are expected to be conducted by large entities. On the Alaska OCS, one company currently holds all OCS oil and gas leases. This company is considered a large entity under the SBA's definition. Therefore, BOEM estimates the increased compliance cost in Alaska would be borne by an operator that is a large entity. Compliance costs by business size can be seen in Table 2 with discount rates. BOEM does not expect new archaeological surveys in other OCS regions over the next 20 years.
The Small Business Regulatory Enforcement Fairness Act (SBREFA), 5 U.S.C. 804(2), requires BOEM to perform a regulatory flexibility analysis, provide guidance, and help small businesses comply with statutes and regulations for major rulemakings. This action is not subject to the SBREFA because it does not have an annual effect on the economy of $100 million or more.
The Unfunded Mandates Reform Act (UMRA), 2 U.S.C. 1531-1538, requires
This action is not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might substantially or uniquely affect small governments.
E.O. 12630 ensures that government actions affecting the use of private property are undertaken on a well-reasoned basis with due regard for the potential financial impacts imposed by the government. This action does not effect a taking of private property or otherwise have taking implications under E.O. 12630, and therefore, a takings implication assessment is not required. Additionally, no comments were received on E.O. 12630 during the public comment period.
Regulatory actions that have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government are subject to E.O. 13132. Under the criteria in section 1 of E.O. 13132, this final rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. It will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. No comments were received on E.O. 13132 during the public comment period.
This final rule complies with the requirements of E.O. 12988. Specifically, this rule:
(1) Meets the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and
(2) Meets the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards.
No comments were received on E.O. 12988 during the public comment period.
E.O. 13175 defines polices that have Tribal implications as regulations, legislative comments or proposed legislation, and other policy statements or actions that will or may have a substantial direct effect on one or more Indian Tribes, or on the relationship between the Federal Government and one or more Indian Tribes. Additionally, the DOI's consultation policy for Tribal Nations and ANCSA Corporations, as described in Departmental Manual part 512 chapter 4, expands on the above definition from E.O. 13175 and requires that BOEM invite Indian Tribes and ANCSA Corporations “early in the planning process to consult whenever a Departmental plan or action with Tribal Implications arises.” BOEM strives to strengthen its government-to-government relationships with Tribal Nations through a commitment to consultation with Tribes, recognition of their right to self-governance and Tribal sovereignty, and honoring BOEM's trust responsibilities for Tribal Nations. BOEM also is respectful of its responsibilities for consultation with corporations established pursuant to ANCSA, 43 U.S.C. 1601
As discussed in the preamble to the 2023 proposed rule (88 FR 9809), BOEM evaluated the proposed rule under DOI's consultation policy and under the criteria in E.O. 13175 and determined that this rule may have Tribal implications.
BOEM sent letters to all Tribes and ANCSA Corporations on March 3, 2023, to ensure they were aware of the proposed rulemaking, to answer any immediate questions they may have, and to invite formal consultation if they would like to consult. Only one request for consultation was received; consultation was held with the Mashpee Wampanoag on March 14, 2024, and meeting notes are included in the docket (memorandum titled
This final rule references existing and new IC requirements for regulations at 30 CFR part 550, subpart A. Submission to OMB for review under the PRA of 1995 (44 U.S.C. 3501
BOEM is revising its IC burden estimates with the final rule to align with the regulations that codify existing industry practice. The new and revised IC requirements for 30 CFR 550.194 and 550.195 identified below require approval by OMB. BOEM would increase the overall annual burden by 505 hours. The burden hours related to this rulemaking are shown in the following table, and burden hour changes are discussed below.
• 30 CFR 550.194(a): This final rule will require that any EP, DOCD, or DPP that proposes activities involving disturbance of the seafloor must be accompanied by or contain an archaeological report and supporting evidence. BOEM proposes to increase the estimated annual burden hours related to this subsection to 500 hours (+500 annual burden hours over the currently approved burden).
• 30 CFR 550.194(c): This final rule will require that archaeological reports must be based on an HRG survey of the APE. The HRG requirements described in 30 CFR 550.194(c) are also part of the requirements used for geological and geophysical IC (
• 30 CFR 550.194(g): If an archaeological resource is likely to be present,
• 30 CFR 550.195(a): This final rule will require the operator to notify the BOEM Regional Director of any unanticipated archaeological resource discovery. This notification would likely occur during the operator's remote sensing phase or during deployment by a remotely operated vehicle for surveys related to hydrophones. BOEM expects that the occurrence will be low, so BOEM estimates the annual burden hours to equal 3 hours (1 hour x 3 responses) (+3 annual burden hours above the currently approved burden).
• The annual burden hours for departure requests will be 2 annual burden hours. (+2 annual burden hours above the currently approved burden).
Once this final rule becomes effective and OMB approves the IC request 1010-0196, BOEM will revise the existing OMB Control Number 1010-0114 for the affected subpart discussed above and will adjust the annual burden hours accordingly. The IC related to 30 CFR part 550 does not include questions of a sensitive nature. BOEM will continue to protect proprietary information according to the Freedom of Information Act and the Department of the Interior's implementing regulations.
In addition, the PRA requires agencies to estimate the total annual reporting and recordkeeping non-hour cost burdens resulting from the collection of information. BOEM solicits your comments regarding non-hour cost burdens arising from this final rule. For reporting and recordkeeping only, your response should split the cost estimate into two components: (1) total capital and startup costs, and (2) annual operation, maintenance, and disclosure costs to provide the information. You should describe the methods you use to estimate your cost components, including system and technology acquisition, expected useful life of capital equipment, discount rates, and the period over which you incur costs. Generally, your estimates should not include equipment or services purchased: (1) before October 1, 1995; (2) to comply with requirements not associated with the IC arising from this final rule; (3) for reasons other than to provide information or to keep records for the U.S. Government; or (4) as part
As part of BOEM's continuing effort to reduce paperwork and respondent burdens, BOEM invites the public and other Federal agencies to comment on any aspect of this IC, including:
(1) Whether or not the collection of information is necessary, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) Ways to minimize the burden of the collection of information on respondents.
This final rule does not constitute a major Federal action significantly affecting the quality of the human environment. A detailed environmental analysis under NEPA is not required because this final rule is covered by a categorical exclusion (
In promulgating this rule, BOEM did not conduct or use a study, experiment, or survey requiring peer review under the Data Quality Act (Pub. L. 106-554, app. C, sec. 515, 114 Stat. 2763, 2763A-153-154). In accordance with the Data Quality Act, the Department has issued guidance regarding the quality of information that it relies upon for regulatory decisions. This guidance is available at the Department's website at:
No comments were received on the Data Quality Act during the public comment period.
Under E.O. 13211, BOEM is required to prepare and submit to OMB a “Statement of Energy Effects for significant energy actions.” This should include a detailed statement of any adverse effects on energy supply, distribution, or use (including a shortfall in supply, price increases, and increased use of foreign supplies) expected to result from the action and a discussion of reasonable alternatives and their effects. This rulemaking will not have an effect on the production, supply, distribution, or use of energy and is not expected to have any effect on the energy industry.
No comments were received on E.O. 13211 during the public comment period.
This action is subject to the Congressional Review Act (CRA), 5 U.S.C. 801
Administrative practice and procedure, Air pollution control, Continental shelf, Environmental impact statements, Environmental protection, Federal lands, Government contracts, Investigations, Mineral resources, Oil and gas exploration, Oil pollution, Outer continental shelf, Penalties, Pipelines, Public lands—rights-of-way, Reporting and recordkeeping requirements, Rights-of-way, Sulfur.
This action by the Principal Deputy Assistant Secretary is taken herein pursuant to an existing delegation of authority.
For the reasons stated in the preamble, BOEM amends 30 CFR part 550 as follows:
25 U.S.C. 3001
(a) To protect archaeological resources, your EP, DOCD, or DPP that proposes activities involving disturbance of the seafloor must be accompanied by or contain one of the following:
(1) An archaeological report based on a high-resolution geophysical (HRG) survey of the APE defined, pursuant to 36 CFR 800.16(d) of the Advisory Council on Historic Preservation's regulations implementing section 106 of the NHPA, as the depth and breadth of the seabed that could potentially be impacted by proposed activities;
(2) A reference to an archaeological report based on an HRG survey of the APE that you previously submitted for your lease, provided that any previously submitted survey complies with the survey parameters identified in these regulations and the results of the survey are, in BOEM's judgment, valid. BOEM may consider a survey or the resulting report to be invalid if BOEM suspects that changes to the seafloor environment warrant acquiring additional data, considering, for example, the time elapsed since the prior survey or change in seafloor from a geological event such as a mudslide; or
(3) Evidence demonstrating to BOEM's satisfaction that a reasonable and good faith effort to identify archaeological resources within the APE has already been performed, provided that the past efforts are sufficient to identify possible marine archaeological resources at a degree of certainty reasonably similar to or better than an HRG survey.
(b) The archaeological report and evidence described in paragraph (a) of this section must have been or be prepared and signed by a qualified marine archaeologist. A qualified marine archaeologist must meet the
(c) The geophysical survey resolution for the surveys described in paragraph (a) of this section must be sufficiently detailed to identify potential archaeological resources and must be performed using instrumentation and methodology that is state-of-the-art and that meets or exceeds scientific standards for conducting marine archaeological surveys. The surveys must, at a minimum, adhere to the following operational requirements and performance standards:
(1) A state-of-the-art navigation system with sub-meter accuracy able to continuously determine the surface position of the survey vessel and in-water position of towed and autonomous survey sensors. Position fixes must be digitally and continuously logged along the vessel track. Geodesy information must be clearly presented and consistent across all data types. Navigation systems meeting the criteria outlined in this section do not require prior approval by BOEM.
(2) For geophysical surveys conducted in water depths of 100 meters (328 feet) or less, the survey must employ a total field magnetometer, gradiometer, or other similar instrument having equal or superior measurement capability. The magnetometer, gradiometer, or its equivalent must be towed as close to the seafloor as possible and sufficiently far from the vessel to isolate the sensor from the magnetic field of the survey vessel and the other survey instruments. The magnetometer, gradiometer, or its equivalent must be towed at a sufficient altitude to detect ferrous metals or other magnetically susceptible materials of at least 1,000 pounds (453 kilograms) in mass with a minimum magnetic deflection of 5 gamma (γ; 5 nanotesla [nT]). An accurate method must be used to record the height of the magnetometer, gradiometer, or its equivalent in the water column. The altitude of the magnetometer, gradiometer, or its equivalent must be continuously recorded during data acquisition along the survey. The instrument's sensitivity must be 1 γ (1 nT) or less. Background noise level must not exceed a total of 3 γ peak to peak with data samples of at least 2 points per meter along the survey track. All collected data must be recorded on a digital medium that can be linked electronically to the positioning data. Survey line, time, position, altitude, and speed must be annotated on all output data. The data must be post-processed and contoured in a manner to best facilitate the interpretation of potential archaeological resources.
(3) For geophysical surveys conducted to locate potential areas of prior human occupation, a sub-bottom profiler system must be used to identify and map buried geomorphological features of archaeological potential that may exist within the horizontal and vertical APE, taking into account the geomorphology of the operational area and the parameters of the proposed project (including the maximum depth of disturbance from the proposed activities). The use of a sub-bottom profiler is required in water depths of 140 meters or less, unless BOEM specifies a different water depth based on its determination of the furthest extent of prior human occupation on the OCS. The sub-bottom profiler system must be capable of achieving a depth of penetration and resolution of vertical bed separation that is sufficient to allow for the identification and cross-track mapping of features of archaeological potential (
(4) In all water depths, a side-scan sonar or equivalent system must be used to provide continuous planimetric imagery of the seafloor to identify potential archaeological resources on and partly embedded in the seafloor. To provide sufficient resolution of seafloor features, BOEM requires the use of a system that operates at as high a frequency as practicable based on the factors of line spacing, instrument range, and water depth. The sonar system must detect small, discrete targets 0.5 meters (1.6 feet) in length at maximum range, along the track. The instrument range must provide at least 100 percent overlapping coverage (
(5) In all water depths, an echo sounder or equivalent system must be used to measure accurate water depths across the area. Where swath bathymetry data are acquired, it is recommended that backscatter values from the seabed returns are logged and processed for use in seabed characterization to support and complement the side scan sonar data. Single beam echo sounder data (or data from the equivalent system) must be used to verify the results of swath bathymetry data to check for gross error. The bathymetry systems must be set up to accurately record data across the range of water depths expected in the survey area. Care must be taken in selection of operating frequencies such that the individual systems do not interfere with each other. The bathymetry systems must be used in conjunction with an accurate motion sensor to compensate for vessel motion. Water column sound velocity must be determined as a minimum at the start and end of data acquisition, and at suitable intervals throughout the project, by use of a conductivity, salinity, and temperature depth probe or a direct reading sound velocity probe suitable for use in the maximum water depths expected within the survey area. Water depths must be corrected for vessel draft, tidal level, and referenced to the appropriate vertical datum (LAT, MSL, etc.). The final processed digital terrain model data cell size covering the entire survey area, without gaps, must reflect the frequency of the system being used, data density, and altitude above seabed of the transducer head.
(6) An archaeological survey conducted prior to the effective date of these regulations may be used in lieu of conducting a new survey, subject to BOEM approval, provided the lessee or operator can demonstrate that such survey was conducted in such a manner as to meet the objectives of this paragraph (c).
(d) The Regional Director may approve a departure from the provisions of paragraph (c) of this section on a case-by-case basis if the Regional Director deems the departure necessary because the applicable requirements, as applied to a specific circumstance:
(1) Are impractical or unduly burdensome;
(2) Are not necessary to achieve the intended objectives of the marine archaeology program;
(3) Fail to conserve the natural resources of the OCS;
(4) Fail to protect life (including human and wildlife), property, or the marine, coastal, or human environment; or
(5) Fail to protect sites, structures, or objects of historical or archaeological significance.
(e) Any departure approved under this section must:
(1) Be consistent with requirements of the OCS Lands Act;
(2) Protect the archaeological resources to the same degree as if there was no approved departure from the regulations;
(3) Satisfy section 106 of the National Historic Preservation Act and achieve results for identifying archaeological resources as if there was no approved departure from the regulations;
(4) Not impair the rights of third parties; and
(5) Be documented in writing.
(f) BOEM may reject any archaeological report if the survey was not prepared in accordance with the requirements of paragraph (c) in this section or any BOEM-approved departure to the survey requirements. BOEM may also reject any archaeological report if the results produced from the survey do not meet the data and resolution requirements specified under paragraph (c), regardless of whether the survey was otherwise conducted appropriately.
(g) If the archaeological report or evidence mentioned in paragraph (a) of this section suggests that an archaeological resource may be present, you must:
(1) Situate your operations so as not to adversely affect the area where the known or suspected archaeological resource may be located; or,
(2) Establish, to the satisfaction of the Regional Director, that an archaeological resource does not exist by conducting further archaeological investigation, under the supervision of a qualified marine archaeologist, using equipment and techniques the Regional Director considers appropriate. You must submit a report documenting the further investigation to the Regional Director for review;
(i) If the further investigation cannot establish to the satisfaction of the Regional Director that an archaeological resource is not likely to be present at the operational site, you must demonstrate to the satisfaction of the Regional Director that your operations will not adversely affect the suspected resource; or,
(ii) If, based on the additional archaeological investigation, the Regional Director determines that an archaeological resource is likely to be present in the operational site and may be adversely affected by operations, you must take whatever additional steps are specified by the Regional Director to protect the archaeological resource before you conduct any further operations at the operational site; or,
(3) If the Regional Director determines that an archaeological resource is likely to be present in the lease area, that it is likely to be adversely affected by your operations, and that there are no feasible means to avoid this adverse effect, the Regional Director may prohibit your operations in the APE.
(h) Any lessee or operator that has an existing lease in effect prior to October 3, 2024 may apply the regulations in effect prior to this date with respect to the provisions of this section for such lease for a period of time not to exceed September 3, 2025.
(a) If you discover any unanticipated archaeological resources while conducting operations on the lease or right-of-way area, you must immediately halt seafloor disturbing operations within at least 305 meters (1,000 feet) of the area of the discovery and report the discovery to the Regional Director within 72 hours.
(b) If BOEM determines that the resource may be eligible for listing on the National Register of Historic Places in accordance with the applicable regulations, the Regional Director will specify measures you must take to protect the resource during operations and activities.
(c) For activities and operations under BSEE jurisdiction, BOEM will refer the discovery to BSEE to determine if the resource may have been adversely impacted by your operations and activities prior to or during its discovery in paragraph (a). The Regional Director of BSEE will specify measures you must take to either demonstrate that no adverse impacts have occurred or to document the extent of adverse impacts that have occurred. BSEE may further specify measures you must take to remediate adverse impacts to any archaeological resources resulting from your operations and activities and will relay to BOEM both the results of its investigation and any further measures it has imposed to remediate the adverse impacts that may have occurred.
Coast Guard, DHS.
Temporary interim rule; correction.
The Coast Guard is correcting a temporary interim rule with request for comments that appeared in the
Effective September 3, 2024.
For information about this document call or email Ms. Jennifer Zercher, Bridge Management Specialist, Seventh Coast Guard District; telephone 571-607-5951, email
In FR Doc. 2024-17452 appearing on page 64369 in the
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is approving the removal of the New Jersey Clean Air Interstate Rule (CAIR) nitrogen oxides (NO
This rule is effective on October 3, 2024.
The EPA has established a docket for this action under Docket ID Number EPA-R02-OAR-2024-0110, at
Fausto Taveras, Environmental Protection Agency, Region 2, Air Programs Branch, 290 Broadway, New York, New York 10007-1866, at (212) 637-3378, or by email at
Throughout this document, whenever “we,” “us,” or “our” is used, we mean EPA.
The
On July 18, 2024, the EPA proposed to approve the removal of the New Jersey Clean Air Interstate Rule (CAIR) nitrogen oxides (NO
In that proposed action, the EPA proposed approval of the removal of the New Jersey CAIR NO
In the July 2024 proposed rulemaking, the EPA also proposed to conditionally approve the removal of the New Jersey NO
In the State's March 7, 2024, commitment letter, New Jersey committed to develop a MOA between the EPA and NJDEP that outlines how NJDEP will comply with the NO
Subsequently, on May 31, 2024, New Jersey submitted an updated commitment letter to revise and replace the previous March 7, 2024, letter. This revision occurred due to NJDEP conducting further analysis to determine what units would have been classified as a non-EGU under the applicability criteria of the New Jersey NO
The specific details of New Jersey's SIP Submittals, subsequent commitment letter which outlines the content of the forthcoming MOA, and the rationale for the EPA's final action are explained in the EPA's proposed rulemaking and are not restated in this final action. For this detailed information, the reader is referred to the EPA's July 18, 2024, proposed rulemaking (89 FR 58306).
In response to EPA's July 10, 2024, proposed rulemaking on New Jersey's
This concludes our response to the comments received. No changes have been made to the final rule.
On August 23, 2018, NJDEP submitted a SIP revision requesting that the EPA update the New Jersey SIP to reflect the removal of New Jersey's CAIR NO
As discussed previously in Section I, NJDEP provided commitment letters to the EPA on March 7, 2024 and May 31, 2024, committing to develop a MOA between the EPA and the NJDEP that outlines how NJDEP will comply with the State's obligations under the NO
In this final rule, the EPA approves the removal of the New Jersey CAIR NO
In this final rule, the EPA is also conditionally approving the removal of the New Jersey NO
Under CAA section 110(k)(4), conditional approval is an option for EPA SIP approvals based on a commitment to adopt specific enforceable measures by a date certain, but no later than one year from the date of approval. If the state fails to meet its commitment within the specified date, this approval is treated as a disapproval.
Since the MOA between NJDEP and the EPA will be enforceable only when approved by the EPA and codified through incorporating by reference in the EPA-approved statutes and regulations in the New Jersey SIP at 40 CFR 52.1570, it will be necessary for the EPA to take this action no later than one year from the date of this conditional approval.
Based on the State's May 31, 2024, commitment to submit a SIP revision by March 7, 2025, addressing the identified deficiency and the EPA taking action to approve the MOA as an enforceable SIP revision no later than one year from the date the EPA finalizes this conditional approval, the EPA is conditionally approving the portion of the August 23, 2018, SIP revision requesting the removal of the New Jersey NO
However, if the State fails to submit this revision, or if EPA does not approve the MOA as an enforceable SIP revision on or before 12 months from the date of final approval of this action, this conditional approval will become a disapproval and the EPA will issue a notice to that effect. If the conditional approval becomes a disapproval, the disapproval triggers the requirement for EPA to issue a Federal Implementation Plan (FIP) under CAA section 110(c) to correct the deficiency.
As stated in New Jersey's May 2024 commitment letter, the State commits to enter a Memorandum of Agreement between the USEPA and the NJDEP that outlines how NJDEP will comply with the NO
The MOA will serve to memorialize an aggregate state-wide budget and monitoring and reporting requirements for the affected non-EGU units as well as official annual ozone season NO
In this document, the EPA is finalizing regulatory text that includes incorporation by reference. The EPA is finalizing the removal of Title 7, Chapter 27, Subchapter 30,
New Jersey provided a supplement to the SIP submission being finalized for approval with this rulemaking on May 16, 2023. The supplemental submission briefed the EPA on Environmental Justice (EJ) considerations within New Jersey by detailing the State's programs and initiatives addressing the needs of communities with EJ concerns that have been ongoing since 1998. Although New Jersey included environmental justice considerations as part of its SIP submittal, the CAA and applicable implementing regulations neither prohibit nor require such an evaluation.
In its supplement, New Jersey discussed how the State has been addressing the needs of communities with EJ concerns since 1998, including assisting in the creation of the Environmental Equity Task Force, which later evolved into the Environmental Justice Advisory Council (EJAC). EJAC and its predecessor have held regular meetings that include EJ advocates and the New Jersey Department of Environmental Protection (NJDEP) to discuss and address issues of concern.
New Jersey has also noted that the State has implemented numerous initiatives, collaborations, Administrative Orders and Executive Orders to address the needs and concerns of overburdened communities. New Jersey provided a timeline of the EJ actions implemented by the State, both prior to the SIP submittal on August 23, 2018, and subsequent to it, to note its continued attention to environmental justice in the State.
New Jersey's Administrative Orders (AO) and Executive Orders (E.O.) include the State's first EJ E.O. issued by Governor James E. McGreevey in 2004 (E.O. No. 96), an EJ E.O. issued by Governor Jon Corzine in 2009 (E.O. No. 131), an EJ AO issued by NJDEP Commissioner Bob Martin in 2016 (AO 2016-08) and an EJ E.O. issued by Governor Phil Murphy in 2018 (E.O. No. 23). Notably, U.S. Senator for New Jersey, Cory Booker, introduced the first Federal EJ bill in 2017 (S. 1996—Environmental Justice Act of 2017).
Additionally, New Jersey also created the “What's In My Community?”
The EPA has reviewed this material but has determined that conducting a comprehensive EJ analysis is not necessary in the context of this SIP submission for the removal from the SIP of New Jersey's CAIR NO
However, the EPA expects that this action, which assesses whether New Jersey's SIP adequately addresses requirements under the NO
In summary, the EPA concludes, for informational purposes only, that this final rule will not disproportionately harm communities with environmental justice concerns. New Jersey did evaluate EJ considerations voluntarily in its SIP submission, but the EPA's assessment of these considerations is provided for context, not as the basis for the action. The EPA is taking action under the CAA independently of the State's EJ assessment.
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this final action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 14094 (88 FR 21879, April 11, 2023);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it approves a State program;
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001); and
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act.
In addition, this final rulemaking action pertaining to New Jersey's SIP revision, is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian Tribe has demonstrated that a Tribe has jurisdiction. In those areas of Indian country, the rule does not have Tribal implications and will not impose substantial direct costs on Tribal governments or preempt Tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, Feb. 16, 1994) directs Federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on communities with environmental justice (EJ) concerns to the greatest extent practicable and permitted by law. EPA defines EJ as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.”
The NJDEP evaluated environmental justice as part of its SIP submittal even though the CAA and applicable implementing regulations neither prohibit nor require an evaluation. The EPA's evaluation of the NJDEP's environmental justice considerations is described above in the section titled, “Environmental Justice Considerations.” The analysis was done for the purpose of providing additional context and information about this rulemaking to the public, not as a basis of the action. The EPA is taking action under the CAA on bases independent of New Jersey's evaluation of environmental justice. In addition, there is no information in the record upon which this decision is based that is inconsistent with the stated goal of E.O. 12898 of achieving environmental justice for communities with EJ concerns.
This action is subject to the Congressional Review Act, and the EPA will submit a rule report to each House of the Congress and the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by November 4, 2024. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2)).
Environmental protection, Air pollution control, Incorporation by reference, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds, oxides of nitrogen.
42 U.S.C. 7401
For the reasons set forth in the preamble, 40 CFR part 52 is amended as follows:
42 U.S.C. 7401
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to modify the Class D airspace, Class E airspace area designated as a surface area (Class E2 surface area), and Class E airspace area extending upward from 700 feet or more above the surface of the earth (Class E5 airspace area) at Camp Guernsey Airport, Guernsey, WY. This action would more appropriately contain instrument flight rules (IFR) operations at the airport. Additionally, the airport's legal descriptions should be amended to match the FAA's database.
Comments must be received on or before October 18, 2024.
Send comments identified by FAA Docket No. FAA-2024-1856 and Airspace Docket No. 24-ANM-70 using any of the following methods:
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FAA Order JO 7400.11H, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Keith T. Adams, Federal Aviation Administration, Western Service Center, Operations Support Group, 2200 S. 216th Street, Des Moines, WA 98198; telephone (206) 231-2428.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify the Class D airspace, Class E2 surface area, and Class E5 airspace area to support IFR operations at Camp Guernsey Airport, Guernsey, WY.
The FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should submit only one time if comments are filed electronically, or commenters should send only one copy of written comments if comments are filed in writing.
The FAA will file in the docket all comments it receives, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, the FAA will consider all comments it receives on or before the closing date for comments. The FAA will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. The FAA may change this proposal in light of the comments it receives.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Operations office (see
Class D, Class E2, and Class E5 airspace designations are published in paragraphs 5000, 6002, and 6005 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document proposes to amend the current version of that order, FAA Order JO 7400.11H, dated August 11, 2023, and effective September 15, 2023. These updates would be published in the next update to FAA Order JO 7400.11. That order is publicly available as listed in the
FAA Order JO 7400.11H lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.
The airport's Class E airspace area extending upward from 700 feet above the surface of the earth does not fully contain the Nondirectional Beacon (NDB) Runway (RWY) 32 Approach procedure. Additionally, the northern portion of the airport's Class D airspace, Class E2 surface area, and Class E5 airspace area overlie special use airspace (SUA) restricted areas (R) R-7001A and R-7002B. These shared airspace areas will convert to the appropriate SUA when the restricted area becomes active. Camp Guernsey Airport legal descriptions currently do not reflect the airspace change when SUAs are active. The airport's airspaces and legal descriptions should be amended to appropriately support IFR operations at Camp Guernsey Airport, Guernsey, WY.
The FAA is proposing an amendment to 14 CFR part 71 to modify the Class E5 airspace area at Camp Guernsey Airport, Guernsey, WY, to support containment of IFR operations.
Class E5 airspace area should be modified to within 6.7- miles radius of the airport and within 6.7 miles each side of the airport's 143° bearing extending from the 6.7-mile radius to 18 miles southeast of the airport, excluding that airspace within R-7001A and R-7002B when active. The proposed airspace would accommodate IFR arrival operations descending through 1,500 feet above the surface and departing IFR operations until reaching 1,200 feet above the surface.
Additionally, administrative amendments are required for Camp Guernsey Airport's legal descriptions. Line one for city location should be identified as Guernsey, WY. The airport's Class D airspace and Class E2 surface area legal descriptions need the updated part-time text. Lastly, SUA exclusionary text should be added to all legal descriptions.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
That airspace extending upward from the surface up to and including 6,900 feet MSL within a 5-mile radius of the airport and within 1.5 miles each side of the 340° bearing from the airport, extending from the 5-mile radius to 6.5 miles north of the airport, excluding that airspace within R-7001A and R-7002B when active. This Class D airspace area is effective during specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from the surface up to and including 6,900 feet MSL within a 5-mile radius of the airport and within 1.5 miles each side of the 340° bearing from the airport, extending from the 5-mile radius to 6.5 miles north of the airport, excluding that airspace within R-7001A and R-7002B when active. This Class E surface area is effective during specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from 700 feet above the surface within a 6.7-mile radius of the airport and within 6.7 miles each side of the 143° bearing from the airport, extending from the 6.7-mile radius to 18 miles southeast of the airport, excluding that airspace within R-7001A and R-7002B when active.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to modify the Class D and Class E airspace designated as a surface area and revoke the Class E airspace designated as an extension to a Class D or Class E surface area at Buckley Space Force Base (BKF), Aurora, CO. Additionally, this action proposes administrative amendments to update the airport's legal description to match the FAA database. These actions would support the safety and management of instrument flight rules (IFR) and visual flight rules (VFR) operations at the airport.
Comments must be received on or before October 18, 2024.
Send comments identified by FAA Docket No. FAA-2024-1857 and Airspace Docket No. 19-ANM-99 using any of the following methods:
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*
*
*
FAA Order JO 7400.11H, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Keith T. Adams, Federal Aviation Administration, Western Service Center, Operations Support Group, 2200 S. 216th Street, Des Moines, WA 98198; telephone (206) 231-2428.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify Class D and Class E airspace designated as a surface area and revoke Class E airspace designated as an extension to a Class D and Class E surface area to support IFR and VFR operations at Buckley Space Force Base, Aurora, CO.
The FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should submit only one time if comments are filed electronically, or commenters should send only one copy of written comments if comments are filed in writing.
The FAA will file in the docket all comments it receives, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed rulemaking. Before acting on this proposal, the FAA will consider all comments it receives on or before the closing date for comments. The FAA will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. The FAA may change this proposal in light of the comments it receives.
An electronic copy of this document may be downloaded through the internet at
You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Operations office (see
Class D, E2, and E4 airspace designations are published in paragraphs 5000, 6002, and 6004, respectively, of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document proposes to amend the current version of that order, FAA Order JO 7400.11H, dated August 11, 2023, and effective September 15, 2023. These updates would be published in the next update to FAA Order JO 7400.11. That order is publicly available as listed in the
FAA Order JO 7400.11H lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.
BKF is located south of Denver International Airport (DEN) and is separated by United States Interstate 70. Centennial Airport (APA) is located nearby, approximately 9.1 nautical miles (NM) southeast of BKF. APA and BKF airports have instrument approach procedures (IAP) that involve conflicting and overlapping circling maneuver patterns. The circling maneuver patterns of category D and E aircraft landing Runway (RWY) 32 at BKF extend beyond the airport's surface area to the west and northwest of the airport. Additionally, APA and BKF Class D airspaces are separated by less than .30 NM. This area is comprised of controlled and uncontrolled airspace, which creates an unfavorable passage as VFR aircraft navigate between the two airports' surface areas. Lastly, IFR departures from BKF's RWY 14 occur underneath the floor of controlled airspace and outside the lateral boundaries of the airport; this is due to rising terrain south-through-southeast of the airport, and the need to size the surface area airspace based on a climb rate of 200 feet per NM.
The FAA is proposing an amendment to 14 CFR part 71 that would modify Class D airspace, modify Class E airspace designated as a surface area, and revoke Class E airspace designated as an extension to a Class D or surface area at Buckley Space Force Base, CO.
The lateral boundaries of the airport's Class D and Class E surface areas are insufficiently sized and should be modified to better contain IFR arrivals when less than 1,000 feet above the surface of the earth and departing IFR aircraft until reaching the next adjacent airspace. Additionally, an approximately .30 NM gap exists between the BKF and APA surface areas. As such, the airport's Class D and Class E surface areas should be re-sized to be within a 4.4-mile radius of the airport, within 2 miles northeast and 4 miles southwest of the airport's 151° bearing extending to 7.1 miles southeast, and within 4 miles south and 4.4 miles north of the airport's 270° bearing extending to 4.7 miles west, excluding that airspace within the DEN Class B and APA Class D airspace areas. Closing this gap should redirect some VFR aircraft to transition a 500-foot vertical Class E airspace area between the vertical limits of BKF's Class D airspace and the floor of DEN Class B Area E airspace.
The FAA is proposing to revoke BKF's Class E airspace, which is designated as an extension to the Class D and E surface area. The Class E airspace area extension is no longer required due to the proposed modification of BKF's surface area airspace.
Finally, the FAA is proposing administrative actions to BKF's airspace legal descriptions. The airport's name on line 2 of both legal descriptions should state “Buckley Space Force Base, CO.” Additionally, line four of both surface area legal descriptions should include “Denver International Airport, CO” and “Centennial Airport, CO” as references, as they are used to define BKF's surface areas.
The FAA has determined that this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration proposes to amend 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
That airspace extending upward from the surface to but not including 7,500 feet MSL within a 4.4-mile radius of the airport, within 2 miles northeast and 4 miles southwest of the airport's 151° bearing extending to 7.1 miles southeast, and within 4 miles south and 4.4 miles north of the airport's 270° bearing extending to 4.7 miles west, excluding that airspace within the Denver International Airport, CO, Class B and Centennial Airport, CO, Class D airspace areas. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from the surface to but not including 7,500 feet MSL within a 4.4-mile radius of the airport, within 2 miles northeast and 4 miles southwest of the airport's 151° bearing extending to 7.1 miles southeast, and within 4 miles south and 4.4 miles north of the airport's 270° bearing extending to 4.7 miles west, excluding that airspace within the Denver International Airport, CO, Class B and Centennial Airport, CO, Class D airspace areas. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Air Missions. The effective date and time will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from the surface within 2 miles each side of the Buckley Runway 32 ILS localizer southeast course extending from the 4.4-mile radius to 7.5 miles southeast of the airport.
Internal Revenue Service (IRS), Treasury.
Notice of proposed rulemaking and notice of public hearing.
This document contains proposed regulations concerning the program to allocate clean electricity low-income communities bonus credit amounts established pursuant to the Inflation Reduction Act of 2022 for calendar years 2025 and succeeding years. Applicants investing in certain clean electricity generation facilities that produce electricity without combustion and gasification may apply for an allocation of environmental justice capacity limitation to increase the amount of the clean electricity investment credit for the taxable year in which the facility is placed in service. This document describes proposed definitions and requirements that would be applicable for the program.
Written or electronic comments must be received by October 3, 2024. The public hearing on these proposed regulations is scheduled to be held on October 17, 2024, at 10 a.m. EST. Requests to speak and outlines of topics to be discussed at the public hearing must be received by October 3, 2024. If no outlines are received by October 3, 2024, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. on October 15, 2024.
Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at
Concerning the proposed rules, Office of Associate Chief Counsel (Passthroughs & Special Industries) at (202) 317-6853 (not a toll-free number); concerning submissions of comments or the public hearing, the Publications and Regulations Section at (202) 317-6901 (not a toll-free number) or by email at
This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 48E(h) of the Internal Revenue Code (Code) to provide proposed definitions and rules relating to the allocation of environmental justice capacity limitation (Capacity Limitation) for calendar year 2025 and succeeding years (proposed regulations). Section 48E(h)(4)(A) provides an express delegation of authority for the Secretary of the Treasury or her delegate (Secretary) to establish a program to allocate amounts of Capacity Limitation to applicable facilities not later than January 1, 2025, and to make such allocations. Section 48E(h)(5) provides an express delegation of authority for the Secretary, by regulations or other guidance, to provide rules for recapturing the benefit of any increase in the credit allowed under section 48E(a) that results from an allocation of Capacity Limitation with respect to any property that ceases to be property eligible for such increase (but that does not cease to be investment credit property within the meaning of section 50(a) of the Code). In addition, section 48E(i) provides an express delegation of authority for the Secretary to issue guidance regarding implementation of section 48E not later than January 1, 2025. The proposed regulations are also issued under the express delegation of authority under section 7805 of the Code.
Section 13702 of Public Law 117-169, 136 Stat. 1818, 1921 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), added new section 48E(h) to authorize the Secretary to establish a program for calendar years 2025 and succeeding years to award allocations of Capacity Limitation that increase the amount of the new clean electricity investment credit determined under section 48E(a) (section 48E credit) with respect to eligible property that is part of an applicable facility. This document contains proposed definitions and rules relating to the allocation of Capacity Limitation for calendar year 2025 and succeeding years.
The amount of section 48E credit for a taxable year generally is calculated by multiplying the qualified investment for such taxable year with respect to any qualified facility placed in service during that taxable year by the applicable percentage (as defined in section 48E(a)(2)). If an applicable facility is awarded an allocation of Capacity Limitation, section 48E(h) increases the amount of the section 48E credit with respect to the applicable facility by increasing the applicable percentage used to calculate the amount of the section 48E credit (section 48E(h) Increase). The term “applicable facility” is defined in section 48E(h)(2) to mean any qualified facility that (i) is not described in section 45Y(b)(2)(B) of the Code (relating to combustion and gasification facilities); (ii) has a maximum net output of less than 5 megawatts (MW) (as measured in alternating current (AC)); and (iii) is described in at least one of four categories in section 48E(h)(2)(A)(iii) (as further described in part II of this Background).
Section 48E(h)(4)(A) directs the Secretary, not later than January 1, 2025, to establish a program to allocate amounts of Capacity Limitation to applicable facilities and to “provide procedures to allow for an efficient allocation” of Capacity Limitation to applicable facilities. Accordingly, the Treasury Department and the IRS are establishing the Clean Electricity Low-Income Communities Bonus Credit Amount Program (Program). As described in the Explanation of Provisions, this notice of proposed rulemaking provides proposed threshold definitions and requirements for the Program to make allocations of Capacity Limitation efficiently and
Procedures for future Program years also will be provided in guidance published in the Internal Revenue Bulletin. The Treasury Department and the IRS expect that many of the procedural aspects of the Program will be similar to the Low-Income Communities Bonus Credit Program established under section 48(e) of the Code
Depending on the category of the facility, an allocation of Capacity Limitation may result in a section 48E(h) Increase equal to either 10 percentage points or 20 percentage points. Section 48E(h)(1)(A)(i) provides for a section 48E(h) Increase of 10 percentage points for eligible property that is located in a low-income community, as defined in section 45D(e) of the Code (Category 1 facility), or on Indian land, as defined in section 2601(2) of the Energy Policy Act of 1992 (25 U.S.C. 3501(2)) (Category 2 facility). Section 48E(h)(1)(A)(ii) provides for a section 48E(h) Increase of 20 percentage points for eligible property that is part of a qualified low-income residential building project (Category 3 facility) or a qualified low-income economic benefit project (Category 4 facility).
Section 48E(h)(2)(B) provides that a facility will be treated as part of a “qualified low-income residential building project” if the facility is installed on a residential rental building that participates in a covered housing program (as defined in section 41411(a) of the Violence Against Women Act of 1994 (34 U.S.C. 12491(a)(3)) (VAWA)), a housing assistance program administered by the Department of Agriculture under title V of the Housing Act of 1949, a housing program administered by a tribally designated housing entity (as defined in section 4(22) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(22))), or such other affordable housing programs as the Secretary may provide, and the financial benefits of the electricity produced by the facility are allocated equitably among the occupants of the dwelling units of such building.
Section 48E(h)(2)(C) provides that a facility will be treated as part of a “qualified low-income economic benefit project” if at least 50 percent of the financial benefits of the electricity produced by such facility are provided to households with income of less than 200 percent of the poverty line (as defined in section 36B(d)(3)(A) of the Code) applicable to a family of the size involved, or less than 80 percent of area median gross income (as determined under section 142(d)(2)(B) of the Code).
For a qualified low-income residential building project and a qualified low-income economic benefit project, section 48E(h)(2)(D) provides that electricity acquired at a below-market rate will be considered a financial benefit.
Section 48E(h)(4)(A) directs the Secretary to establish the Program, not later than January 1, 2025, to allocate amounts of Capacity Limitation to applicable facilities. Under section 48E(h)(4)(C), the total annual Capacity Limitation that may be allocated is 1.8 gigawatts of direct current capacity for each of the calendar years during the period beginning on January 1, 2025, and ending on December 31 of the applicable year (as defined in section 45Y(d)(3)),
Under section 48E(h)(4)(D)(i), if the annual Capacity Limitation for any calendar year exceeds the aggregate amount allocated for such year, the excess is carried forward to the next year. No amount of Capacity Limitation may be carried to any calendar year after the third calendar year following the applicable year (as defined in section 45Y(d)(3)). Under section 48E(h)(4)(D)(ii), if the annual Capacity Limitation for calendar year 2024 under section 48(e)(4)(D) exceeds the aggregate amount allocated for such year, the excess amount may be carried over and applied to the annual Capacity Limitation under this paragraph for calendar year 2025. The annual Capacity Limitation for calendar year 2025 is increased by the amount of such excess.
The proposed regulations in this notice of proposed rulemaking would provide definitions and requirements necessary to submit an application to request an allocation of Capacity Limitation for calendar year 2025 (and subsequent years) under the Program and to claim a section 48E(h) Increase. The Treasury Department and the IRS request comments on these proposed definitions and requirements.
The proposed regulations relate to specific definitions and requirements regarding the following topics: (1) the definition of “applicable facility;” (2) definitions of “eligible property” under section 48E(h)(3); (3) the definition of “located in” for relevant geographic criteria; (4) definitions and requirements related to the term “financial benefit” and “electricity acquired at a below-market rate” under section 48E(h)(2)(D), as well as a manner to apply such definitions, appropriately, to Category 3 facilities that are part of qualified low-income residential building projects and Category 4 facilities that are part of qualified economic benefit projects; (5) a rule for facilities placed in service prior to an allocation award; (6) reservations of Capacity Limitation allocation for applicant facilities that meet certain Additional Selection Criteria; (7) sub-reservations of Capacity Limitation allocation for facilities built in a low-income community; (8) the requirement to submit certain application materials demonstrating facility viability in order to allow for an efficient allocation process; (9) the requirement to submit certain documentation and attestations when a facility is placed in service; and (10) post-allocation compliance, including disqualification of allocations of Capacity Limitation and recapture of the section 48E(h) Increase.
The term “applicable facility” is defined in section 48E(h)(2)(A) to mean any qualified facility (as defined in section 48E(b)(3)) that (i) is not described in section 45Y(b)(2)(B) (related to combustion and gasification facilities); (ii) has a maximum net output of less than 5 MW (as measured in AC); and (iii) is described in at least one of the four categories described in section 48E(h)(2)(A)(iii) (Category 1, 2, 3, or 4). Therefore, proposed § 1.48E(h)-1(b)(1) would define an applicable facility as any qualified facility described in section 48E(b)(3) that (i) is a facility that is not described in section 45Y(b)(2)(B) (non-combustion and gasification facilities); (ii) has a
Proposed § 1.48E(h)-1(b)(1) would also clarify that the types of qualified facilities eligible for the Program are only those non-combustion and gasification qualified facilities
Depending on the category of the facility, an allocation of Capacity Limitation under the Program may result in a section 48E(h) Increase equal to either 10 percentage points or 20 percentage points. Section 48E(h)(1)(A)(i) provides for a section 48(e) Increase of 10 percentage points for eligible property that is located in a low-income community (Category 1 facility), or on Indian land (Category 2 facility). Section 48E(h)(1)(A)(ii) provides for a section 48E(h) Increase of 20 percentage points for eligible property that is part of a qualified low-income residential building project (Category 3 facility) or a qualified low-income economic benefit project (Category 4 facility). Proposed § 1.48E(h)-1(b)(2) would define the four facility categories (Category 1, 2, 3, or 4).
Section 48E(h)(2)(A)(iii)(I) defines an “applicable facility” in part to include a qualified facility that is located in a low-income community (as defined in section 45D(e)). Under section 48E(h)(2)(A)(iii)(I), the term low-income community generally is defined under section 45D(e)(1), with certain modifications described elsewhere in section 45D(e), as any population census tract if the poverty rate for such tract is at least 20 percent, or, in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.
Proposed § 1.48E(h)-1(b)(2)(i) would define a Category 1 facility consistent with section 48E(h)(2)(A)(iii)(I) as a facility located in a low-income community, which generally is defined under section 45D(e)(1) as any population census tract if the poverty rate for such tract is at least 20 percent based on the most recently released low-income community data currently used for the New Markets Tax Credit (NMTC) under section 45D, or, in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or, in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income. Proposed § 1.48E(h)-1(b)(2)(i) would provide that the term “low-income community” also includes the modifications in section 45D(e)(4) and (5) for tracts with low population and modification of the income requirement for census tracts with high migration rural counties. Low-income community information for NMTC can be found at the U.S. Department of Treasury, Community Development Financial Institutions Fund website and its web page mapping tool,
Proposed § 1.48E(h)-1(b)(2)(i) would clarify also that the poverty rate for a census tract generally is based on the most recently released ACS low-income community data for the NMTC. However, if updated data is released, a taxpayer can choose to base the poverty rate for any population census tract on either the prior version of the ACS low-income community data or the updated ACS low-income community data for a period of 1 year following the date of the release of the updated data. After the 1-year transition period, the updated ACS low-income community data must be used.
Proposed § 1.48E(h)-1(b)(2)(i) would provide that population census tracts that satisfy the definition of low-income community at the time of application are considered to continue to meet the definition of low-income community for the duration of the recapture period unless the location of the facility changes.
Section 48E(h)(2)(A)(iii)(I) defines an “applicable facility” in part to include a qualified facility that is located on Indian land (as defined in section 2601(2) of the Energy Policy Act of 1992 (25 U.S.C. 3501(2)). Proposed § 1.48E(h)-1(b)(2)(ii) would define a Category 2 facility, consistent with section 48E(h)(2)(A)(iii)(I), as facility that is located on Indian land. Proposed § 1.48E(h)-1(b)(2)(ii) would provide that the term “Indian land” is defined in section 2601(2) of the Energy Policy Act of 1992 (25 U.S.C. 3501(2)).
Section 48E(h)(2)(A)(iii)(II) defines an “applicable facility” in part to include a qualified facility that is part of a qualified low-income residential building project. Proposed § 1.48E(h)-1(b)(2)(iii) would define a Category 3 facility as a facility that is part of a qualified low-income residential building project. A facility would be treated as part of a qualified low-income residential building project if such
The statutory cross-reference to VAWA is comprehensive and includes numerous types of housing programs and policies across Federal agencies. The Treasury Department and the IRS, in consultation with other Federal agencies, developed an illustrative list of Federal housing programs and policies that meet the requirements in section 48E(h)(2)(B)(i):
Covered housing programs and policies (as defined in VAWA) are those with active affordability covenants tied to the following:
• Department of Housing and Urban Development's (HUD) Section 202 Supportive Housing for the Elderly, including the direct loan program under Section 202.
• HUD's Section 811 Supportive Housing for Persons with Disabilities.
• HUD's Housing Opportunities for Persons With AIDS (HOPWA) program.
• HUD's homeless programs under title IV of the McKinney-Vento Homeless Assistance Act, including the Emergency Solutions Grants program, the Continuum of Care program, and the Rural Housing Stability Assistance program.
• HUD's HOME Investment Partnerships (HOME) program.
• Federal Housing Administration (FHA) mortgage insurance under Section 221(d)(3) subsidized with a below-market interest rate (BMIR) prescribed in the proviso of Section 221(d)(5) of the National Housing Act.
• HUD's Section 236 interest rate reduction payments.
• HUD Public Housing assisted under section 9 of the United States Housing Act of 1937.
• HUD project-based rental assistance under section 8 of the United States Housing Act of 1937.
• HUD Section 8 Moderate Rehabilitation Program.
• HUD Section 8 Moderate Rehabilitation Single Room Occupancy Program for Homeless Individuals.
• USDA Section 515 Rural Rental Housing.
• USDA Section 514/516 Farm Labor Housing.
• USDA Section 538 Guaranteed Rural Rental Housing.
• USDA Section 533 Housing Preservation Grant Program.
• Treasury/IRS Low-Income Housing Credit under section 42.
• HUD's National Housing Trust Fund.
• Veterans Administration's (VA) Comprehensive Service Programs for Homeless Veterans.
• VA's grant program for homeless veterans with special needs.
• VA's financial assistance for supportive services for very low-income veteran families in permanent housing.
• Department of Justice transitional housing assistance grants for victims of domestic violence, dating violence, sexual assault, or stalking.
Section 48E(e)(2)(B)(i) also includes the following Federal housing programs:
• Housing assistance programs administered by the USDA under title V of the Housing Act of 1949.
• Housing programs administered by an Indian Tribe or a Tribally designated housing entity (as defined in section 4(22) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4103(22)).
• Housing programs administered by the Department of Hawaiian Homelands as defined in Title VIII of the Native American Housing Assistance and Self-Determination Act of 1996 (24 CFR 1006.10), Native Hawaiian Organizations as defined in (13 CFR 124.3), and Hawaiian Homestead Associations as defined in (43 CFR 48.6).
This list also will be made available on the Program web page.
Section 48E(e)(2)(B)(i) authorizes the Secretary to add other affordable housing programs to the list of eligible programs. The Treasury Department and the IRS request comment on whether other affordable housing programs should be added to the list of eligible programs, and specifically request comment on whether and under what conditions certain state programs should be added to the list.
Section 48E(h)(2)(A)(iii)(II) defines an “applicable facility” in part to include a qualified facility that is part of a qualified low-income economic benefit project. Section 48E(h)(2)(C) provides that a facility will be treated as part of a qualified low-income economic benefit project if at least 50 percent of the financial benefits of the electricity produced by such facility are provided to households with income of less than 200 percent of the poverty line (as defined in section 36B(d)(3)(A)) applicable to a family of the size involved, or less than 80 percent of area median gross income (as determined under section 142(d)(2)(B)).
Proposed § 1.48E(h)-1(b)(2)(iv), consistent with 48E(h)(2)(A)(iii)(II), would define a Category 4 facility as a facility that is part of qualified low-income economic benefit project. A facility would be treated as part of a qualified low-income economic benefit project if, as provided in proposed § 1.48E(h)-1(f), at least 50 percent of the financial benefits of the electricity produced by the facility are provided to households with income of less than (A) 200 percent of the poverty line (as defined in section 36B(d)(3)(A)) applicable to a family of the size involved, or (B) 80 percent of area median gross income (as determined under section 142(d)(2)(B)).
Section 48E(h)(2)(A)(ii) requires that an applicable facility have a maximum net output of less than 5 (MW) (measured in AC), referred to in this preamble as the “less than five megawatts requirement.” Proposed § 1.48E(h)-1(b)(3)(i) would provide that the less than five megawatts requirement is measured at the level of the applicable facility in accordance with section 48E(h)(2)(A)(ii). The maximum net output of an applicable facility is measured only by nameplate generating capacity of the applicable facility, which includes only functionally interdependent components of property that are owned by the taxpayer, that are operated together, and that can operate apart from other property to produce electricity, at the time the applicable facility is placed in service. In accordance with proposed § 1.48E-2(b)(2)(ii), proposed § 1.48E(h)-1(b)(3)(i) would provide that components of property are functionally interdependent if the placing in service of each component is dependent upon placing in service other components to produce electricity.
Proposed § 1.48E(h)-1(b)(3)(ii) would provide that the determination of whether an applicable facility has a maximum net output of less than 5 MW (as measured in AC) is based on the nameplate capacity of the applicable facility. The nameplate capacity for purposes of the less than five megawatts requirement is the maximum electrical generating output in MW that the applicable facility is capable of producing on a steady state basis and during continuous operation under standard conditions, as measured by the manufacturer and consistent with the definition of nameplate capacity provided in 40 CFR 96.202. If applicable, the International Standard Organization conditions should be used to measure the maximum electrical generating output of an applicable facility.
The Treasury Department and the IRS request comments on other approaches to address this statutory requirement that would further the purpose of efficient allocation of a Federal tax credit program with a national impact and would advance the goals of the Program to incentivize additional deployment of qualified facilities in low-income communities. These approaches could include rules that would aggregate the capacity of qualified facilities with integrated operations (that is, qualified facilities that are owned by the same taxpayer, placed in service in the same taxable year, and transmit electricity generated by the facilities through the same point of interconnection or, if the facilities are not grid-connected, to the same end user(s)) solely for the purposes of whether an application meets the less than five megawatts requirement under Section 48E(h)(2)(A)(ii).
Section 48E(h)(3) defines “eligible property” as a qualified investment with respect to any applicable facility. Section 48E(b) describes a qualified investment with respect to a qualified facility. Generally, for purposes of section 48E(a), section 48E(b)(1)(A) and (b)(1)(B)(i) provides that the qualified investment with respect to a qualified facility for any taxable year is the sum of the basis of any qualified property placed in service by the taxpayer during such taxable year that is part of a qualified facility, plus the amount of expenditures that are paid or incurred by the taxpayer for qualified interconnection property that is properly chargeable to capital account of the taxpayer. Pursuant to section 48E(h)(3), eligible property does not include any qualified investment with respect to energy storage technology.
Proposed § 1.48E(h)-1(c) would define “eligible property” as a qualified investment (as defined in section 48E(b))
Proposed § 1.48E(h)-1(d)(1) would treat an applicable facility as “located in a low-income community” or “on Indian land” under section 48E(h)(2)(A)(iii)(I) or located in a geographic area under the Additional Selection Criteria (
Under the Nameplate Capacity Test for Location, which would be provided in proposed § 1.48E(h)-1(d)(2), an applicable facility would be considered located in or on the relevant geographic area described in proposed § 1.48E(h)-1(d)(1) if 50 percent or more of the applicable facility's nameplate capacity is in a qualifying area. The percentage of an applicable facility's nameplate capacity (as defined in proposed § 1.48E(h)-1(d)(3)) that is in a qualifying area would be determined by dividing the nameplate capacity of the applicable facility's electricity-generating units that are located in the qualifying area by the total nameplate capacity of all the electricity-generating units of the applicable facility.
Proposed § 1.48E(h)-1(d)(3) would provide that nameplate capacity for purposes of the Nameplate Capacity Test for Location for an electricity generating unit means the maximum electrical generating output that the applicable facility is capable of producing on a steady state basis and during continuous operation under standard conditions, as measured by the manufacturer and consistent with the definition of nameplate capacity provided in 40 CFR 96.202. If applicable, the International Standard Organization conditions should be used to measure the maximum electrical generating output of an applicable facility. For purposes of assessing the Nameplate Capacity Test for Location, electricity-generating units that generate direct current (DC) power before converting to AC (for example, solar photovoltaic) should use nameplate capacity in DC, otherwise the nameplate capacity in AC should be used.
Section 48E(h)(2)(D) provides that “electricity acquired at a below market rate” will not fail to be taken into account as a financial benefit. To clarify this language, the Treasury Department and the IRS propose definitions of the terms “financial benefit” and “electricity acquired at a below market rate” under section 48E(h)(2)(D), as well as a manner to apply such definitions, appropriately, to qualified low-income residential building projects (section 48E(h)(2)(B)) and qualified economic benefit projects (section 48E(h)(2)(C)). The definitions and requirements would be different for an allocation under Category 3 (section 48E(h)(2)(B)) and Category 4 (section 48E(h)(2)(C)).
For a facility to be treated as part of a qualified low-income residential building project (Category 3 facility), section 48E(h)(2)(B)(ii) provides that the financial benefits of the electricity produced by such facility must be allocated equitably among the occupants of the dwelling units of a residential rental building that participates in a covered housing program or other affordable housing program (Qualified Residential Property). The Treasury Department and the IRS propose to reserve allocations under this category exclusively for applicants that would apply the financial benefits requirement in proposed § 1.48E(h)-1(e).
Proposed § 1.48E(h)-1(e)(1) would provide that, to satisfy the requirements of a Category 3 facility, the financial benefits of the electricity produced by the facility must be allocated equitably among the occupants of the dwelling units of the Qualified Residential Property. The same rules for financial benefits for Category 3 facilities apply to both multi-family property and single-family Qualified Residential Property.
Proposed § 1.48E(h)-1(e)(2) would provide that at least 50 percent of the financial value of the electricity produced by the facility (as defined in proposed § 1.48E(h)-1(e)(3)) must be equitably allocated to the Qualified Residential Property's occupants that are designated as low-income occupants under the housing program.
Proposed § 1.48E(h)-1(e)(3) would define the financial value of the electricity produced by the applicable facility as the greater of: (i) 25 percent of the gross financial value (as defined
Proposed § 1.48E(h)-1(e)(4) would calculate gross financial value of the annual electricity produced by the applicable facility as the sum of: (i) the total self-consumed kilowatt-hours produced by the applicable facility multiplied by the Qualified Residential Property's metered volumetric price of electricity, (ii) the total exported kilowatt-hours produced by the applicable facility multiplied by the Qualified Residential Property's volumetric export compensation rate for kilowatt-hours of electricity, and (iii) the sale of any attributes associated with the applicable facility's production (including, for example, any Federal, State, or Tribal renewable energy credits or incentives), if separate from the metered price of electricity or export compensation rate.
The definition of net financial value in proposed § 1.48E(h)-1(e)(5) would account for the specific nature of facilities serving low-income residential buildings and facility ownership, as the applicable facility may be third-party owned or commonly owned with the building. For common ownership, proposed § 1.48E(h)-1(e)(5)(i) would define net financial value as the gross financial value of the annual electricity produced minus the annual average (or levelized) cost of the applicable facility over the useful life of the facility (including debt service, maintenance, replacement reserve, capital expenditures, and any other costs associated with constructing, maintaining, and operating the facility). For third-party ownership, if the facility and the Qualified Residential Property are not commonly owned, and the facility owner enters into a power purchase agreement or other contract for electricity services with the Qualified Residential Property owner and/or building occupants, proposed § 1.48E(h)-1(e)(5)(ii) would define net financial value as the gross financial value of the annual electricity produced minus any payments made by the building owner and/or building occupants to the applicable facility owner for electricity services associated with the applicable facility in a given year.
Proposed § 1.48E(h)-1(e)(5)(iii) would provide different rules to ensure an equitable allocation of financial benefits depending on whether or not financial value is distributed to building occupants via utility bill savings or through different means. If financial value is distributed via utility bill savings, proposed § 1.48E(h)-1(e)(5)(iii)(A) would provide that financial benefits will be considered to be allocated equitably if at least 50 percent of the financial value of the electricity produced by the applicable facility is distributed as utility bill savings in equal shares to each building dwelling unit among the Qualified Residential Property's occupants that are designated as low-income under the covered housing program or other affordable housing program (described in section 48E(h)(2)(B)(i)) or alternatively distributed in proportional shares based on each low-income dwelling unit's square footage, or each low-income dwelling unit's number of occupants. Proposed § 1.48E(h)-1(e)(5)(iii)(A) would provide also that for any occupant(s) who choose to not receive utility bill savings (for example, exercise their right to not participate in or to opt out of a community generation subscription in applicable jurisdictions), the portion of the financial value that would otherwise be distributed to non-participating occupants must be instead distributed to all participating occupants. Proposed § 1.48E(h)-1(e)(5)(iii)(A) would clarify that no less than 50 percent of the Qualified Residential Property's occupants that are designated as low-income must participate and receive utility bill savings for the applicable facility to use this method of benefit distribution.
Proposed § 1.48E(h)-1(e)(5)(iii)(A) also would provide that in the case of a solar facility, applicants must follow the HUD guidance on Treatment of Financial Benefits to HUD-Assisted Tenants Resulting from Participation in Solar Programs Notice (Housing Notice 2023-09), located at
Proposed § 1.48E(h)-1(e)(5)(iii)(B) would provide that if financial value is not distributed via utility bill savings, financial benefits will be considered to be allocated equitably if at least 50 percent of the financial value of the electricity produced by the applicable facility is distributed to occupants using one or more methods described Housing Notice 2023-09 for a master-metered building, or future HUD guidance, or other guidance or notices from the Federal agency that oversees the applicable housing program identified in section 48E(h)(2)(B). In the case of a solar facility, applicants must comply with HUD guidance, or future HUD guidance, for how residents of master-metered HUD-assisted housing can benefit from owners' sharing of financial benefits accrued from an investment in solar electricity generation to ensure that tenants' utility allowances and annual income for rent calculations are not negatively impacted. Applicants should apply similar principles in the case of any other applicable facility.
To achieve the goal of verifying Program compliance and to provide clarification to applicants regarding how they can demonstrate that statutory requirements are met, proposed § 1.48E(h)-1(e)(6)(i) would provide that a Category 3 facility owner must prepare a Benefits Sharing Statement. The Benefits Sharing Statement would be required to include (A) a calculation of the facility's gross financial value using the method described in proposed § 1.48E(h)-1(e)(4), (B) a calculation of the facility's net financial value using the method described in proposed § 1.48E(h)-1(e)(5), (C) a calculation of the financial value required to be distributed to building occupants using the method described in proposed § 1.48E(h)-1(e)(3), (D) a description of the means through which the required financial value will be distributed to building occupants, and (E) if the facility and Qualified Residential Property are separately owned, an indication of which entity will be responsible for the distribution of benefits to the occupants.
Proposed § 1.48E(h)-1(e)(6)(ii) would provide that the Qualified Residential Property owner must formally notify the occupants of units in the Qualified Residential Property of the development of the facility and planned distribution of benefits.
For a facility to be treated as part of a qualified low-income economic
Proposed § 1.48E(h)-1(f)(1) would provide that to satisfy the requirements of a Category 4 facility:
(i) The facility must serve multiple qualifying low-income households under section 48E(e)(2)(C)(i);
(ii) At least 50 percent of the facility's total output in kilowatts (kW) must be assigned to Qualifying Households; and
(iii) Each Qualifying Household must be provided a bill credit discount rate (as defined in proposed § 1.48E(h)-1(f)(2)) of at least 30 percent.
The Treasury Department and the IRS request comment on (1) whether a 30-percent bill credit discount rate would be feasible for Category 4 facilities, (2) whether a rate of 30 percent or greater would be feasible if transitioned in over time (that is, an increase in the minimum bill credit discount for each subsequent program year) and, if so, what would be an appropriate rate of transition, (3) how would this discount rate impact different eligible technologies, and (4) the impact of a minimum bill discount credit rate for Category 4 facilities that is different from benefit requirements for existing or planned state programs (for example, state-level community solar programs supported by the U.S. Environmental Protection Agency's Greenhouse Gas Reduction Fund).
Proposed § 1.48E(h)-1(f)(2)(i) would define a bill credit discount rate as the difference between the financial benefit provided to a Qualifying Household (including utility bill credits, reductions in a Qualifying Household's electricity rate, or other monetary benefits accrued by the Qualifying Household on their utility bill) and the cost of participating in the community program (including subscription payments for zero-carbon energy and any other fees or charges), expressed as a percentage of the financial benefit distributed to the Qualifying Household. The bill credit discount rate can be calculated by starting with the financial benefit provided to the Qualifying Household, subtracting all payments made by the Qualifying Household (or payments remitted on behalf of the Qualifying Household through net crediting, consolidated billing, or similar arrangements) to the facility owner and any related third parties as a condition of receiving that financial benefit, then dividing that difference by the financial benefit distributed to the Qualifying Household.
Proposed § 1.48E(h)-1(f)(2)(ii) would provide that in cases in which the Qualifying Household has no or only a nominal cost of participation, and financial benefits are delivered through a utility or government body, the bill credit discount rate should be calculated as the financial benefit provided to a Qualifying Household (including utility bill credits, reductions in a Qualifying Household's electricity rate, or other monetary benefits accrued by a Qualifying Household on their utility bill) divided by the total value of the electricity produced by the facility and assigned to the Qualifying Household (including any electricity services, products, and credits provided in conjunction with the electricity produced by such facility), as measured by the utility, independent system operator (ISO), or other off-taker procuring electricity (and related services, products, and credits) from the facility. Proposed § 1.48E(h)-1(f)(2)(iii) would clarify that the bill credit discount rate is calculated on an annual basis. Proposed § 1.48E(h)-1(f)(2)(iv) would provide examples to clarify that application of proposed § 1.48E(h)-1(f)(2).
The Treasury Department and the IRS are considering adding other methods, apart from bill credit discounts, for financial benefits to be shared with Qualifying Households. Accordingly, the Treasury Department and the IRS request comments on (1) what alternative methods for delivering financial benefits should be considered to provide equivalent financial benefits in cases in which bill credit discounts are not available or are not feasible for covered technologies; (2) how these alternative mechanisms should be verified to ensure they provide the required financial benefits to Qualifying Households; (3) whether these alternative mechanisms are feasible for multiple technologies; and (4) what requirements can be put in place to address any uncertainties related to the potential treatment of financial benefits as income for Federal income tax purposes or the potential impact on eligibility for public assistance benefits.
Proposed § 1.48E(h)-1(f)(2)(iii) would provide that if the facility derives financial value from the production of electricity in a manner such that this value cannot be directly applied to the Qualifying Household's utility bill (for example, renewable energy credit payments made directly to the facility owner), then no less than 30 percent of that monetary value must also be provided to the Qualifying Household, either through a greater bill credit discount on the Qualifying Household's utility bill than would otherwise be derived from the method described in proposed § 1.48E(h)-1(f)(1)(i) or through other means.
To ensure the requirements of proposed § 1.48E(h)-1(f) are met, proposed § 1.48E(h)-1(f)(3) would require verification of households' qualifying low-income status. Applicants are responsible for proof-of-income verification. Proposed § 1.48E(h)-1(f)(3)(i) would provide that to establish that financial benefits are provided to Qualifying Households as provided in proposed § 1.48E(h)-1(f)(1), applicants must submit documentation in accordance with guidance published in the Internal Revenue Bulletin. A Qualifying Household's low-income status is determined at the time the household enrolls in the subscription program and does not need to be re-verified.
Proposed § 1.48E(h)-1(f)(3)(ii) would provide that applicants can use categorical eligibility or other income verification methods to establish that a household is a Qualifying Household. Proposed § 1.48E(h)-1(f)(3)(ii)(A) would provide that categorical eligibility consists of obtaining proof of the household's participation in a needs-based Federal, State, Tribal, or utility program with income limits at or below the qualifying income level required to be a Qualifying Household. Federal programs may include, but are not limited to: Medicaid, Low-Income Home Energy Assistance Program (LIHEAP) administered by the Department of Health and Human Services, Weatherization Assistance Program (WAP) administered by the Department of Energy (DOE), Supplemental Nutrition Assistance Program (SNAP) administered by the USDA, Section 8 Project-Based Rental Assistance, the Housing Choice Voucher Program administered by HUD, the Federal Communication Commission's Lifeline Support for Affordable Communications, the National School Lunch Program administered by the USDA, the Supplemental Security Income Program administered by the Social Security Administration, and any verified government or non-profit program serving Asset Limited Income Constrained Employed (ALICE) persons or households. With respect to the Federal programs listed previously an individual in the household must currently be approved for assistance from or participation in the program with an award letter or other written documentation within the last 12 months for enrollment in that program to establish categorical eligibility of the household. State agencies also can
Proposed § 1.48E(h)-1(f)(3)(ii)(B) would provide that paystubs, Federal or State tax returns, or income verification through crediting agencies and commercial data sources can also be used to establish that a household is a Qualifying Household. Proposed § 1.48E(h)-1(f)(3)(ii)(C) would provide that a self-attestation from a household is not a permissible method to establish a household is a Qualifying Household. This prohibition on direct self-attestation from a household does not extend to categorical eligibility for needs-based Federal, State, Tribal, or utility programs with income limits that rely on self-attestation for verification of income.
Under section 48E(h)(4)(C), the total annual Capacity Limitation is 1.8 gigawatts of DC capacity for each calendar year during the period beginning on January 1, 2025, and ending on December 31 of the applicable year (as defined in section 45Y(d)(3)),
Proposed § 1.48E(h)-1(g)(2) would provide that if the annual Capacity Limitation for any calendar year exceeds the aggregate amount of annual Capacity Limitation allocated for a calendar year under proposed § 1.48E(h)-1(g)(2), then the annual Capacity Limitation for the succeeding calendar year is increased by the amount of such excess. No amount of Capacity Limitation may be carried to any calendar year after the third calendar year following the applicable year (as defined in section 45Y(d)(3)).
Proposed § 1.48E(h)-1(h)(1) would provide that at least 50 percent of the total Capacity Limitation in each facility category would be reserved for facilities meeting criteria described in proposed § 1.48E(h)-1(h)(2) (relating to ownership criteria) and proposed § 1.48E(h)-1(h)(3) (relating to geographic criteria); both the ownership and the geographic criteria are collectively referred to as “Additional Selection Criteria”. The specific amount of Capacity Limitation reserved (but not less than 50 percent) would be provided in guidance published in the Internal Revenue Bulletin for each Program year.
The procedure for using these Additional Selection Criteria also will be provided in guidance published in the Internal Revenue Bulletin. The Treasury Department and the IRS expect that in evaluating applications received during the initial application window, priority would be given to eligible applications for facilities meeting at least one of the two Additional Selection Criteria. The Treasury Department and the IRS expect that if the eligible applications for Capacity Limitation for facilities that meet at least one of the two Additional Selection Criteria categories exceed the Capacity Limitation for a category, then facilities meeting both of the Additional Selection Criteria categories would be prioritized for an allocation. If eligible applications for facilities that meet at least one of the two Additional Selection Criteria categories received during the initial application window total less than 50 percent of the Capacity Limitation for a category, then additional Capacity Limitation would be reserved during the rolling application period such that 50 percent of the total Capacity Limitation in the category would be reserved for these facilities.
Proposed § 1.48E(h)-1(h) also would provide that after the reservation of Capacity Limitation for qualified facilities meeting the Additional Selection Criteria described in proposed § 1.48E(h)-1(h)(2) and (3) is established in guidance published in the Internal Revenue Bulletin, it may be reallocated later across facility categories and sub-reservations in the event one category or sub-reservation within a category is oversubscribed and another has excess capacity. The Treasury Department and the IRS would retain the discretion to reallocate Capacity Limitation across categories and sub-categories to maximize allocations in the event one category or sub-reservation is oversubscribed and another has excess capacity.
Proposed § 1.48E(h)-1(h)(2) would provide criteria based on ownership (Ownership Criteria). The Ownership Criteria category is based on characteristics of the applicant that owns the applicable facility. An applicable facility would meet the Ownership Criteria if it is owned by a Tribal enterprise, an Alaska Native Corporation, a Native Hawaiian Organization, a renewable energy cooperative, or a qualified tax-exempt entity. If an applicant wholly owns an entity that is the owner of an applicable facility, and the entity is disregarded as separate from its owner for Federal income tax purposes (disregarded entity), then the applicant, and not the disregarded entity, is treated as the owner of the applicable facility for purposes of the Ownership Criteria. For corporations incorporated under the authority of either section 17 of the Indian Reorganization Act of 1934, 25 U.S.C. 5124 or section 3 of the Oklahoma Indian Welfare Act, 25 U.S.C. 5203, an application may be made as a Tribal Enterprise. If an applicant is an entity treated as a partnership for Federal income tax purposes, and an entity described in proposed § 1.48E(h)-1(h)(2)(i)(A) through (E) owns at least a one percent interest (either directly or indirectly) in each material item of partnership income, gain, loss, deduction, and credit and is a managing member or general partner (or similar title) under State or Tribal law of the partnership (or directly owns 100 percent of the equity interests in the managing member or general partner) at
Currently, these proposed regulations do not include an Ownership Criteria category for emerging market businesses, such as those businesses that do not have large market shares that could be demonstrated by the number of employees, annual revenue, and other factors. The Treasury Department and IRS considered including a category for emerging market businesses similar to the qualified renewable energy company category under the section 48(e) Low-Income Communities Bonus Credit Program and § 1.48(e)-1(h)(2)(vi), but ultimately decided not to retain the qualified renewable energy company category for purposes of the Program under section 48E(h) and these proposed regulations. The Treasury Department and IRS request comments on how an administrable emerging market business Ownership Criteria category could be structured, including what thresholds a definition should include to define market share and size, age of business, the number of employees (both minimum and maximum) and/or annual gross receipts generated by an emerging market business, and the supporting documentation that could be provided as part of the application to verify an applicant meets such criteria. Additionally, the Treasury Department and the IRS request comments on any other appropriate Ownership Criteria that might be applied, for example the degree to which a business focuses its efforts on and delivers benefits to low-income and disadvantaged communities, and the supporting documentation that could be provided as part of the application to verify an applicant meets such criteria.
A “Tribal enterprise” for purposes of the Ownership Criteria is an entity that is (1) owned at least 51 percent directly by an Indian Tribal government (as defined in section 30D(g)(9) of the Code), or owned at least 51 percent indirectly through a corporation that is wholly owned by the Indian Tribal government and is created either under the Tribal laws of the Indian Tribal government or through a corporation incorporated under the authority of either section 17 of the Indian Reorganization Act of 1934, 25 U.S.C. 5124, or section 3 of the Oklahoma Indian Welfare Act, 25 U.S.C. 5203, and (2) subject to Tribal government rules, regulations, and/or codes that regulate the operations of the entity.
An “Alaska Native Corporation” for purposes of the Ownership Criteria is defined in section 3 of the Alaska Native Claims Settlement Act, 43 U.S.C. 1602(m).
A “Native Hawaiian Organization” for purposes of the Ownership Criteria is defined in 13 CFR 124.3.
A “renewable energy cooperative” for purposes of the Ownership Criteria is an entity that develops applicable facilities and is either (1) a consumer or purchasing cooperative controlled by its members with each member having an equal voting right and with each member having rights to profit distributions based on patronage as defined by proportion of volume of energy or energy credits purchased (kWh), volume of financial benefits delivered ($), or volume of financial payments made ($), and in which at least 50 percent of the patronage in the qualified facility is by cooperative members who are low-income households (as defined in section 48(e)(2)(C)); or (2) a worker cooperative controlled by its worker-members with each member having an equal voting right.
A “qualified tax-exempt entity” for purposes of the Ownership Criteria is:
(1) An organization exempt from the tax imposed by subtitle A of the Code by reason of being described in section 501(c)(3) or (d) of the Code;
(2) Any State, the District of Columbia, or political subdivision thereof, or any agency or instrumentality of any of the foregoing;
(3) An Indian Tribal government (as defined in section 30D(g)(9)), a political subdivision thereof, or any agency or instrumentality of any of the foregoing; or
(4) Any corporation described in section 501(c)(12) operating on a cooperative basis that is engaged in furnishing electric energy to persons in rural areas.
Proposed § 1.48E(h)-1(h)(3) would provide criteria based on geography (Geographic Criteria). The Geographic Criteria category is based on where the facility will be placed in service. Geographic Criteria would not apply to Category 2 facilities. To meet the Geographic Criteria, a facility would need to be located in a Persistent Poverty County (PPC)
Proposed § 1.48E(h)-1(h)(3)(ii) would describe a PPC as any county in which 20 percent or more of residents have experienced high rates of poverty over the past 30 years. For purposes of the Program, the Treasury Department and the IRS propose using the PPC measure adopted by the USDA to make this determination. The most recent measure, which would apply for the 2025 program year, incorporates poverty estimates from the 1990 and 2000 censuses, and 2007-2011 and 2017-2021 ACS Survey 5-year averages.
Proposed § 1.48E(h)-1(h)(3)(iii) would provide that a census tract qualifies under § 1.48E(h)-1(h)(3)(i) if it is described in the latest official CEJST, as greater than or equal to the 90th percentile for energy burden and greater than or equal to the 65th percentile for low income, or as greater than or equal to the 90th percentile for PM
The Treasury Department and the IRS anticipate that Category 1 will receive the largest number of applications, and that within Category 1, many applications will involve residential solar facilities that are smaller in scale and have relatively short construction completion timelines. Therefore, proposed § 1.48E(h)-1(i) would subdivide the Capacity Limitation reservation for facilities seeking a Category 1 allocation with a portion of the Capacity Limitation specifically reserved for eligible residential behind the meter (BTM) facilities, including rooftop solar. The sub-reservation of a substantial portion of the allocation in Category 1 for eligible residential BTM facilities would help ensure that allocations predominantly are awarded to facilities serving residences and consumers, rather than facilities serving businesses. Proposed § 1.48E(h)-1(i) would reserve the remaining Capacity Limitation in Category 1 for applicants with front of the meter (FTM) facilities as well as non-residential BTM facilities. Proposed § 1.48E(h)-1(i) clarifies that the specific amounts of the Category 1 sub-reservations will be provided in future guidance published in the Internal Revenue Bulletin that is applicable to a Program year based on factors such as promoting efficient allocation of Capacity Limitation and allowing like-projects to compete for an allocation. Proposed § 1.48E(h)-1(i) provides that after the sub-reservation is established in guidance published in the Internal Revenue Bulletin, it may be reallocated later in the event it has excess capacity.
Proposed § 1.48E(h)-1(i)(2)(ii) would define an eligible residential BTM facility as single-family or multi-family residential applicable facility that does not meet the requirements for Category 3 and is BTM. Proposed § 1.48E(h)-1(i)(2)(ii) would provide that an applicable facility is residential if it is uses energy to generate electricity for use in a dwelling unit that is used as a residence. Proposed § 1.48E(h)-1(i)(2)(i) would define an applicable facility as BTM if: (1) it is connected with an electrical connection between the facility and the panelboard or sub-panelboard of the site where the facility is located, (2) it is to be connected on the customer side of a utility service meter before it connects to a distribution or transmission system (that is, before it connects to the electricity grid), and (3) its primary purpose is to provide electricity to the utility customer of the site where the facility is located. This also includes systems not connected to a grid and that may not have a utility service meter, and whose primary purpose is to serve the electricity demand of the owner of the site where the system is located.
Proposed § 1.48E(h)-1(i)(2)(iii) would define a facility as FTM if it is directly connected to a grid and its primary purpose is to provide electricity to one or more offsite locations via such grid or utility meters with which it does not have an electrical connection; alternatively, FTM is defined as a facility that is not BTM. For purposes of Category 4 facilities, an applicable facility is also FTM if 50 percent or more of its electricity generation on an annual basis is physically exported to the broader electricity grid.
Section 48E(h)(4)(A) provides that “[i]n establishing such program and to carry out the purposes of this paragraph, the Secretary shall provide procedures to allow for an efficient allocation process.” The Treasury Department and the IRS anticipate that the number of eligible applicants seeking an allocation may exceed the total Capacity Limitation allocation available to be allocated. Accordingly, the Treasury Department and the IRS are designing an application process that both ensures that allocations are awarded to facilities that advance the Program goals and facilitates an efficient allocation process.
Proposed § 1.48E(h)-1(j)(1) provides that applications for a Capacity Limitation allocation will be evaluated according to the procedures specified in guidance published in the Internal Revenue Bulletin. Based on feedback received with respect to the section 48(e) Low-Income Communities Bonus Credit Program (a similar program applicable solely to qualified solar and wind facilities in 2023 and 2024) and an assessment of operational capabilities set up to administer the Program, the Treasury Department and the IRS expect to provide a process that includes one or more initial application windows in which applications received by a certain time and date would be evaluated together, followed by a rolling application process if Capacity Limitation is not fully allocated after an initial application window closes. Facilities that meet at least one of the two categories of specified Ownership and Geographic criteria (Additional Selection Criteria, discussed in part V.B. of this Explanation of Provisions) would receive priority for an allocation within each facility category described in section 48E(h)(2)(A)(iii).
Because section 48E(h) is subject to a finite annual Capacity Limitation, the Treasury Department and the IRS think that allocating amounts of Capacity Limitation to a group of related qualified facilities with an aggregate total maximum net output equal to or greater than five megawatts (as measured in alternating current) could concentrate allocations in a smaller number of communities, which would not further the purpose of efficient allocation of a Federal tax credit program with a national impact. The Treasury Department and the IRS additionally believe that although such facilities could be provided a small capacity allocation rather than be deprioritized, providing a small allocation to a group of related qualified facilities with a much larger aggregate capacity is not likely to be determinative of the deployment of those qualified facilities and thus would not advance the goals of the Program to incentivize additional deployment of qualified facilities in low-income communities. The Treasury Department and the IRS therefore intend to deprioritize review of applications for an applicable facility that together with other qualified facilities (1) share a point of interconnection, (2) produce electricity using the same technology, (3) are owned by the same taxpayer, and (4) have an aggregate total maximum net output (as determined by the sum of the maximum net output of the applicable facility and each qualified facility under proposed § 1.48E(h)-1(b)(3)(ii)) equal to or greater than five megawatts (alternating current). Deprioritized applications will be considered after other applications in the current allocation round, or a subsequent allocation round at the Secretary's discretion. An application for review may be deemed to not be part of a group of related qualified facilities with a total combined maximum net output equal to or greater than five megawatts if it has an interconnection agreement for less than five megawatts.
Section 48E(h)(4)(A) directs the Secretary to provide procedures to allow for an efficient allocation process. Additionally, section 48E(h)(4)(E)(i) requires that facilities allocated an amount of Capacity Limitation be placed in service within four years of the date of allocation. To promote efficient allocation, and to ensure that allocations will be awarded to facilities that are sufficiently viable and well defined to allow for a review for an allocation, and sufficiently advanced
The Treasury Department and the IRS expect that the specific application information, documentation, and attestation requirements provided in procedural guidance applicable to the Program published in the Internal Revenue Bulletin will be substantially similar to requirements applicable the section 48(e) Low-Income Communities Bonus Program provided in Revenue Procedure 2024-19, 2024-16 I.R.B. 899. Like the section 48(e) program, some requirements may differ for FTM and BTM facilities and other requirements may differ by Facility Category and Additional Selection Criteria. The Treasury Department and the IRS will periodically assess the Program and previous applications to determine any changes to the Program's application process. The Treasury Department and the IRS request comments on all aspects of the application and selection process but specifically request comments on whether (1) modifications are necessary with respect to any of the application requirements so that the Program is available to all applicable facilities under the Program, and (2) certain facility categories can demonstrate project viability with other types of documentation.
Proposed § 1.48E(h)-1(j)(3) would provide that there is no administrative appeal of Capacity Limitation allocation decisions.
The Treasury Department and the IRS also propose in § 1.48E(h)-1(k)(1) to require facilities that received a Capacity Limitation allocation to report to the DOE the date the eligible property was placed in service. Proposed § 1.48E(h)-1(k)(1) also would require that this report be made through the same portal used to submit the original application for allocation.
Proposed § 1.48E(h)-1(k)(2) would require facilities that received a Capacity Limitation to submit additional documentation or complete additional attestations with this reporting. At the time of application, applicants would not necessarily be able to demonstrate compliance with certain eligibility requirements, as the facility would not yet be operating at that time. Requiring placed in service reporting would allow for final verification that the facilities that were awarded a Capacity Limitation Allocation have met certain eligibility requirements under the Program. Therefore, proposed § 1.48E(h)-1(k)(2) would require facilities awarded a Capacity Limitation to submit final eligibility information at placed in service time. At the time that the owner reports that eligible property has been placed in service the owner also must confirm information about the facility and submit additional documentation to prove the facility is still eligible to maintain the allocation and the increased applicable percentage under section 48E(h)(1) as specified in guidance published in the Internal Revenue Bulletin.
Proposed § 1.48E(h)-1(k)(3) would provide that the DOE will review the placed in service documentation and attestations to determine if the facility meets the eligibility criteria for the owner to claim an increased applicable percentage. The DOE then provides a recommendation to the IRS regarding whether the facility continues to meet the eligibility requirements for the facility to retain its allocation or if the facility should be disqualified (as provided in proposed § 1.48E(h)-1(m)). Based on DOE's recommendation, the IRS will decide whether the facility should retain its allocation or if the facility should be disqualified and will notify the applicant of its decision. Each applicant must receive confirmation from the IRS that the DOE has reviewed the placed in service submissions, and that eligibility is confirmed, prior to the owner (or a partner or shareholder in the case of a partnership or S corporation) claiming the increased credit amount on Form 3468,
Proposed § 1.48E(h)-1(k)(4) would provide a definition of placed in service. Pursuant to proposed § 1.48E(h)-1(k)(4), for purposes of § 1.48E(h)-1(k), eligible property is considered placed in service in the earlier of the following taxable years: (i) the taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to such eligible property begins; or (ii) the taxable year in which the eligible property is placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business or in the production of income.
The Treasury Department and the IRS propose in § 1.48E(h)-1(l) that facilities placed in service prior to being awarded an allocation of Capacity Limitation would not be eligible to receive an allocation. One of the goals of the Program is to increase adoption of and access to renewable energy facilities in low-income and other communities with environmental justice concerns. Awarding an allocation to facilities that have already been placed in service would be inconsistent with this goal. Further, section 48E(h)(4)(E)(i) provides that a facility must be placed in service within four years of receiving an allocation of Capacity Limitation, indicating that allocations should be made to new facilities that have not yet been placed in service. Accordingly, the Treasury Department and the IRS propose that facilities placed in service prior to being awarded an allocation of Capacity Limitation would not be eligible to receive an allocation.
The Treasury Department and the IRS recognize that because, under section 48E(h)(4)(E)(i), an applicant has four years after the date of an allocation of Capacity Limitation to place eligible property in service, circumstances may change prior to the property being placed in service such that a facility is no longer eligible for the allocation it received. In addition, to promote an efficient allocation process consistent with section 48E(h)(4)(A), the Treasury Department and the IRS want to discourage material changes in project plans, such as significant reductions in facility size that tie up Capacity Limitation that could otherwise be awarded to other qualified facilities.
Accordingly, proposed § 1.48E(h)-1(m) would provide that a facility that was awarded a Capacity Limitation allocation is disqualified and loses its allocation if prior to or upon the facility being placed in service: (1) the location where the facility will be placed in service changes; (2) the maximum net output of the facility increases such that
Section 48E(h)(5) requires the Secretary, by regulations or other guidance, to provide rules for recapturing the benefit of any section 48E(h) Increase with respect to any property that ceases to be property eligible for such section 48E(h) Increase (but that does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture is determined under rules similar to the rules of section 50(a). To the extent provided by the Secretary, such recapture may not apply with respect to any property if, within 12 months after the date the applicant becomes aware (or reasonably should have become aware) of such property ceasing to be property eligible for such section 48E(h) Increase, the eligibility of such property for such section 48E(h) Increase is restored. Such restoration of a section 48E(h) Increase is not available more than once with respect to any facility.
Proposed § 1.48E(h)-1(n)(1) would provide that if, at any time during the five-year recapture period beginning on the date that an applicable facility under section 48E(h) is placed in service, there is a recapture event under proposed § 1.48E(h)-1(n)(3) with respect to such property, then the Federal income tax imposed on the taxpayer by chapter 1 of the Code for the taxable year in which the recapture event occurs is increased by the recapture percentage of the benefit of the increase in the section 48E credit. The recapture percentage is determined according to the table provided in section 50(a)(1)(B).
Proposed § 1.48E(h)-1(n)(2) would provide that recapture under proposed § 1.48E(h)-1(n)(1) may not apply with respect to any property if, within 12 months after the date the applicant becomes aware (or reasonably should have become aware) of such property ceasing to be property eligible for such increase in the credit allowed under section 48E(a), the eligibility of such property for such increase pursuant to section 48E(h) is restored. Such restoration of an increase pursuant to section 48E(h) is not available more than once with respect to any facility.
Proposed § 1.48E(h)-1(n)(3) would provide that the following circumstances result in a recapture event if the property ceases to be eligible for the increased credit under section 48E(h): (1) property described in section 48E(h)(2)(A)(iii)(II) fails to provide financial benefits over the 5-year period after its original placed-in-service date; (2) property described under section 48E(h)(2)(B) ceases to allocate the financial benefits equitably among the occupants of the dwelling units, such as not passing on to residents the required net energy savings of the electricity; (3) property described under section 48E(h)(2)(C) ceases to provide at least 50 percent of the financial benefits of the electricity produced to Qualifying Households as described under section 48E(h)(2)(C)(i) or (ii), or fails to provide those households the required minimum 30 percent bill credit discount rate; (4) for property described under section 48E(h)(2)(B), the residential rental building the facility is a part of ceases to participate in a covered housing program or any other housing program described in section 48E(h)(2)(B)(i), if applicable; and (5) a facility increases its maximum net output such that the facility's maximum net output is 5 MW AC or greater.
Proposed § 1.48E(h)-1(n)(4) would provide that any event that results in recapture under section 50(a) also will result in recapture of the benefit of the increase in the section 48E credit by reason of section 48E(h). The exception to the application of recapture provided in proposed § 1.48E(h)-1(n)(2) does not apply in the case of a recapture event under section 50(a).
These regulations are proposed to apply to qualified facilities placed in service after December 31, 2024, and during taxable years ending after the date the final regulations are filed for public inspection by the Office of the Federal Register.
Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required.
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) requires that a Federal agency obtain the approval of OMB before collecting information from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit. The collections of information in these proposed regulations contain reporting and recordkeeping requirements that are required to obtain the section 48E(h) Increase. This information in the collections of information would generally be used by the IRS and the DOE for tax compliance purposes and by taxpayers to facilitate proper reporting and compliance. A Federal agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.
The recordkeeping requirements mentioned within this proposed regulation are considered general tax records under § 1.6001-1(e). These records are required for IRS to validate that taxpayers have met the regulatory requirements and are entitled to receive section 48E(h) Increase. For PRA purposes, general tax records are already approved by OMB under 1545-0123 for business filers, 1545-0074 for individual filers, and 1545-0047 for tax-exempt organizations.
The proposed regulations also provide reporting requirements related to providing attestations and supporting documentation for initial application,
IRS will be soliciting feedback on the collection requirements for the application and attestations. Commenters are strongly encouraged to submit public comments electronically. Written comments and recommendations for the proposed information collection should be sent to
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility;
(2) The accuracy of the estimated burden associated with the proposed collection of information;
(3) How the quality, utility, and clarity of the information to be collected may be enhanced;
(4) How the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and
(5) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
The Regulatory Flexibility Act (5 U.S.C. 601
Pursuant to section 7805(f), this notice of proposed rulemaking has been submitted to the Chief Counsel of Advocacy of the Small Business Administration for comment on its impact on small business.
The proposed regulations would provide guidance to potential applicants to determine eligibility to apply for an allocation of Capacity Limitation under section 48E(h), and, in general, to taxpayers awarded an allocation of Capacity Limitation to understand the requirement to claim the section 48E(h) Increase. The proposed regulations are expected to encourage applicants to invest in applicable facilities. Thus, the Treasury Department and the IRS intend and expect that the proposed rule will deliver benefits across the economy and environment that will beneficially impact various industries.
The Small Business Administration estimates in its 2018 Small Business Profile that 99.9 percent of United States businesses meet its definition of a small business. The applicability of these proposed regulations does not depend on the size of the business, as defined by the Small Business Administration. As described more fully in the preamble to this proposed regulation and in this IRFA, these rules may affect a variety of different businesses across serval different industries.
The Treasury Department and the IRS expect to receive more information on the impact on small businesses through comments on this proposed rule and again when participation in the Program commences.
The recordkeeping and reporting requirements would increase for applicants that participate in the Program. Although the Treasury Department and the IRS do not have sufficient data to determine precisely the likely extent of the increased costs of compliance, the estimated burden of complying with the recordkeeping and reporting requirements are described in the Paperwork Reduction Act section of the preamble.
The Treasury Department and the IRS considered alternatives to the proposed regulations. For example, the Treasury Department and the IRS considered requests from stakeholders that potential applicants be able to place a facility in service before applying for or receiving an allocation of Capacity Limitation. The Treasury Department and IRS determined it would not be possible to accommodate this request in the proposed regulations because the statutory language under section 48E(h)(4)(E)(i) requires that the facility be placed in service by a date that is 4 years after the date of the allocation. Moreover, facilities that were placed in service prior to the allocation process do not increase adoption of and access to renewable energy facilities, as compared to the absence of the Program, and so do not further Program goals.
Additionally, the Treasury Department and IRS considered proposing a variety of bill credit discounts for Category 4 qualified low-income benefit project facilities, including the 20 percent bill credit discount rate used in the Low-Income Communities Bonus Credit Program established under section 48(e). However, to ensure that low-income customers are receiving meaningful financial benefits, the Treasury Department and the IRS decided to propose a 30 percent bill credit discount for the Program but are also requesting comments on whether this is the most appropriate bill credit discount rate for the Program and whether a transition rule to achieve this bill discount rate is necessary.
Another example is the revisions to the list of eligible covered housing
Additionally, the Treasury Department and IRS considered whether to propose to include the sub-reservation for Category 1 facilities for eligible residential BTM facilities but concluded this sub-reservation should be proposed for the Program. The sub-reservation of a substantial portion of the allocation in Category 1 for eligible residential BTM facilities would help ensure that allocations are predominantly awarded to facilities serving residences and consumers, rather than facilities serving businesses.
Comments are requested on the requirements in the proposed regulations, including specifically, whether there are less burdensome alternatives that ensure the Treasury Department and IRS and DOE can efficiently administer the Program.
The proposed rule would not duplicate, overlap, or conflict with any relevant Federal rules. As discussed in the Explanation of Provisions, the proposed rules would merely provide requirements, procedures, and definitions related to the Program. The Treasury Department and the IRS invite input from interested members of the public about identifying and avoiding overlapping, duplicative, or conflicting requirements.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Indian Tribal government, in the aggregate, or by the private sector, of $100 million (updated annually for inflation). These proposed regulations do not include any Federal mandate that may result in expenditures by State, local, or Indian Tribal governments, or by the private sector in excess of that threshold.
Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These proposed regulations do not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order.
Executive Order 13175 (Consultation and Coordination With Indian Tribal Governments) prohibits an agency from publishing any rule that has Tribal implications if the rule either imposes substantial, direct compliance costs on Indian Tribal governments, and is not required by statute, or preempts Tribal law, unless the agency meets the consultation and funding requirements of section 5 of the Executive order. These proposed do not have substantial direct effects on one or more Federally recognized Indian tribes and does not impose substantial direct compliance costs on Indian Tribal governments within the meaning of the Executive order.
Nevertheless, consistent with Treasury's Tribal Consultation Policy, the Treasury Department and the IRS will hold a consultation with Tribal leaders requesting assistance in addressing questions related to these proposed regulations.
Before these proposed amendments to the regulations are adopted as final regulations, consideration will be given to comments regarding the notice of proposed rulemaking that are submitted timely to the IRS as prescribed in the preamble under the
A public hearing with respect to this notice of proposed rulemaking has been scheduled for October 17, 2024, beginning at 10 a.m. EST. The hearing scheduled for October 17, 2024, will be held in the Auditorium at the Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. Participants may alternatively attend the public hearing by telephone.
The rules of 26 CFR 601.601(a)(3) apply to the public hearing. Persons who wish to present oral comments at the public hearing must submit an outline of the topics to be discussed and the time to be devoted to each topic by October 3, 2024. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the public hearing. If no outline of the topics to be discussed at the public hearing is received by October 3, 2024, the public hearing will be cancelled. If the public hearing is cancelled, a notice of cancellation of the public hearing will be published in the
Individuals who want to testify in person at the public hearing must send an email to
Individuals who want to testify by telephone at the public hearing must send an email to
Individuals who want to attend the public hearing in person without testifying must also send an email to
Individuals who want to attend the public hearing by telephone without testifying must also send an email to
Public hearings will be made accessible to people with disabilities. To request special assistance during a public hearing please contact the Publications and Regulations Section of the Office of Associate Chief Counsel (Procedure and Administration) by sending an email to
Guidance cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at
The principal author of these proposed rules is the Office of the Associate Chief Counsel (Passthroughs and Special Industries), IRS. However, other personnel from the Treasury Department and the IRS participated in their development.
Income taxes, Reporting and recordkeeping requirements.
Accordingly, the Treasury Department and IRS propose to amend 26 CFR part 1 as follows:
26 U.S.C. 7805 * * *
Section 1.48E(h)-1 also issued under 26 U.S.C. 48E(h) and (i).
This section lists the captions contained in § 1.48E(h)-1.
(a) Overview.
(1) General rule.
(2) Certain terms used in this section.
(i) Applicants.
(ii) Internal Revenue Bulletin.
(b) Applicable facility defined.
(1) In general.
(2) Facility categories.
(i) Category 1 facility.
(ii) Category 2 facility.
(iii) Category 3 facility.
(iv) Category 4 facility.
(3) Less than five megawatts requirement.
(i) In general.
(ii) Nameplate capacity for purposes of the less than five megawatts requirement.
(c) Eligible property.
(d) Location.
(1) In general.
(2) Nameplate Capacity Test for Location.
(3) Nameplate capacity for purpose of Nameplate Capacity Test for Location.
(e) Financial benefits for a Category 3 facility.
(1) In general.
(2) Threshold requirement.
(3) Financial value of the electricity produced by the facility.
(4) Gross financial value.
(5) Net financial value defined.
(i) Common ownership.
(ii) Third-party ownership.
(iii) Equitable allocation of financial benefits.
(A) If financial value distributed via utility bill savings.
(B) If financial value is not distributed via utility bill savings.
(6) Benefits sharing statement.
(i) In general.
(ii) Notification requirement.
(f) Financial benefits for a Category 4 facility.
(1) In general.
(2) Bill credit discount rate.
(i) In general.
(ii) No or nominal cost of participation.
(iii) Other value from electricity production.
(iv) Calculation on annual basis.
(v) Examples.
(A) Example 1.
(B) Example 2.
(C) Example 3.
(3) Low-income verification.
(i) In general.
(ii) Methods of verification.
(A) Categorical eligibility.
(B) Other income verification methods.
(C) Impermissible verification method.
(g) Annual Capacity Limitation.
(1) In general.
(2) Carryover of unallocated Annual Capacity Limitation.
(h) Reservations of Capacity Limitation allocation for facilities that meet certain Additional Selection Criteria.
(1) In general.
(2) Ownership criteria.
(i) In general.
(ii) Indirect ownership.
(A) Disregarded entities.
(B) Partner qualifying partnership under ownership criteria.
(iii) Tribal enterprise.
(iv) Alaska Native Corporation.
(v) Native Hawaiian Organization.
(vi) Renewable energy cooperative.
(vii) Qualified tax-exempt entity.
(3) Geographic criteria.
(i) In general.
(ii) Persistent Poverty County.
(iii) Certain census tracts under Climate and Economic Justice Screening Tool.
(A) Energy burden.
(B) PM
(C) Low-income.
(i) Sub-reservations of allocation for Category 1 facilities.
(1) In general.
(2) Definitions.
(i) Behind the meter (BTM) facility.
(ii) Eligible residential BTM facility.
(iii) FTM facility.
(j) Process of application evaluation.
(1) In general.
(2) Information required as part of application.
(3) No administrative appeal of Capacity Limitation allocation decisions.
(k) Placed in service.
(1) Requirement to report date placed in service.
(2) Requirement to submit final eligibility information at placed in service time.
(3) DOE confirmation.
(4) Definition of placed in service.
(l) Facilities placed in service prior to an allocation award.
(1) In general.
(2) Rejection or rescission.
(m) Disqualification.
(n) Recapture of section 48E(h) Increase to the section 48E(a) credit.
(1) In general.
(2) Exception to application of recapture.
(3) Recapture events.
(4) Section 50(a) recapture.
(o) Applicability date.
(a)
(2)
(i)
(ii)
(b)
(i) Is a non-combustion and gasification facility for which the Secretary of the Treasury or her delegate has determined has a greenhouse gas (GHG) emissions rate of not greater than zero in guidance published either in the
(ii) Has a maximum net output of less than 5 megawatts (MW) (as measured in alternating current (AC)); and
(iii) Is described in at least one of the four categories described in section 48E(h)(2)(A)(iii) and paragraph (b)(2) of this section.
(2)
(ii)
(iii)
(iv)
(A) Two-hundred percent of the poverty line (as defined in section 36B(d)(3)(A) of the Code) applicable to a family of the size involved; or
(B) Eighty percent of area median gross income (as determined under section 142(d)(2)(B) of the Code).
(3)
(ii)
(c)
(d)
(2)
(3)
(e)
(2)
(3)
(i) 25 percent of the gross financial value (as defined in paragraph (e)(4) of this section) of the annual electricity produced by the applicable facility; or
(ii) The net financial value (as defined in paragraph (e)(5) of this section) of the annual electricity produced by the applicable facility.
(4)
(i) The total self-consumed kilowatt-hours produced by the applicable facility multiplied by the Qualified Residential Property's metered volumetric price of electricity;
(ii) The total exported kilowatt-hours produced by the applicable facility multiplied by the Qualified Residential Property's volumetric export compensation rate for the type of electricity produced by the applicable facility per kilowatt-hour; and
(iii) The sale of any attributes associated with the applicable facility's production (including, for example, any Federal, State, or Tribal renewable energy credits or incentives), if separate from the metered price of electricity or export compensation rate.
(5)
(ii)
(iii)
(A)
(B)
(6)
(A) A calculation of the facility's gross financial value using the method described paragraph (e)(4) of this section;
(B) A calculation of the facility's net financial value using the method described in paragraph (e)(5) of this section;
(C) A calculation of the financial value required to be distributed to building occupants using the method described in paragraph (e)(3) of this section;
(D) A description of the means through which the required financial value will be distributed to building occupants; and
(E) If the facility and Qualified Residential Property are separately owned, specify the entity that will be responsible for the distribution of benefits to the occupants.
(ii)
(f)
(i) The facility must serve multiple qualifying low-income households under section 48E(h)(2)(C)(i) or (ii) (Qualifying Household);
(ii) At least 50 percent of the facility's total output in kW must be assigned to Qualifying Households; and
(iii) Each Qualifying Household must be provided a bill credit discount rate (as defined in paragraph (f)(2) of this section) of at least 30 percent.
(2)
(ii)
(iii)
(iv)
(v)
(A)
(B)
(C)
(3)
(ii)
(A)
(B)
(C)
(g)
(2)
(h)
(2)
(A) A Tribal enterprise (as defined in paragraph (h)(2)(iii) of this section);
(B) An Alaska Native Corporation (as defined in paragraph (h)(2)(iv) of this section);
(C) A Native Hawaiian Organization (as defined in paragraph (h)(2)(v) of this section);
(D) A renewable energy cooperative (as defined in paragraph (h)(2)(vi) of this section); or
(E) A qualified tax-exempt entity (as defined in paragraph (h)(2)(vii) of this section).
(ii)
(B)
(iii)
(A) Owned at least 51 percent directly by an Indian Tribal government (as defined in section 30D(g)(9) of the Code), or owned at least 51 percent indirectly through a corporation that is wholly owned by the Indian Tribal government and is created under either the Tribal laws of the Indian Tribal government or through a corporation incorporated under the authority of either section 17 of the Indian Reorganization Act of 1934, 25 U.S.C. 5124, or section 3 of the Oklahoma Indian Welfare Act, 25 U.S.C. 5203; and
(B) Subject to Tribal government rules, regulations, and/or codes that regulate the operations of the entity.
(iv)
(v)
(vi)
(A) A consumer or purchasing cooperative controlled by its members with each member having an equal voting right and with each member having rights to profit distributions based on patronage as defined by proportion of volume of electricity or energy credits purchased (kWh), volume of financial benefits delivered ($), or volume of financial payments made ($); and in which at least 50 percent of the patronage in the qualified facility is by cooperative members who are low-income households (as defined in section 48E(h)(2)(C)); or
(B) A worker cooperative controlled by its worker-members with each member having an equal voting right.
(vii)
(A) An organization exempt from the tax imposed by subtitle A by reason of being described in section 501(c)(3) or section 501(d) of the Code;
(B) Any State, the District of Columbia, or political subdivision thereof, or any agency or instrumentality of any of the foregoing;
(C) An Indian Tribal government (as defined in section 30D(g)(9)), a political subdivision thereof, or any agency or instrumentality of any of the foregoing; or
(D) Any corporation described in section 501(c)(12) operating on a cooperative basis that is engaged in furnishing electric energy to persons in rural areas.
(3)
(ii)
(iii)
(A)
(B)
(C)
(i)
(2)
(A) It is connected with an electrical connection between the facility and the panelboard or sub-panelboard of the site where the facility is located;
(B) It is to be connected on the customer side of a utility service meter before it connects to a distribution or transmission system (that is, before it connects to the electricity grid); and
(C) Its primary purpose is to provide electricity to the utility customer of the site where the facility is located. This also includes systems not connected to a grid and that may not have a utility service meter, and whose primary purpose is to serve the electricity demand of the owner of the site where the system is located.
(ii)
(iii)
(j)
(2)
(3)
(k)
(2)
(3)
(4)
(i) The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to such eligible property begins; or
(ii) The taxable year in which the eligible property is placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business or in the production of income.
(l)
(2)
(m)
(1) The location where the facility will be placed in service changes.
(2) The maximum net output of the facility increases such that it exceeds the less than five megawatts AC requirement provided in section 48E(h)(2)(A)(ii) or the nameplate capacity decreases by the greater of 2 kW or 25 percent of the Capacity Limitation awarded in the allocation.
(3) The facility cannot satisfy the financial benefits requirements under section 48E(h)(2)(B)(ii) and paragraph (e) of this section as planned, if applicable, or cannot satisfy the financial benefits requirements under section 48E(h)(2)(C) or paragraph (f) of this section as planned, if applicable.
(4) The eligible property that is part of the facility that received the Capacity Limitation allocation is not placed in
(5) The facility received a Capacity Limitation allocation based, in part, on meeting the ownership criteria and ownership of the facility changes prior to the facility being placed in service, unless the original applicant transfers the facility to an entity treated as a partnership for Federal income tax purposes and retains at least a one percent interest (either directly or indirectly) in each material item of partnership income, gain, loss, deduction, and credit of such partnership and is a managing member or general partner (or similar title) under State or Tribal law of the partnership (or directly owns 100 percent of the equity interests in the managing member or general partner) at all times during the existence of the partnership.
(n)
(2)
(3)
(i) Property described in section 48E(h)(2)(A)(iii)(II) fails to provide financial benefits;
(ii) Property described under section 48E(h)(2)(B) ceases to allocate the financial benefits equitably among the occupants of the dwelling units, such as not allocating to residents the required net electricity savings of the electricity, as required by paragraph (e) of this section;
(iii) Property described under section 48E(h)(2)(C) ceases to provide at least 50 percent of the financial benefits of the electricity produced to qualifying households as described under section 48E(h)(2)(C)(i) or (ii), or fails to provide those households the required minimum 30 percent bill credit discount rate, as required by paragraph (f) of this section;
(iv) For property described under section 48E(h)(2)(B), the residential rental building the facility is a part of ceases to participate in a covered housing program or any other affordable housing program described in section 48E(h)(2)(B)(i), as applicable; or
(v) A facility increases its maximum net output or nameplate capacity such that the facility's maximum net output or nameplate capacity is 5 MW AC or greater.
(4)
(o)
Internal Revenue Service (IRS), Treasury.
Notice of proposed rulemaking; correction.
This document contains corrections to the proposed regulations (REG-105128-23), published in the
Written or electronic comments and requests for a public hearing are still being accepted and must be received by October 7, 2024.
Andrew L. Wigmore at (202) 317-5443 (not a toll-free number).
The proposed regulations (REG-105128-23) subject to this correction are proposed to be issued under sections 1502 and 1503(d) of the Internal Revenue Code.
Accordingly, FR Doc. 2024-16665 (REG-105128-23), appearing on page 64750 in the
The corrections read as follows:
(d) * * *
(6) * * *
(ii) * * *
(C) * * *
(
(D)
(
(7) * * *
(v) * * * For purposes of this paragraph (d)(7)(v), the term
Architectural and Transportation Barriers Compliance Board.
Notice of proposed rulemaking.
The Architectural and Transportation Barriers Compliance Board (hereafter, “Access Board” or “Board”), is issuing this notice of proposed rulemaking to amend the accessibility guidelines for buildings and facilities covered by the Americans with Disabilities Act of 1990 (ADA) and the Architectural Barriers Act of 1968 (ABA) to specifically address the accessibility of Electric Vehicle Charging stations. This proposed rule provides specifications for the accessibility of EV charging stations, to include the EV charger (including physical and communication access), EV charging space, access aisles, and accessible routes.
Send comments on or before November 4, 2024.
You may submit comments, identified by docket number ATBCB-2024-0001, by any of the following methods:
•
•
•
Accessibility Specialist Juliet Shoultz, (202) 272-0045,
The U.S. Access Board is proposing to revise and update its accessibility guidelines at 36 CFR 1191 for buildings and facilities covered by the Americans with Disabilities Act of 1990 (ADA) and the Architectural Barriers Act of 1968 (ABA) to address the accessibility of EV charging stations covered by the ADA, as well as EV charging stations owned or managed by or on behalf of the federal government. These guidelines cover new construction and alterations and serve as the basis for enforceable standards once adopted by other Federal agencies. The ADA applies to places of public accommodation, commercial facilities and State and local government facilities. The ABA covers facilities designed, built, altered with Federal funds or leased by Federal agencies. The purpose of this proposed rule is to set minimum guidelines to ensure that EV charging stations are readily accessible to and usable by persons with disabilities, including both physical access to the EV charging station and access to the interface to operate and pay for the charging session. As electric vehicles become more numerous, and with the current effort to increase the number of EV charging stations across the United States, it is imperative that these EV charging stations are accessible to and usable by people with disabilities.
Key accessible features addressed in this proposed rule for EV charging stations include: scoping (including minimum number of accessible EV charging spaces at each EV charging station); accessible routes; mobility features of the EV charger; operable parts; accessibility of the EV charging
These guidelines, once adopted by the enforcement authorities, will require all new construction of EV charging stations to be fully compliant with the technical specifications for accessibility. Existing EV charging stations will need to be made compliant as they are altered in the future, to the maximum extent feasible if existing physical constraints prevent full compliance.
The Americans with Disabilities Act (ADA) of 1990 charges the Access Board with developing and maintaining minimum guidelines to ensure the accessibility and usability of the built environment in new construction, alterations, and additions.
The Access Board has a similar responsibility under the Architectural Barriers Act (ABA) of 1968, which requires that buildings and facilities designed, built, or altered with certain federal funds or leased by federal agencies be accessible to people with disabilities.
Under both the ADA and the ABA, the Access Board maintains these accessibility guidelines, which includes updating the current requirements and addressing new technology as it is developed.
Electric Vehicle (EV) charging stations are becoming commonplace with the rising production and use of electric and plug-in hybrid vehicles. According to the U.S. Department of Energy, there are nearly 50,000 public EV charging stations with almost 127,000 charging ports across the country. Additionally, on November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act (P. L. 117-58) (commonly referred to as the “Bipartisan Infrastructure Law”), which contains significant new funding for EV charging stations. Key new U.S. Department of Transportation (USDOT) programs established by this legislation include the National Electric Vehicle (NEVI) Formula Program ($5 billion) and the Discretionary Grant Program for Charging and Fueling Infrastructure ($2.5 billion). The law also makes the installation of EV charging infrastructure an eligible expense under the USDOT Surface Transportation Block Grant formula program.
The Bipartisan Infrastructure Law supports national goals of building a network of greater than 500,000 electric vehicle chargers in the U.S. and ensuring that EVs make up at least 50% of new car sales by 2030.
With the new funding for the installation of EV charging stations, USDOT approached the Access Board to provide guidance on how to design and install accessible EV charging stations in accordance with the ADA and ABA. On July 21, 2022, the Access Board issued a technical assistance document,
The NEVI Standards and Requirements, which sets minimum standards and requirements for projects funded under the NEVI Formula Program and projects for the construction of publicly accessible EV chargers under certain statutory authority, specify that the ADA of 1990 and the implementing regulations apply to EV charging stations by prohibiting discrimination on the basis of disability by public and private entities. 23 CFR 680.118(c). The NEVI Standards and Requirements further specify that EV charging projects under NEVI and projects funded under Title 23 of the Code of Federal Regulations must comply with the applicable accessibility standards adopted by DOT into its ADA regulations (49 CFR part 37) in 2006, and by DOJ into its ADA regulations (28 CFR parts 35 and 36) in 2010. 23 CFR 680.118(c). Additionally, in the preamble to the NEVI final rule, FHWA recommended that EV charging stations be designed and constructed according to the Access Board's technical assistance document,
The Access Board's ADA and ABA Accessibility Guidelines are promulgated in the Appendices of 36 CFR 1191. The regulation is broken down into scoping for the ADA (Appendix B), scoping for the ABA (Appendix C) and the technical provisions (Appendix D) which apply to both the ADA and the ABA. In this NPRM, the Board is proposing to add new provisions to address EV charging stations in both scoping sections for the ADA and the ABA, as well as in the technical provisions. The proposed provisions for the ADA and the ABA scoping sections are identical and will be discussed together below. Additionally, the Board will be proposing commensurate updates to Appendix A, which is the table of contents.
The proposed specifications will address the accessibility of EV charging
The Board has looked to its existing accessible parking requirements as a starting point in determining scoping for and the design of accessible EV charging spaces; however, the specifications for EV charging spaces warrant different treatment as there are significant differences between parking spaces and EV charging spaces, particularly concerning the space required for individuals who use mobility devices to operate EV chargers independently. These differences are discussed more fully in the section-by-section analysis that follows, and in the discussion of 507.2 specifically.
In Chapter 1 and Chapter 2, the Board is proposing mirror provisions for the ADA and the ABA to provide scoping for the applicable technical provisions in Appendix D (Chapters 3 to 7).
TIA 1083-B, Telephone Terminal Equipment Handset Magnetic Measurement Procedures and Performance requirements would be incorporated by reference at 709.7.3. This standard defines measurement procedures and performance requirements for the handset generated audio band magnetic noise of wire line telephones, including handsets which might be integrated into an EV Charger. This standard is consistent with current telecommunications industry practice.
This rule proposes to add seven new defined terms to 106 and F106 to address the application of the guidelines to EV chargers. These definitions are consistent with current industry standards and are consistent with the definitions used by the Department of Transportation in its recent National Electric Vehicle Infrastructure Standards and Requirements Final Rule, 88 FR12724 (Feb. 28, 2023) (codified at 23 CFR part 680). The proposed definitions include charging port, connector, electric vehicle, EV charger, EV supply equipment, EV charging station, and EV charging space.
This rule proposes to add “accessible EV charging spaces” in both 206.2.1 and F206.2.1 to the list of areas from which an accessible route must be provided within a site to the accessible building or facility entrance they serve. This provision currently requires such an accessible route from the accessible parking spaces, accessible passenger loading zones, public streets and sidewalks, and public transportation stops. For EV charging stations built as standalone stations, more akin to a gas station, which also provides a facility to buy snacks, use the restroom or a lounge to relax in, there must be an accessible route from the accessible EV charging space to the facility.
The Board understands that many EV charging stations are being placed in existing parking lots. For example, an EV charging station that is put into the parking lot of a store would need to ensure that an accessible route is provided from the accessible EV charging space to the accessible entrance of the store. The Board notes that when EV charging stations are being placed in existing parking lots of malls, grocery stores, and department stores, they are often placed away from the entrance of the building, in the back or side of the parking lot due to necessary access to utilities and other constraints. Regardless of placement, an accessible route must be provided to ensure that the person with a disability whose vehicle is charging can access the building or facility, just like an individual without a disability. Even EV fast charging can take up to one hour for a total charge, increasing the likelihood that individuals will go into nearby facilities to shop, use the restroom or buy snacks. Individuals with disabilities must be able to get to the accessible entrance of these facilities, just as individuals without disabilities can get to an entrance.
While the Board is not proposing any changes to Section 206.2.2/F206.2.2 Accessible Route Within a Site, this provision will apply to EV charging stations and will require that at least one accessible route connect the accessible EV charging space with accessible buildings, facilities, elements and spaces that are on the same site.
The Board is proposing to add a new provision to address signage for accessible EV charging spaces in both 216.14 and F216.14. This provision would require accessible EV charging spaces to be identified with a sign complying with 507.6. The Board proposes two exceptions to the sign requirement. The first allows for no signage indicating the accessible EV charging space, where a total of four or fewer EV charging spaces are provided on a site. This exception is the same as the exception in 216.5 accessible parking spaces and is intended to mitigate the impact of a reserved space on a small EV charging station. This proposal would still require an accessible EV charging space to be provided, but not require the space to be identified as reserved only for people with a disability in situations where only four or fewer EV charging spaces are provided on a site.
The second exception, also the same as the second exception in 216.5 applicable to accessible parking spaces, applies only in residential facilities and permits identification of accessible EV charging spaces to be omitted if the space is assigned to a specific residential dwelling unit. If the space is already reserved for a specific unit, no reserved signage is necessary.
Section 249/F249 proposes the minimum number of EV chargers and EV charging spaces required to be accessible. This section addresses the accessibility of both EV chargers and the associated EV charging spaces. In 249.1/F249.1 General, the Board is proposing an exception from compliance for EV charging stations used exclusively for buses, trucks, other delivery vehicles, and law enforcement vehicles. This exception is akin to the exception in section 208 for accessible parking spaces and is provided to alleviate the requirement for accessible spaces at EV charging stations that only service these types of vehicles.
In section 249.2/F249.2 EV Chargers, the Board proposes to require all EV chargers to comply with proposed Section 506, which contains requirements regarding accessible communication features for all EV chargers, and requirements for accessible mobility features for those EV chargers associated with accessible EV charging spaces as required by 249.3/F249.3.
The Board proposes to require a specified minimum number of accessible EV charging spaces on a sliding scale dependent on the number of EV charging spaces provided at each EV charging station as noted in Table 249.3.1/F249.3.1. The Board is also proposing that where there is more than one EV charging station on a site, each station shall be treated separately and the number of accessible EV charging spaces would be calculated based on the number of spaces at each EV charging station. For example, if a site had two EV charging stations, one with 10 EV charging spaces and the second with eight EV charging spaces, then each charging station would be required to have at least one accessible EV charging space, whereas if the site had only one EV charging station with 18 EV charging spaces, then only one accessible space would be required.
The Board also proposes to scope the EV charging spaces within an EV charging station separately if the EV charging station contains EV chargers of different levels. For example, if an EV charging station on a site contains a total of eight EV chargers, comprised of four Direct Current Fast Charging (DCFC) chargers and four Alternating Current (AC) Level 2 chargers, the number of required accessible spaces would be calculated separately for each type of charger. In this example, an accessible space would be required for the DCFC chargers, and an accessible space would be required for the AC Level 2 chargers. To ensure equitable Access to the available EV chargers, it is imperative that a person with a disability be provided with the same options as a person without a disability; that is, someone with mobility accessibility needs must have a choice of chargers at different charging levels if various types of chargers are provided. The level of charger may affect cost and the amount of time to charge the vehicle.
This provision also makes clear that accessible EV charging spaces will not count toward the minimum number of accessible car and van parking spaces required in a parking facility by 208.2. Parking spaces and EV charging spaces are scoped separately.
The proposed Table 249.3.1/F249.3.1 provides for a sliding scale of required accessible EV charging spaces similar to the requirements for accessible parking in 208.2/F208.2. However, the Board is also considering a different “use last” model to address the accessibility of EV charging spaces. A “use last” model would require more accessible EV charging spaces but would allow anyone to use them if all other spaces are occupied. This alternative proposal is discussed in Section VI, below.
The Board is also proposing separate scoping provisions for residential facilities. Where EV charging spaces are provided for each residential dwelling unit, section 249.3.1.2 and F249.3.1.2 would require that at least one accessible EV charging space be provided for each dwelling unit required to have mobility features complying with 809.4 through 809.9. Where EV charging spaces are not provided for each dwelling unit, EV charging spaces provided for residents, guests, employees or other nonresidents must be provided in accordance with Table 249.3.1.
The Board is proposing that accessible EV charging spaces that serve a particular building or facility shall be located on the shortest accessible route from the EV charging station to the accessible entrance, relative to other EV charging spaces at the same EV charging station. For example, if a shopping center has an EV charging station located at the back of its associated parking facility, then the accessible EV charging space should be located on the shortest accessible route to the accessible entrance of the shopping center in comparison to the other EV charging spaces. This proposed requirement does not require that the accessible EV charging space be located at the front of the parking facility next to the accessible parking.
As previously noted, the Board is aware that utility configurations and other site-specific factors related to the installation of EV chargers may at times dictate the location of the EV charging station within an established parking lot. This provision simply requires that the accessible EV charging space be the closest spot relative to other EV charging spaces. This provision also addresses the location of accessible EV charging spaces at a site where the primary function is EV charging. For example, an EV charging station located near amenities such as bathrooms, stores, or pedestrian routes to the public way, but not part of a particular facility, must also include accessible routes that connect the accessible EV charging space to each of these amenities.
The Board proposes an exception to the location requirement for EV Charging Spaces that would allow locating accessible EV charging spaces at different EV charging stations on a site, if substantially equivalent or greater accessibility is provided in terms of distance from an accessible entrance or entrances, fees, and user convenience. For example, if a site had two EV charging stations and each station was required to have one accessible EV charging space, it would be permissible to place both accessible EV charging spaces at the EV charging station that is closest to the accessible entrance as long as the fees to use the charger are the same or less, and the convenience to the user is the same or better.
In 506 the Board proposes a new provision containing technical requirements for all EV chargers. In 506.1 the Board is proposing to require that all EV chargers, whether or not they are associated with an accessible EV charging space, provide accessible communication features in accordance with the proposed 709, EV Charger Communication Elements and Features, with the exception that 709.3.1 (visibility) will only apply to EV chargers associated with an accessible EV charging space. This universal requirement for communication access will ensure that a person with a disability who needs only communication access and is ineligible to use an accessible space and accompanying EV charger, such as someone who is deaf or hard of hearing, can use any available EV charger. Additionally, if accessible communication features were restricted to the EV chargers associated with mobility accessible EV charging spaces, the number of accessible EV charging spaces needed, would greatly increase, as the proposed number of accessible spaces only accounts for mobility needs. Therefore, the Board is proposing that all EV charger user interfaces provide accessible communication features in accordance with 709.
In 506.2, the Board is proposing that EV chargers serving accessible EV charging spaces provide accessible
The Board is proposing to apply the existing technical specifications for clear floor or ground space, reach range, and operable parts to EV chargers. This includes 506.2.1, which proposes requiring a clear floor or ground space in front of the EV charger to allow a parallel approach to the EV charger, centered on the operable part. The clear floor or ground space shall be 30 inches minimum by 48 inches maximum, in accordance with Section 305. The Board is also proposing an exception when there are multiple operable parts, then the clear floor or ground space shall be centered on the EV charger.
In 506.2.2 Reach Range and Operation, the Board is proposing that the EV charger controls be provided in accordance with 308.3.1 unobstructed side reach. The unobstructed side reach provision requires that the operable part be located within a reach range to ensure that it is usable by a person using a mobility device. This provision requires that the high side reach be a maximum of 48 inches and the low side reach be a minimum of 15 inches above the ground. The Board is also proposing that the operable parts of an EV Charger comply with 309.4, which requires that controls are operable with one hand, without tight grasping, pinching, or twisting of the wrist and require no more than 5 pounds operating force.
An operable part is defined in Section 106.5 as “[a] component of an element used to insert or withdraw objects, or to activate, deactivate, or adjust the element.” This would include, among other things, the EV charging connector, any components that activate or deactivate the EV charger, and any screen provided with the charger. While 309.4 excepts gas pump nozzles, the Board is not currently proposing to provide the same exception for EV charging connectors. In the final rule for ADAAG, the Board explained that the exception was provided for gas pump nozzles because manufacturers indicated that safety requirements for their operation effectively precluded a maximum operating force of 5 pounds.”
Additionally, the Board notes that gas nozzles are currently inaccessible to many individuals with disabilities, who rely on gas station attendants to provide refueling assistance.
In 506.2.3, the Board is proposing to require that EV charging cables that exceed a weight of 5 pounds provide a cable management system. The Board is concerned with the overall weight of the EV charging cables and the ability of persons who use mobility devices to move the cable into place to connect it to their vehicles. The Board is proposing to require a cable management system, similar to what gas stations use, to assist someone with a disability in moving the cable to the appropriate place. The purpose of the requirement is to reduce the weight as much as possible to make it accessible to more users, regardless of whether the cable management system reduces the weight of the cable below five pounds. The cable management system also helps keep long cable slack off the accessible routes when stored or when connected to vehicles.
In 507 the Access Board proposes multiple provisions to address the size, access aisle, ground surface, vertical clearance, identification, and relationship to accessible routes for EV Charging Spaces. These provisions only apply to EV charging spaces that are required to provide accessibility pursuant to the scoping provisions in 249.3/F249.3. The purpose of these provisions is to provide mobility access to individuals with disabilities. While these provisions are similar to accessible parking, there are some key differences in that the space is not only used to park the vehicle, but also must ensure that the person can maneuver around the vehicle to the EV charger and plug in the vehicle to begin charging.
This provision clarifies that measurements shall be taken from the centerline of the markings. When the EV charging spaces or access aisle are not adjacent to another EV charging space, access aisle, or parking space, then the measurement may include the full width of the line defining the access aisle or EV charging space. These are the same requirements currently in place for accessible parking spaces and access aisles.
EV charging spaces with mobility features must provide a vehicle space with a minimum width of 132 inches and minimum length of 240 inches and have an access aisle complying with 507.3. The Board is not proposing separate van and car spaces for EV chargers, as exists for accessible parking.
The Board is proposing two exceptions to the size of the EV charging space. Both exceptions apply to pull-through EV charging stations to provide ease of use and an adjacent vehicular way. This would apply to a station set up like a gas station at which there are multiple EV charging stations where the EVs line up and wait their turn to charge and pull through after charging. These exceptions allow for spaces without an access aisle as long as they are 192 inches wide and provide for an adjacent vehicular way so vehicles can maneuver into and out of their charging spaces.
Additionally, the Board is considering adding an exception to the proposed dimensions of the EV charging space where inductive charging is used. Inductive charging occurs when the EV drives over and automatically connects to an in ground charger which prevents the driver from having to manually connect the EV charging cable to an inlet. Because this technology would negate the need for the driver to maneuver around the EV to the EV charger and then back to the EV to plug in the charging cable, the Board is considering providing an exception for compliance with the specified length of the EV charging space. The specified width would still be required to ensure that a user with a disability would be able to exit the vehicle and use the EV charger if needed to start or pay for the charge. The accessible route to any onsite amenities or public right-of-ways would also be required. The Board is seeking public comment on whether a required length of accessible EV charging spaces should be specified when inductive charging is available.
The Access Board is proposing that two accessible EV charging spaces, or one accessible parking space and one accessible EV charging space, be permitted to share a common access aisle. The Board is proposing that access aisles serving accessible EV charging spaces be a minimum of 60 inches wide, extend the full length of the EV charging space they serve, and be marked so as to discourage parking in them. Access aisles may be placed on either side of the EV charging space, but cannot overlap the vehicular way. These provisions are taken directly from the requirements for access aisles at accessible parking spaces.
The Board is proposing that EV charging spaces and access aisles comply with 302, which requires floor and ground surfaces to be stable, firm, and slip resistant. The Board is also proposing that accessible EV charging spaces and the adjoining access aisles be at the same level and that changes in level are not permitted. This is to ensure someone can transfer to a mobility device or deploy and traverse a ramp from the vehicle, and then traverse the EV charging space and access aisle safely.
This section contains two proposed exceptions. The first is that a slope not steeper than 1:48 be permitted. This exception is also provided for in 502.4 for parking spaces and allows for sufficient slope for drainage. The second exception is new and would permit a change in level created by in-ground connectors, so long as they are not located in the access aisle. The exceptions would permit an in-ground connector, such as a wireless connector, over which a vehicle is positioned in order to charge, to be installed within the EV charging space.
The Board is proposing a vertical clearance requirement of 98 inches minimum for EV charging spaces, access aisles, and vehicular routes that service them. This is the same as the current requirements for vertical clearance of accessible parking in 502.5.
The Board is proposing that accessible EV charging spaces be identified with the International Symbol of Accessibility (ISA), complying with 703.7.2.1, and that the sign be 60 inches minimum above the ground surface measured to the bottom of the sign. If four or fewer EV charging spaces are located on a site, signage is not required, as proposed in 216.14 and discussed above. Identifying accessible EV charging spaces with the International Symbol of Accessibility is the “reserved model” in that those spaces are only available to individuals with a disability, and in practice means the individual would need to have a state issued disability placard. The Access Board is also proposing a “use last model” as an alternative to the “reserved model”, which is discussed below in Section VI.
Finally, the Board is proposing that EV charging spaces and access aisles be designed so that while vehicles charging they do not obstruct the required clear width of adjacent accessible routes. For example, wheel stops are an effective way to prevent vehicle overhangs from reducing the clear width of an accessible route. This is the same as the current requirements for accessible parking spaces in 502.7.
Many EV chargers have an electronic user interface and are similar to smart parking meters or fare vending machines. EV chargers that provide an electronic user interface must be accessible to and usable by people with disabilities. Accessible communication features enable people who are deaf or hard of hearing, people with vision impairments (but who drive), and other people with disabilities to use an EV charger. As noted above, the Access Board is proposing that all EV chargers provide accessible communication features and comply with 709, except that 709.3.1 will apply only to EV chargers with mobility features complying with 506. As explained below, 709.3.1 ensures that display screens are located at a height to be visible to a person sitting in a mobility device. Many of the requirements for communication proposed in this NPRM are similar to the provisions in the Access Board's Revised Section 508 Standards.
In 709.2 the Board proposes that all EV chargers that deliver sound provide volume control and output amplification. For private listening, the EV charger shall provide a mode of operation to control the volume. For non-private listening, the EV charger shall include incremental volume control with output amplification up to a level of at least 65 dB and a function shall be provided to automatically reset the volume to the default level after every use. The Board is proposing an exception so that EV chargers complying with 709.7.2 Volume Gain for EV Chargers with Two-Way Communication, need not comply with 709.2
The Board is proposing that display screens on EV chargers associated with accessible EV charging spaces be visible from a point located 40 inches above the center of the clear ground space in front of the EV Charger to ensure the display screen is visible from a seated position in a mobility device.
Additionally, the Board is proposing that all EV charger display screens provide at least one mode of characters displayed on the screen in a sans serif font, and that if the EV charger does not provide a screen enlargement feature, characters must be
Where provided, status indicators shall be visually discernable and discernable by touch or sound. For example, if the EV charger makes a sound to indicate charging is completed, then it shall also provide a visual notification.
Where provided, color coding cannot be used as the only means of conveying information, indicating an action, prompting a response, or distinguishing a visual element. For example, a light that is illuminated red while the vehicle is charging and then turns green when the charge is complete cannot be the only means of informing the user that the charge is complete.
Where provided, audible signals or cues shall not be the only means of conveying information, indicating an action, or prompting a response. Information conveyed with an audible signal must also be conveyed visually or with a tactile indication if appropriate.
EV chargers that provide a method of two-way communication, such as the ability to call a help desk or video chat with a representative, shall provide an accessible means of communication for individuals who are deaf or hard of hearing. The EV charger must provide a method to increase volume of received audio. If the EV charger delivers output by a handset or other type of audio transducer that is typically held up to the ear, then the EV charge must reduce interference with hearing technologies; provide a means for effective magnetic wireless coupling; and conform to TIA-1083-B, incorporated by reference. TIA-1083-B is an industry consensus standard that describes in a technical engineering document what characteristics are needed for a telecoil in a handset speaker to be compatible with the “T-Switch” feature provided by modern hearing aids. Additional information about the incorporation by reference is detailed below in Section VII.
Finally, if real-time video communication is provided, the quality of the video must be sufficient to support communication using sign language.
Where an EV charger displays or processes video with synchronized audio, captioning of the audio shall be provided. For example, if a video of instructions on how to use the EV charger is provided with accompanying audio, the audio must be captioned.
The Access Board is considering an alternative to the number of mobility accessible EV charging spaces currently proposed in this NPRM. The current proposal follows a traditional “reserved” approach, where the accessible spaces are restricted to only those persons with a disability and are identified by a sign with the International Symbol of Accessibility (ISA). The Board seeks public input on an alternative concept of “use last”. In the “use last model”, the accessible spaces would be marked with a sign with the ISA, but also the words “use last”. The space would not be reserved only for a person with physical disabilities. Instead, anyone could use the accessible charging space if it is the last charging space available. Under this alternative approach, the Board proposes that a greater number of accessible spaces per EV charging station be required since they would not be solely reserved for persons with certain physical disabilities.
The table below provides the proposed minimum number of mobility accessible EV charging spaces under a “use last” model. Instead of one accessible space for the first 25 EV charging spaces, the requirement would be two accessible spaces for two to 25 EV charging spaces at a charging station. This increase would compensate for the fact that the space could be used by a person without a disability.
As noted above in the discussion of sections 216/F216, under the proposed “reserved” model, identification of an accessible EV charging space would not be required if four or fewer EV charging spaces are provided at an EV charging station. The Board welcomes comment on the appropriate threshold of total number of EV charging spaces that
The Board is considering an alternative 507.6, which would require the designation “use last” and the ISA symbol on the sign marking the accessible space. All other requirements of this section would remain the same.
The Board first introduced the idea of a “use last” model in the technical assistance document it issued in August 2022. Design Recommendations for Accessible Electric Vehicle Charging Stations, available at
However, the Board does have significant reservations about the “use last” approach, and thus proposes it as an alternative approach for consideration and public comment. The Board is concerned that enforcement will be difficult, if not impossible. Suppose, for example, that a person with a physical disability who needs an accessible EV charging space made a complaint that someone without a disability was occupying the accessible space, even though there were other spaces available. In some instances, it may not be possible to determine whether all other spaces were occupied at the time the non-disabled driver arrived at the EV charging station. The Board is also concerned that individuals without disabilities will choose to use the accessible space because it is a larger space, even when non-accessible spaces are available.
Further, as “use last” is a new concept, it may lead to confusion for drivers and require public education to implement. For example, individuals without disabilities may not understand that they are permitted to use the “use last” space, if no other space is available, because traditionally a sign with the ISA indicates that the space is reserved. The Board seeks public comment, especially from any jurisdiction or EV charging station operator that is currently using the “use last” approach. The Board is particularly interested on information regarding enforcement and wait times for individuals with disabilities attempting to use the accessible spaces. The Board also seeks input from individuals with disabilities who may have used a “use last” EV charging space, as well as any experiences with “reserved” accessible EV charging spaces and how often they are available for use.
In the preliminary regulatory assessment (PRIA), discussed below, the Board has analyzed both the costs and benefits of this alternative “use last” approach. The alternative would require more accessible spaces per EV charging stations and therefore be more costly than the “reserved” model. However, as discussed in the PRIA, the magnitude of the difference is quite small for stations outside of California, in that the “use last” approach costs at most $113 more than the “reserved” model for the most common size of EV charging stations (one to 25 charging spaces), which currently accounts for 99% of EV charging stations. California is the only state that has adopted accessible EV charging standards, and so while the cost of both models are lower in California than the costs for the rest of the United States, the “use last” alternative does increase the costs for California from $0 to $1,592.49 per charging station.
While the costs increase slightly with the “use last” alternative, the PRIA notes that the “use last” model is expected to provide better outcomes for all users (with disabilities and without disabilities.) Owing to the greater number of spaces complying with accessibility requirements, and the opportunity for non-disabled people to use those chargers if unoccupied, “[t]he [“use last”] alternative lowers the probability that a user would need to wait for an appropriate EV charging space to become available because it increases the capacity of the EV charging station for both users with disabilities and users without disabilities compared to the [“reserved model”].” PRIA at 45 available at
The benefits analysis also takes into consideration the difficulty of enforcement and includes scenarios where 20 percent and 50 percent of users without disability placards were non-compliant with the “use-last” approach (meaning the user was not a person with a disability and parked in an accessible spot when other non-accessible spots were available). The results show that even if 50 percent of users without disability placards use the accessible spaces inappropriately, the “use last” alternative results in lower probabilities of people with disabilities waiting for accessible spaces than under the “reserved” model because the number of required accessible spaces is greater. The Board seeks public input on this alternative “use last” model, including comments on the PRIA.
As required by the Office of the Federal Register, the Board is providing this information to the public about the proposed material to be incorporated by reference in Appendix B, 105.2 and Appendix C, F105.2. In addition to the information provided below relating to public availability, a copy of this reference standard is available for inspection at the Access Board's office, 1331 F Street NW, Suite 1000, Washington, DC 20004.
Consistent with the obligation that federal agencies under Executive Orders 12866 and 13563 propose and adopt regulations only upon a reasoned determination that benefits justify costs, this proposed rule has been evaluated from a benefit-cost perspective in the preliminary regulatory impact assessment (PRIA). The USDOT Volpe Center prepared this PRIA on behalf of the Access Board. The PRIA is available on the Access Board's website at
Pursuant to E.O. 13563, the Volpe Center has used “the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible”; however, the proposed rule and the underlying statutes create many important benefits that, in the words of E.O. 13563, stem from “values that are difficult or impossible to quantify.” In addition to considering the proposed rule's quantitative effects, the Board has considered the proposed rule's qualitative effects.
Executive Order 13563 states that in making a reasoned determination that a regulation's benefits justify its costs, “each agency may consider and (discuss qualitatively) values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.” The proposed guidelines promote important societal values that are difficult or impossible to quantify. When enacting the ADA, Congress found “the discriminatory effects of architectural, transportation, and communication barriers” to be a continuing problem that “denies people with disabilities the opportunity to compete on an equal basis and to pursue those opportunities for which our free society is justifiably famous, and costs the United States billions of dollars in unnecessary expenses resulting from dependency and nonproductivity.” 42 U.S.C. 12101(a)(5) and (8).
Congress declared that “the Nation's proper goals regarding individuals with disabilities are to assure equality of opportunity, full participation, independent living, and economic self-sufficiency.” 42 U.S.C. 12101(a)(7). This proposed rule promotes the goals declared by Congress by eliminating the discriminatory effects of architectural, transportation, and communication barriers in the design and construction of electric vehicle charging stations.
In the PRIA, the Volpe Center explains that the benefits of the proposed rule relate to preserving equal access to public facilities and facilities designed, built, or altered with federal dollars or leased by federal agencies for people with disabilities. The mobility features of the accessible EV charging spaces and EV chargers would ensure they are usable by people with physical disabilities including those who use mobility devices such as wheelchairs, powered scooters, and canes/crutches/walkers. The requirements related to operable parts would ensure that EV chargers are usable by people who use mobility devices and by people who have difficulty, pinching, twisting, or grasping due to a disability. The requirements related to communication features would ensure that people with difficulty hearing, difficulty seeing (including but not limited to small print), or color-blindness can use EV chargers.
The PRIA describes the methodology used to quantify compliance costs and associated benefits, including data sources, key input values and assumptions, calculation methods, information on potential limitations and sources of uncertainty, and areas where the Board is requesting additional information to inform the final regulatory impact assessment.
In summary, the PRIA explains that the quantified costs of the proposed rule over the seven-year analysis period of 2024 to 2030 are estimated to be $831.8 million when discounted at 3 percent and $683.3 million when discounted at 7 percent. The costs are based on the forecast of the number of EV charging stations that will be built in the United States by 2030. Some costs could not be quantified with the available information and the Access Board requests information from the public to improve those cost estimates. The cost of the rule is at most $2,225 per charging station in most of the United States for the most common sizes of charging stations. Most of the cost is associated with the extra land or space required to provide a wider accessible charging space and an adjacent access aisle. The cost of the rule is a small percentage of the baseline cost of the rule for large Level 2 charging stations and for DC Fast Charging stations. In California, the cost the proposed rule is essentially zero for the most common sizes of charging stations because California has already enacted accessibility requirements for EV charging stations. The total cost of the rule is largely driven by the high number of public EV charging stations that are expected to be built in the near future.
The PRIA also considers a regulatory alternative related to the number of accessible EV charging spaces with mobility features that would be required at a charging station. Whereas the proposed rule requires one accessible charging space reserved for people with disabilities at charging stations with 25 or fewer charging spaces, the alternative would require two accessible charging spaces signed as “use last,” meaning that people without disabilities could use them if the non-accessible charging spaces were all occupied.
In most of the country, the extra cost of the “use last” alternative compared to the “reserved” model is minor, just over $100 per charging station. However, in California, the additional cost of the “use last” alternative compared to the “reserved” model is more substantial. California accounts for just over 30 percent of charging stations, so at a national level, the “use last” alternative is estimated to cost 28 percent more than the “reserved” model, as shown below.
The alternative would cost more than the “reserved” model, but, because it results in more accessible charging spaces being provided, it improves outcomes for disabled users of EV charging stations. A simulation model of queuing behavior at DC Fast Charging stations developed for this PRIA finds that under a range of scenarios, the alternative would substantially decrease the probability that a disabled user would need to wait at a charging station for an accessible charging space to become available, compared to the proposed rule. The PRIA also explores scenarios where 20 percent or 50 percent of non-disabled users do not comply with the ”use last” concept and instead use the accessible charging spaces even when non-accessible spaces are available. Even at fairly high levels of non-compliance, the “use last” concept is expected to provide better outcomes for users with mobility disabilities.
An initial regulatory flexibility analysis (IRFA) has been prepared to evaluate the proposed rule under the Regulatory Flexibility Act. The USDOT Volpe Center has prepared this IRFA on behalf of the Access Board. The IRFA is available on the Access Board's website at
The Regulatory Flexibility Act of 1980 (RFA), as amended, requires agencies to conduct a separate analysis of the economic impact of rules on small entities. The RFA requires agencies to take small entities' concerns into account when developing, writing, publicizing, promulgating, and enforcing regulations. To this end, the RFA requires agencies to detail how they have met these concerns by including an initial and later a final regulatory flexibility analysis.
As required by the RFA, this analysis includes:
The IRFA evaluates the proposed accessibility standards for EV chargers and EV charging stations at places covered under this proposed rule, including places of public accommodation and commercial facilities under the ADA and buildings and facilities that were designed, built, or altered with federal dollars or leased by federal agencies under the ABA. The analysis assesses the effects of the proposed rule on four categories of entities that have roles in providing EV charging stations: EVSE manufacturers, EV charging station operators, non-governmental entities that provide EV charging stations as an amenity to patrons and/or employees, and governmental jurisdictions that provide EV charging stations as a service to the general public.
The proposed rule is expected to have non-significant economic impacts on small EVSE manufacturers, small non-governmental entities that provide EV charging stations to their patrons and/or employees, and small governmental entities that provide EV charging stations to the general public. The proposed rule is expected to have non-significant economic impacts on small EV charging station operators who provide DC Fast Charging (DCFC) charging stations. However, the rule may have significant economic impacts on small EV charging station operators who provide Level 2 charging stations.
The Access Board does not anticipate any meaningful alternatives to minimizing the significant economic impacts on small entities. The alternative described above and analyzed in the PRIA results in slightly higher upfront costs (although it may reduce expected wait times for EV charging station users).
E.O. 14096 set the goal of environmental justice for all, including ensuring “equitable access to a healthy, sustainable, and resilient environment in which to live, play, work, learn, grow, worship, and engage in cultural and subsistence practices.” See E.O. 14096, 88 FR 25,253 (Apr. 26, 2023). The agency has considered environmental justice and believes this proposed rule will advance accessibility and improve the quality of life for communities with environmental justice concerns, and thus advance this goal. As part of public comment on this proposal, the agency welcomes any additional input or engagement from the public, including communities with environmental justice concerns, to inform this rulemaking.
The Access Board has evaluated this notice of proposed rulemaking in accordance with the principles and criteria set forth in Executive Order 13132. We have determined that this action will not have a substantial direct effect on the States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, and, therefore, does not have Federalism implications.
The proposed rule adheres to the fundamental federalism principles and policy making criteria in Executive Order 13132. The portion of this rule applicable to state and local
The Unfunded Mandates Reform Act does not apply to legislative or regulatory provisions that establish or enforce any “statutory rights that prohibit discrimination on the basis of race, color, religion, sex, national origin, age, handicap, or disability.” 2 U.S.C. 658a. Accordingly, it does not apply to this rulemaking.
Under the Paperwork Reduction Act (PRA), federal agencies are generally prohibited from conducting or sponsoring a “collection of information: as defined by the PRA, absent OMB approval.”
To the extent this rule is subject to the Congressional Review Act, the Access Board will comply with its requirements by submitting the final rule to Congress and the Government Accountability Office.
Buildings and facilities, Civil rights, Federal buildings and facilities, Incorporation by reference, Individuals with disabilities, Parking, and Transportation.
For the reasons stated in the preamble, and under the authority of 29 U.S.C. 792(b)(3) and 42 U.S.C. 12204, the Board proposes to amend 36 CFR part 1191 as follows:
29 U.S.C. 792(b)(3); 42 U.S.C. 12204.
The revisions and additions read as follows:
The revisions and additions read as follows:
Copies of the referenced standards may be obtained from the Telecommunications Industry
2. An accessible route shall not be required between site arrival points and the building or facility entrance if the only means of access between them is a vehicular way not providing pedestrian access.
2. In residential facilities, where
The revisions and additions read as follows:
Copies of the referenced standards may be obtained from the Telecommunications Industry (TIA), 1320 North Courthouse Road, Suite 890, Arlington, VA 22201; (800) 332-6077;
2. An accessible route shall not be required between site arrival points and the building or facility entrance if the only means of access between them is a vehicular way not providing pedestrian access.
2. In residential facilities, where
The additions read as follows:
2: EV charging spaces at a pull through
2. Changes in level created by in-ground
Environmental Protection Agency (EPA).
Proposed rule.
Pursuant to the Federal Clean Air Act (CAA or the Act), the Environmental Protection Agency (EPA) is proposing to determine that the sulfur dioxide (SO
Written comments must be received on or before October 3, 2024.
Submit your comments, identified by Docket No. EPA-R06-OAR-2020-0434, at
James E. Grady, EPA Region 6 Office, Regional Haze and SO
Throughout this document “we,” “us,” or “our” mean the EPA.
Under section 109 of the CAA, the EPA has established primary and secondary NAAQS for certain pervasive air pollutants (referred to as “criteria pollutants”) and conducts periodic reviews of the NAAQS to determine whether they should be revised or whether new NAAQS should be established. The primary NAAQS represent ambient air quality standards that the EPA has determined are requisite to protect the public health, while the secondary NAAQS represent ambient air quality standards that the EPA has determined are requisite to protect the public welfare from any known or anticipated adverse effects associated with the presence of such an air pollutant in the ambient air.
Under the CAA, the EPA must establish a NAAQS for SO
On June 22, 2010, the EPA published in the
Following promulgation of a new or revised NAAQS, the EPA is required to designate all areas of the country as either “attainment,” “nonattainment,” or “unclassifiable,” pursuant to CAA section 107(d)(1). On August 5, 2013, the EPA finalized its first round of designations for the 2010 1-hour primary SO
CAA section 191(a) requires states that contain an area designated nonattainment for the 2010 1-hour primary SO
When a NAA is attaining the 2010 1-hour primary SO
Section 179(c)(1) of the CAA requires the EPA to determine whether a NAA attained an applicable standard by the applicable statutory attainment date based on the area's air quality as of the attainment date. The EPA is to issue this determination within 6 months of the attainment date. Thus, the EPA had a mandatory duty under CAA section 179(c) to determine by July 12, 2022, whether the NAAs attained the NAAQS by the statutory attainment date. With this action, the EPA proposes to determine, in accordance with CAA section 179(c), that the Freestone-Anderson and Titus NAAs attained the 2010 1-hour primary SO
A determination of whether an area's air quality meets applicable standards is generally based upon the most recent 3 years of complete, quality-assured data gathered at established state and local air monitoring stations (SLAMS) in a NAA and entered into the EPA's Air Quality System (AQS) database, along with other available information.
The attainment date for the Freestone-Anderson and Titus NAAs was January 12, 2022. For an area where monitoring data alone is used in the determination of attainment, the 3-year design value for the calendar years preceding the attainment date is typically used (
The Freestone-Anderson NAA in Texas is bound by the following Universal Traverse Mercator (UTM) coordinates encompassed by the following rectangular area vertices in UTM zone 14 with datum NAD83:
(1) vertices—UTM Easting (m) 766752.69, UTM Northing (m) 3536333.0,
(2) vertices—UTM Easting (m) 784752.69, UTM Northing (m) 3536333.0,
(3) vertices—UTM Easting (m) 784752.69, UTM Northing (m) 3512333.0,
(4) vertices—UTM Easting (m) 766752.69, UTM Northing (m) 3512333.0.
The Titus NAA in Texas is bound by the following UTM coordinates encompassed by the following rectangular area vertices in UTM zone 15 with datum NAD83:
(1) vertices—UTM Easting (m) 304329.030, UTM Northing (m) 3666971.0,
(2) vertices—UTM Easting (m) 311629.030, UTM Northing (m) 3666971.0,
(3) vertices—UTM Easting (m) 311629.03, UTM Northing (m) 3661870.5,
(4) vertices—UTM Easting (m) 304329.03, UTM Northing (m) 3661870.5.
At the time of these area designations, EPA relied on modeling that indicated that the Big Brown Steam Electric Station in Freestone County and the Monticello Steam Electric Station in Titus County were the key contributors to the modeled 2010 SO
Shortly after EPA published these nonattainment designation boundaries, Luminant announced plans to retire the Monticello Steam Electric Station (October 6, 2017) and the Big Brown Steam Electric Station (October 13, 2017), and to close both facilities at the beginning of 2018. Luminant permanently retired the Big Brown electric generating units 1 and 2 on February 12, 2018, and the TCEQ voided the operating permit for these units on August 3, 2018. The TCEQ voided most individual NSR permits for Big Brown units 1 and 2 on March 28, 2018, and the remaining NSR authorizations were voided on June 30, 2020. On April 18, 2021, the Big Brown facility was permanently demolished. Luminant permanently retired the Monticello electric generating units 1, 2, and 3 on December 31, 2017, and the TCEQ voided the operating permit for these units on August 29, 2018. The TCEQ voided most individual NSR permits for Monticello units 1, 2, and 3 on February 14, 2018, and the remaining NSR authorizations were voided on July 14, 2020. On July 1, 2021, the Monticello facility was permanently demolished. Thus, a key factor in our determination that these two areas attained the 2010 SO
On October 30, 2017, Texas deployed a special purpose SO
For the Titus County NAA, Texas did not install a monitor that had been planned near the Monticello Steam Electric Station once the retirement of the facility was announced for 2017. However, monitoring data from the Welsh monitor (AQS ID 48-449-1078), (the Cookville FM 4855 monitor) also located in Titus County, Texas approximately 16 km to the east of the NAA surrounding the Monticello Steam Electric Station, was evaluated to provide corroborating evidence that the source shutdowns have resulted in attainment. The Welsh Monitor began operating in January 2017. The Welsh monitor was located at the Cookville FM 4855 site by Texas to characterize the SO
In 2016, Sierra Club and Vistra Energy submitted modeling data for the most recent 3 years (2013-2015) at that time. This modeling provided the basis for the two nonattainment designations as discussed earlier. In our CDD,
Although the initial designation modeling showed that Big Brown and Monticello Steam Electric Stations contributed nearly 100 percent of the point source emissions in their nonattainment areas, and those sources have shutdown, the EPA also evaluated total County-wide emissions to consider any point sources that are within the Counties. The EPA evaluated annual SO
Table 1 shows that Big Brown emitted nearly 100 percent of the total point source emissions within Freestone and Anderson Counties until after its retirement in 2018. The total SO
In Table 2, EPA provided categorized County-wide emissions, including point, non-point and mobile source emissions from 2017 and 2020 National Emission Inventory (NEI)
Table 3 shows the SO
In Table 4, EPA provided categorized County-wide emissions from 2017 and 2020 NEI data to further compare Monticello's impact against the rest of the emission inventory in Titus County. The 2017 and 2020 NEI data showed that the SO
We propose to determine that the Freestone-Anderson and Titus NAAs attained the 2010 1-hour SO
Based on the EPA's review of all available evidence described in this notice, the EPA is proposing to determine that the Freestone-Anderson and Titus NAA's attained the 2010 1-hour primary SO
Finalizing this action would not constitute a redesignation of the Freestone-Anderson and Titus NAA's to attainment of the 2010 1-hour SO
If finalized, this action will address the EPA's obligation under CAA section 179(c) to determine if the Freestone-Anderson and Titus NAAs attained the 2010 1-hour SO
The EPA is soliciting public comments on this notice. These comments will be considered before taking final action.
Information on Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, February 16, 1994) and how EPA defines environmental justice (EJ) can be found in the section, below, titled “V. Statutory and Executive Order Reviews.” EPA is providing additional analysis of environmental justice associated with this action. We are doing so for the purpose of providing information to the public, not as a basis of our action.
The EPA conducted screening analyses utilizing EJSCREEN, an environmental justice mapping and screening tool that combines various environmental and demographic indicators within the area.
This action is proposing our determination of attainment by the attainment date for the 2010 1-hour primary SO
This action proposes to find that areas attained the NAAQS by the relevant statutory attainment date and does not impose additional or modify existing requirements. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 14094 (88 FR 21879, April 11, 2023);
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001); and
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act.
Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, February 16, 1994) directs Federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. EPA defines environmental justice (EJ) as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.” As noted in Section IV, the EPA performed an EJ analysis, but we did not consider EJ as a basis for this action. Due to the nature of the action being taken here, this action is expected to have no impact on the air quality of the affected area. Consideration of EJ is not required as part of this action, which finds that NAAs attained the 2010 SO
In addition, this proposed rulemaking, the finding of attainment by the attainment date for the Freestone-Anderson and Titus SO
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Reporting and recordkeeping requirements, Sulfur oxides.
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Proposed rule.
Pursuant to the Federal Clean Air Act (CAA, the Act), the Environmental Protection Agency (EPA) is proposing to disapprove a revision to the Texas State Implementation Plan (SIP) submitted by the State of Texas through the Texas Commission on Environmental Quality (TCEQ) on August 20, 2020. The SIP submittal addresses emissions during planned Maintenance, Startup and Shutdown (MSS) activities for certain Electric Generating Units (EGUs) and includes requirements intended to address visible emissions (opacity) and Particulate Matter (PM) emissions during planned MSS activities The requirements are included in eight Agreed Orders (AOs) issued by TCEQ to the affected EGUs and provided in the SIP revision. EPA is proposing to determine that the requirements contained in these AOs do not meet the CAA requirements that emission limitations must be practically enforceable and must apply on a continuous basis. We are taking this action in accordance with section 110 of the Act.
Comments must be received on or before October 3, 2024.
Submit your comments, identified by Docket No. EPA-R06-OAR-2021-0029 at
Mr. Michael Feldman, Regional Haze and SO
Throughout this document “we,” “us,” and “our” means the EPA.
Texas promulgated rules for the control of visible emissions (opacity) and particulate matter emissions for inclusion in its SIP on January 28, 1972, and EPA first approved those rules into the SIP on May 31, 1972 (37 FR 10895) at 40 CFR 52.2270(b). In the original codification, Texas' rules concerning visible emissions and emission restrictions for particulate matter emissions were contained in TACB Regulation I—Control of Smoke, Visible Emissions and Particulate Matter, Rule 103.1 and 105.31. In developing these original rules, the state has noted that it relied in part on the findings of a study conducted by the Radian Corporation (Radian Report)
Since the original EPA approval of Rules 103.1 and 105.31 in 1972, there have been several subsequent state rule revision actions and EPA-approved SIP revisions which renumbered and recodified Rules 103.1 and 105.31 to what they are today—namely, 30 TAC 111.111 (for opacity) and 30 TAC 111.153(b) (for particulate matter) of the EPA-approved SIP. See 74 FR 19144 (April 28, 2009). However, none of the subsequent rulemakings and SIP revisions were substantive in nature and the record for those actions do not suggest a change to the original scope and application of Rules 103.1 and 105.31.
In 2009, Texas recodified Regulation I, Rules 103.1 and 105.31, in a new location, 30 TAC 111.111 (Approved by EPA. April 28, 2009 (74 FR 19144) effective May 28, 2009,
On October 30, 2014, EPA received a petition from the Environmental Integrity Project and Sierra Club (Petitioners) requesting that the EPA object to the title V operating permit issued by the TCEQ to the Southwestern Electric Power Company (SWEPCO) H.W. Pirkey power plant.
On February 3, 2016, EPA issued an order granting portions of the 2014 petition, objecting to the title V permit for the Pirkey power plant (Petition Number VI-2014-01) which indicated that the Pirkey power plant permit and permit record were unclear as to whether TCEQ's rules created an exemption from the opacity and PM limits in Chapter 111. EPA found that the Petitioners demonstrated that the title V permit and permit record were unclear regarding whether the SIP opacity and PM limits applicable to the source apply during periods of planned MSS, as required. Therefore, the EPA directed TCEQ to revise the title V permit to “ensure that it requires that the opacity and PM limits of 30 T.A.C. §§ 111.111(a)(1)(B) and 111.153(b) apply during periods of planned MSS.”
In a March 13, 2017 letter from EPA to the TCEQ,
As a result of the 2016 meeting and letter exchange, TCEQ submitted the August 2020 SIP submittal. In the submittal, Texas reiterated its interpretation that the opacity and PM emission restrictions for coal-fired EGUs equipped with ESPs established in TAC Rule 103.1 and Rule 105.31 were promulgated by the state on the premise that its rules were based on normal (steady state) or routine operations of ESPs, and therefore were not applicable during periods of planned MSS at such sources.
The August 20, 2020 submittal is intended to address emissions from certain sources during planned MSS events. The state adopted and submitted for inclusion in its SIP, AOs for eight coal-fired power plants (comprised of thirteen EGUs)
The state, through the submittal, seeks to include the eight source-specific AOs into the Texas SIP through incorporation by reference into 40 CFR 52.2770(d), together with a notation in 40 CFR 52.2270(c) to the effect that the requirements of 30 TAC 111.111(a)(1) and 30 TAC 111.153(b) apply to all affected sources during all periods of operation, with the exception of the sources covered by the eight AOs that would be incorporated into 40 CFR 52.2270(d).
The eight affected sources, which are all EGUs, and their county of location are listed in Table 1 below.
As stated earlier, if approved, this SIP revision would amend the SIP to provide that the sources subject to the 8 AOs in this SIP revision are required to comply with the stated visible (opacity) and PM emissions restrictions of 30 TAC 111.111 and 30 TAC 111.153(b) during all periods of operation except periods of MSS during which time the requirements of the AOs would apply. Any other sources subject to 30 TAC 111.111 and 30 TAC 111.153(b), not addressed with AOs in this SIP revision, would be required to comply with 30 TAC 111.111 and 30 TAC 111.153(b) at all times including during periods of MSS.
Each of the AOs is comprised of two main sections titled Stipulation and Ordering Provisions. The Stipulation section of the AOs describes the State air agency's authority for regulating the quality of the State's air and preparing and developing a general, comprehensive plan for the control of the State's air pollution. It also explains that under 42 U.S.C. 7410, Texas is required to submit SIP revisions to EPA for review and approval and that such SIP revisions cannot interfere with any applicable provision concerning attainment or any other applicable requirement of the CAA. The Ordering Provisions section of the AOs state that emissions from the boiler(s), during each planned MSS, shall comply with the opacity limit in 30 TAC § 111.111(a)(1) and the PM limit in 30 TAC § 111.153(b), or the requirements listed in detail and tailored for planned MSS activities. Each of the AOs is signed by the responsible corporate official and TCEQ representatives.
As an initial matter, we acknowledge TCEQ's interpretation of its regulations is that the existing SIP approved limitations on opacity and PM contained in 30 TAC 111.111(a)(1) and 30 TAC 111.153(b) do not apply to the sources subject to this SIP revision during periods of planned MSS. However, as written, these rules do not contain exemptions or any other textual indication that they do not apply during periods of MSS. We do note that the ESPs that are the existing control measures for PM on these sources have technical constraints that prohibit safe and effective operations until sufficient temperatures are reached therefore it is highly improbable that these sources could have met the limitations required by the rules during MSS as historically
CAA section 302(k) provides, in relevant part, that “the terms `emission limitation' and `emission standard' mean a requirement established by the State or the Administrator which limits the quantity, rate, or concentration of emissions of air pollutants on a continuous basis, including any requirement relating to the operation or maintenance of a source to assure continuous emission reduction, and any design, equipment, work practice or operational standard promulgated under this chapter.” Further, CAA Section 110(a)(2)(A) requires that SIPs include “enforceable emission limitations and other control measures, means, or techniques (including economic incentives such as fees, marketable permits, and auctions of emissions rights), as well as schedules and timetables for compliance, as may be necessary or appropriate to meet the applicable requirements of this chapter.” In light of these two provisions, EPA's position is, and has been, that emissions limitations contained in SIPs must be continuous. Because emission limitations must be continuous, they cannot include gaps or periods during which sources are not required to limit their emissions and thus, for example, cannot include exemptions for emissions during periods of operation such as MSS. While emission limits need to be continuous, EPA also believes that SIP emission limitations: (i) do not need to be numerical in format; (ii) do not have to apply the same limitation (
As noted, the SIP submission at issue in this action raises issues related to emissions during MSS. The term MSS has considerable overlap with the events EPA refers to as startup, shutdown, and malfunction (SSM).
Specific to this action, EPA notes that the Court vacated the 2015 SSM SIP Action with respect to SIP provisions that contain automatic exemptions for emissions during SSM events, and that EPA had considered automatic exemptions for emissions during other modes of operation such as maintenance to pose the same legal deficiency. In the 2015 SSM SIP Action, EPA found that certain SIP provisions were inconsistent with CAA 110(a)(2)(A) and 302(k). CAA 110(a)(2)(A) requires SIPs to “include enforceable emission limitations and other control measures, means, or techniques . . . as may be necessary or appropriate to meet the applicable requirements of this chapter.” Because the automatic exemption provisions excluded applicability of emission limitations during SSM periods, the emission limitations at issue no longer operated on a “continuous basis” as required by CAA 302(k).
Significantly, the Court vacated the 2015 SSM SIP Action as to automatic exemptions, because the Agency did not first determine that the particular SIP provisions at issue were “emissions limitations” as defined by CAA 302(k), or that it was “necessary or appropriate” that these provisions be such an emission limitation under CAA section 110(a)(2)(A). The court's opinion stated that while emission limitations must be continuous, SIPs can contain “other control measures, means, or techniques” per CAA 110(a)(2)(A), and such other measures, means, or techniques do not need to meet the CAA's definition of an “emission limitation,” including the requirement that it apply on a continuous basis. The Court therefore took issue with EPA's SIP call for SIP provisions with automatic SSM exemptions, on the basis that “EPA's rationale breaks down if the measure need not qualify as an `emission limitation' in the first place,” and therefore such measure would need not meet the continuity requirement.
In light of the court's decision, EPA is evaluating the nature of the SIP provisions at issue in this action. Based on the language of the existing SIP provisions and the SIP submission at issue in this action, EPA finds that 30 TAC 111.111(a)(1) and 30 TAC 111.153(b) are emissions limitations as contemplated under 110(a)(2)(A) and 302(k), and thus are required to be continuous. Texas, in its submittal, confirms that it adopted the AOs for these eight sources to ensure that the SIP provisions are emission limitations that apply continuously. From the SIP submission in the Executive Summary, “[t]he proposed SIP revision would make certain operational limits and work practices for periods of planned MSS at the listed EGUs federally enforceable so that emission limitations apply on a continuous basis (at all times of operation) (see FCAA, § 110(a)(2)(A)—SIP must contain emission limits, measures, etc. and
As previously discussed, Texas has identified 30 TAC 111.111(a)(1) and 30 TAC 111.153(b) as emission limitations, and EPA agrees with this description. Accordingly, the rules must be continuous and cannot have exemptions. The state indicated that it specifically submitted the SIP revision with the AOs to ensure that the emission limitations apply on a continuous basis, including during MSS periods.
The revision submitted by Texas takes the form of new Alternative Emission Limitations (AELs) intended to apply during MSS periods. The EPA interprets the CAA (80 FR 33913, June 12, 2015) to allow SIP provisions to include AELs that apply to sources during specific modes of operation during which the source cannot meet an otherwise applicable emission limitation, such as may be the case during MSS periods. An AEL, whether a numerical limitation, technological control requirement, or work practice requirement, would apply during a specific mode of operation as a component of the continuously applicable emission limitation. All components of the resulting emission limitation must meet the substantive requirements applicable to the type of SIP provision at issue, must meet the applicable level of stringency for that type of emission limitation, and must be legally and practically enforceable.
EPA has longstanding guidance for AELs, which it reiterated and restated in the 2015 SSM SIP Action. For the AELs to be approvable (
We also note that AELs applicable during modes of operation such as startup and shutdown cannot allow an inappropriately high level of emissions or an effectively unlimited or uncontrolled level of emissions, as those would constitute impermissible de facto exemptions for emissions during certain modes of operation.
After reviewing the information in the Texas SIP submittal, EPA has identified the following concerns:
The requirements in the AOs limit the duration of a normal (as opposed to an extended) planned startup or shutdown to a number of hours per event (48 hours for all units with the exception of Martin Lake units which are limited to 24 hours per normal startups) but provides no limit on the frequency of these events. During these times, the only requirements that apply are the work standards concerning placing the ESP in service as soon as practicable during startup or keeping the ESP in service as late as practicable during shutdown. There is no requirement for the sources to limit emissions during such events in any other way. PM emissions during these events can be much higher than normal emissions and there is no limitation on the number of times during the year a boiler can go through a planned startup or shutdown. The SIP provides no discussion on the historical frequency of these events or why there is no limitation on the total number of hours a year, or times per year, these events may occur.
With respect to factors 5 and 6, AELs should require that all possible steps are taken to minimize the impact of emissions during modes of operation such as MSS on ambient air quality and to require that, at all times, the facility is operated in a manner consistent with good practice for minimizing emissions and the source uses best efforts regarding planning, design, and operating procedures. We propose to find that the Texas SIP submittal and AOs do not address the feasibility or availability of any specific measures to minimize emissions during startup or shutdown. The only requirement is a work practice that consists of placing the ESP into service as soon as practicable or remove the ESP from service as late as possible. Nothing in the August 20, 2020 submittal indicates that technological or economic limitations prevent affected sources from using additional measures to limit emissions during planned MSS events that would address requirements to minimize emissions during such periods and be practically enforceable. This omission is particularly concerning, when planned MSS is an intentional, predictable event and within the control of the source. Because of the predictability of these events, alternative means of limiting emissions appear to be available such as use of natural gas or other cleaner burning fuels as auxiliary fuel to the maximum extent possible during startup operations until the required operating temperatures of the ESP are met and the ESP can be engaged. In addition, the submittal contains no analysis indicating that the use of another control device for PM emissions (for example, fabric filter baghouse) is not feasible, either.
Furthermore, to the extent that these sources already do utilize fuel oil or natural gas in the start-up process, there is no discussion in the SIP submission or requirement in the AOs that addresses the use of alternative fuels during startup and when coal combustion can begin with respect to operation of the ESPs. PM emissions are likely highest when coal is introduced into the boiler but the ESP has not yet been engaged. Utilizing natural gas (or fuel oil when natural gas is not an available fuel) to the maximum extent possible to bring equipment to temperature would serve to minimize emissions during startup and could allow for ESPs to reach necessary conditions for operation at the time coal is introduced into the boilers. In fact, EPA's Mercury and Air Toxics Standards (MATS) rule for power plants published February 16, 2012, and amended on May 7, 2024, contains additional requirements for particulate control for these units. Specific to periods of startup and shutdown, the MATS requirements include work practice standards that requires sources to have sufficient clean fuel capacity to startup and warm the facility to the point where the primary PM controls (
Clean Air Act Section 110(a)(2)(A) requires that SIPs include enforceable emission limits. As discussed previously, Texas stated that the AELs are designed to provide continuously effective limits on PM and opacity through all modes of operation, with chapter 111 requirements to apply during routine operations and the AELs to apply during MSS periods. SIP provisions, including emission limitations under Section 110(a)(2)(A), must be both legally and practically enforceable.
One EPA concern with the state's approach in the AOs is that it does not provide for adequate monitoring, recordkeeping and reporting. The monitoring and recordkeeping requirements in the AOs are not sufficient to ensure that all the data necessary for demonstrating compliance is recorded and available for review. The AOs require recordkeeping to identify periods of planned MSS, the opacity measured by the continuous opacity monitoring system (COMS) for the duration of the planned MSS activities, and the work practices followed during the planned MSS activities. However, they do not specifically identify and require recordkeeping of the parameters used to identify when startup or shutdown periods end or begin, such as temperature, unit load or ESP operating parameters, nor do they specifically require recordkeeping of the parameters monitored (
EPA also proposes to find that the state's conditions in the AOs are too subjective to provide for practical enforceability. The AELs must be accompanied by appropriate methods and conditions to determine compliance that are fully enforceable (specifying clear, unambiguous, and measurable requirements for which compliance can be practicably determined) and replicable (the procedures for determining compliance which are sufficiently specific and non-subjective so that two independent entities applying the procedures would obtain the same result). Moreover, the work practices that apply during MSS events must be practically enforceable and it must be clear when the units are in MSS mode, and thus not subject to the otherwise applicable numerical limits specified in TAC Ch. 111.
The AOs contained in Texas' submittal all include a requirement that the sources must comply with the boiler and ESP manufacturer's operating procedures or the owner/operator's written Standard Operating Procedures (SOP) manual and to operate in a manner consistent with those procedures to minimize opacity.
As summarized in Table 2, the AOs vary in the specificity and conditions for when the ESPs should be placed into service. The Oklaunion AO specifies that the ESP should be placed into service during planned startups “once the outlet gas temperature to the ESP is greater than 300 °F.” This is a clear, unambiguous and measurable requirement and compliance can be verified by reviewing the outlet gas temperature and when the ESP is brought online. The AOs for the other seven facilities lack this level of specificity and are not practically enforceable because they require the ESP to be placed into service “as soon as practical.” For Gibbons Creek, Sam Seymour, Limestone and San Miguel, the ESP is to be placed into service as soon as practical after the air heater outlet temperature is within a specified 100 degree F range. It is unclear why a range is specified rather than a minimum temperature or if there are other measurable parameters, such as flow rate or drum metal temperature, that are being evaluated to determine when it would be “practical” to place the ESP into service. Similarly, the AO for Harrington specifies that the ESP be placed into service as soon as practical after solid fuel is being burned. It is unclear what other measurable parameters, such as ESP inlet temperature, is being evaluated to determine when it would be “practical” to place the ESP into service. Finally, for Martin Lake and Pirkey, there is no additional specification for when the ESP is placed into service other than “as soon as practical.”
The AOs also vary in the specificity and conditions for when the ESPs should be removed from service. For Harrington, the AO specifies that the ESP should be kept in service while the unit is burning solid fuel. For Sam Seymour, San Miguel, Oklaunion and Pirkey, the AOs provide no specificity to the conditions that determine when the ESP should be removed from service and only require that the ESP be removed from service “as late as possible.” For Gibbons Creek, Limestone and Martin Lake, the ESP is to be removed from service as late as possible after the air heater outlet temperature is within a large, specified temperature range. It is unclear why a range is specified rather than a minimum temperature or if there are other measurable parameters, such as flow rate or drum metal temperature, that are being evaluated to determine when the ESP should be removed from service. The AOs for these facilities lack specificity and are not practically enforceable.
The AO requirements for these facilities provide definitions for when the startup period ends that lack specificity such that it is not clear when the units are in startup mode and when they should be complying with the otherwise applicable numerical emission limitations in TAC Chapter 111. The definitions for when startup ends lack clear, unambiguous and measurable requirements by which compliance could be practicably determined.
The AOs for Gibbons Creek and San Miguel define the end of startup as when the “boiler reaches the lowest sustainable load (LSL) and maintains that load (or greater load) for 60 consecutive minutes and ESP operations have been optimized.” The AO for Martin Lake defines the end of startup as when the “[b]oiler reaches stable load and the electrostatic precipitator (ESP) operation has been fully optimized.” However, what constitutes the LSL or stable load is not specified in the requirements. In addition, the startup event does not end until the ESP operations have been optimized, but there is no additional specificity to determine when the ESP would be considered optimized. One can imagine that ESP operations with emissions above the Chapter 111 numerical levels would be considered non-optimized. For Martin Lake, the AO also fails to identify what constitutes a stable load so it is unclear what duration of operation at that load level is considered stable, such that the startup would be deemed to have ended. Similarly, the AOs for Oklaunion and Pirkey define the end of startup as “lowest sustainable load (LSL) on lignite for at least 60 consecutive minutes while coal is being fired” but do not define the LSL. We also note that it is not clear how the LSL “on lignite” applies to the Oklaunion unit that has historically burned subbituminous coal. While the AO for Harrington does define the necessary load level (150 MW) it also does not identify what duration of operation at that load level is to be considered “sustained.” The AO for Limestone specifies both the load level (400 MW) and the duration (60 minutes) but also requires that the ESP operations are “fully optimized” before the startup event is considered ended. The AO for Sam Seymour defines the end of startup as when the “the boiler is released to the LCRA generation desk for automatic dispatch.” The AO provides no additional details to identify the conditions such as sustained load to identify when the boiler would be released for dispatch to demonstrate that this condition is consistent with the goal of minimizing the duration of the event and startup emissions. In addition, while all other AOs define the beginning of startup as when the fans are placed into service, the AO for Sam Seymour defines the beginning of startup when the fuel oil igniters are placed in service. It is not clear what limits the source is required to meet when the fans are brought online before the igniters are placed into service.
The AO requirements for these facilities provide definitions for when the shutdown period begins that lack specificity such that it is not clear when the units are in shutdown mode or when they should be complying with the otherwise applicable numerical emission limitations in TAC Chapter 111. The definitions for when shutdown begins lack clear, unambiguous and measurable requirements by which compliance could be practicably determined.
The duration of shutdown events are limited in the AOs to a specific amount of time, however, the time periods vary between the facilities from 10 hours to 48 hours. There is no discussion as to how the duration of the allowed shutdown period was determined nor justification for how a shutdown period lasting up to 48 hours is consistent with the goal of minimizing the duration of the event and associated emissions.
The AOs for Gibbons Creek, Limestone and San Miguel define the start of a shutdown as when the “load drops below LSL following dispatch request for a shutdown” and the AOs for Oklaunion and Pirkey define the start of a shutdown as when the boiler “has dropped below the lowest sustainable load for at least 30 consecutive minutes.” However, what constitutes the LSL is not specified in the requirements. For Martin Lake, the AO defines the start of shutdown as “when the ESP is partially or completely de-energized due to reaching its minimum operating temperature” but does not identify the minimum operating temperature. For Sam Seymour, the AO defines shutdown as beginning when the LCRA Generation Desk releases control of the boiler to the plant for the purpose of a shutdown but provides no additional details to identify the conditions such as sustained load to identify when the boiler would be released for shutdown. For Harrington, the AO defines shutdown as beginning when the generator breaker is opened or at the point of main fuel no longer being fired in the boiler, whichever is earlier, but provides no additional details to identify the conditions when the breaker is to be opened. In sum, to be legally and practically enforceable, the AOs should clearly define the moment when the requirements switch from compliance with 30 TAC 111.111(a)(1) and 30 TAC 111.153(b) to compliance with the alternative emission limitations that apply during shutdown in the AOs.
In sum, to be legally and practically enforceable, the AOs should contain enforceable limitations on the duration of start-up and shutdown emissions and clearly define the moment when the requirements switch from compliance with the alternative emission limitations for such modes of operation in the AOs to compliance with 30 TAC 111.111(a)(1) and 30 TAC 111.153(b). These AO restrictions as written, however, are not practically enforceable. Instead, the AOs, due to various ambiguities as discussed above, are unclear as to the procedures an operator must follow to be in compliance and at what point in the startup or shutdown process, the facility must switch from compliance with the AO to compliance with 30 TAC 111.111(a)(1) and 30 TAC 111.153(b) as required for routine operation.
In addition to the work practices and operational limits for planned startup and shutdown, the AOs contain provisions specific to planned online or offline maintenance activities, such as boiler general maintenance, de-slagging, combustion optimization, and flue gas conditioning.
As stated in EPA's June 12, 2015 SSM policy, states may not create SIP provisions that contain automatic or discretionary exemptions from otherwise applicable emission limitations during periods such as “maintenance,” “load change,” “soot blowing,” “on-line operating changes” or other similar normal modes of operation. Like startup and shutdown, the EPA considers all of these to be modes of normal operation at a source, for which the source can be designed, operated and maintained in order to meet applicable emission limitations and during which the source should be expected to control and minimize emissions. Excess emissions that occur during planned and predicted periods should be treated as violations of applicable emission limitations. Accordingly, exemptions for emissions during these periods of normal source operation are not consistent with CAA requirements.
It may be appropriate for an air agency to establish an alternative numerical limitation or other form of control measure that applies during these modes of source operation, as for startup and shutdown events, but any such alternative emission limitation should be developed using the same criteria that the EPA recommends for alternative emission limitations applicable during startup and shutdown. Similarly, any SIP provision that includes an emission limitation for sources that includes alternative emission limitations applicable to modes of operation such as “maintenance,” “load change,” “soot blowing” or “on-line operating changes” must also meet the applicable level of stringency for that type of emission limitation and be practically and legally enforceable.
For the reasons discussed in this notice, the EPA is proposing to disapprove a revision to the Texas SIP submitted by TCEQ on August 20, 2020 (concerning opacity and PM emissions during planned MSS activities for certain EGU sources equipped with ESPs as the PM control device). These EGUs are the Southwestern Electric Power Company (SWEPCO) H.W. Pirkey Power Plant; the Lower Colorado River Authority (LCRA) Sam Seymour Fayette Power Project; the Luminant Generation Company, LLC Martin Lake Steam Electric Station; the NRG Texas Power, LLC Limestone Electric Generating Station; the San Miguel Electric Cooperative, Inc. San Miguel Plant; the Southwestern Public Service Company (SPS) Harrington Station; the Texas Municipal Power Agency (TMPA) Gibbons Creek Steam Electric Station; and the Public Service Company of Oklahoma (PSCO) Oklaunion Power Station.
The effect of this disapproval, if finalized, is that the Agreed Orders will not be incorporated into the SIP. There will be no sanctions or FIP clocks started by this action if finalized.
Information on Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, February 16, 1994) and how EPA defines environmental justice (EJ) can be found in the section, below, titled “VII. Statutory and Executive Order Reviews.” For informational and transparency purposes only, the EPA is including additional analysis of environmental justice associated with this proposed action for the purpose of providing information to the public.
EPA conducted screening analyses using EJSCREEN, an environmental justice mapping and screening tool that provides EPA with a nationally consistent dataset and approach for combining various environmental and demographic indicators.
The EPA prepared EJSCREEN reports covering a buffer area of approximately 6-mile radius around each affected EGU. Tables 5 and 6 present a summary of results from the EPA's screening-level analysis for the areas surrounding the affected EGUs in Texas compared to the U.S. as a whole. The full, detailed EJSCREEN report is provided in the docket for this rulemaking.
Communities in close proximity to and/or downwind of these EGUs may be subject to environmental impacts of emissions. Short- and/or long-term exposure to air pollution has been associated with a wide range of human health effects including increased respiratory symptoms, hospitalization for heart or lung diseases, and even premature death.
We therefore propose to determine that this rulemaking action, if finalized as proposed, will not have disproportionately high or adverse human health or environmental effects on communities with environmental justice concerns.
Under the Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Act. Accordingly, this action proposes to disapprove the SIP submittal as not meeting applicable requirements of the CAA.
Additional information about these statutes and Executive Orders can be found at
This action is not a significant regulatory action as defined in Executive Order 12866 (58 FR 51735, October 4, 1993), as amended by Executive Order 14094 (88 FR 21879, April 11, 2023), and was therefore not subject to a requirement for Executive Order 12866 review.
This action does not impose an information collection burden under the PRA (44 U.S.C. 3501
This action is certified to not have a significant economic impact on a substantial number of small entities under the RFA (5 U.S.C. 601
This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. This action imposes no enforceable duty on any State, local, or tribal governments or the private sector.
This action does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.
This proposed action has no tribal implications as specified in E.O. 13175 (65 FR 67249, November 9, 2000). This action will neither impose substantial direct compliance costs on federally recognized tribal governments, nor preempt tribal law. This action will not impose substantial direct compliance costs on federally recognized tribal governments because no actions will be required of tribal governments. This action will also not preempt tribal law as it does not have applicable or related tribal laws.
EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern environmental health or safety risks that EPA has reason to believe may disproportionately affect children, per the definitions of “covered regulatory action” in section 2-202 of the Executive Order. Therefore, this action is not subject to Executive Order 13045
This action is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because it is not a significant regulatory action under Executive Order 12866.
Section 12(d) of the NTTAA directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. This action is not subject to the requirements of section 12(d) of the NTTAA (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA.
Executive Order 12898 (Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, 59 FR 7629, Feb. 16, 1994) directs Federal agencies to identify and address “disproportionately high and adverse human health or environmental effects” of their actions on minority populations and low-income populations to the greatest extent practicable and permitted by law. EPA defines environmental justice (EJ) as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” EPA further defines the term fair treatment to mean that “no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.”
The air agency did not evaluate environmental justice considerations as part of its SIP submittal; the CAA and applicable implementing regulations neither prohibit nor require such an evaluation. The EPA performed an environmental justice analysis, as is described above in the section titled, “Environmental Justice Considerations.” The analysis was done for the purpose of providing additional context and information about this rulemaking to the public, not as a basis of the action. Due to the nature of the action being taken here, this action is expected to have no impact on the air quality of the affected area. In addition, there is no information in the record upon which this decision is based inconsistent with the stated goal of E.O. 12898 of achieving environmental justice for people of color, low-income populations, and Indigenous peoples.
Environmental protection, Air pollution control, Carbon monoxide, Hydrocarbons, Incorporation by reference, Intergovernmental relations, Lead, Nitrogen dioxide, Particulate matter, Sulfur dioxide, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
Animal and Plant Health Inspection Service, USDA.
Notice of public meeting.
We are giving notice that the National Wildlife Services Advisory Committee will be holding a public meeting.
The public meeting will be held on October 29th and October 30th, 2024, from 8 a.m. to 5 p.m. (Mountain Daylight Time) each day.
On October 29th and 30th the meeting will be held at the USDA office located at 2150 Centre Avenue, Building B: Fort Collins, CO 80526.
Ms. Carrie Joyce, Designated Federal Officer, Wildlife Services, APHIS, 4700 River Road Unit 87, Riverdale, MD 20737; (301) 851-3999;
The National Wildlife Services Advisory Committee (the Committee) advises the Secretary of Agriculture concerning policies, program issues, and research needed to conduct the Wildlife Services (WS) program. The Committee also serves as a public forum enabling those affected by the WS program to have a voice in the program's policies.
The meeting will focus on operational and research activities conducted by the WS program. The committee will discuss pertinent WS operational, research, and program activities, to increase program effectiveness and ensure that WS remains an active participant in the protection of agriculture, property, natural resources, and human health and safety.
The meeting will be open to the public. Attendees should arrive between 7:30 a.m. and 8:00 a.m. To gain access to the meeting, members of the public will need to pass through a security check that includes metal detection and have a valid Government issued photo identification.
Due to time constraints, the public will not be allowed to participate in the discussions during the meeting: Written public comments will be accepted before and after the meeting but must be received no later than 11:59 p.m. (EST) on November 15th, 2024. Written comments may be filed with the Committee before or after the meeting by sending them to the person listed under
If needed, please request reasonable accommodations no later than October 15, 2024, by contacting the person listed under
This notice of meeting is given pursuant to section 10 of the Federal Advisory Committee Act (5 U.S.C. 10).
USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of communication for program information (
Equal opportunity practices, in accordance with USDA policies, will be followed in all membership appointments to the Committee. To ensure that the recommendations of the Committee have taken into account the needs of the diverse groups served by the Department, membership shall include, to the extent practicable, individuals with demonstrated ability to represent the many communities, identities, races, ethnicities, backgrounds, abilities, cultures, and beliefs of the American people, including underserved communities.
Animal and Plant Health Inspection Service, USDA.
Notice of availability.
We are advising the public that the Animal and Plant Health Inspection Service has prepared an environmental assessment relative to permitting the release of the insect,
We will consider all comments that we receive on or before October 3, 2024.
You may submit comments by either of the following methods:
•
•
Supporting documents and any comments we receive on this docket may be viewed at
Dr. Jinbo Wang, Assistant Director, Pests, Pathogens, and Biocontrol Permits, Permitting and Compliance Coordination, PPQ, APHIS, 4700 River Road Unit 133, Riverdale, MD 20737-1238; (301) 851-2327; email:
The Animal and Plant Health Inspection Service (APHIS) is proposing to issue permits for the release of the insect,
Flowering rush is an herbaceous aquatic perennial in the plant family Butomaceae. Native to Europe and Asia, flowering rush was introduced into North America by 1900, possibly both accidentally in ballast water and packing material and intentionally via the horticulture trade. It is now widely naturalized in wetlands, lakes, ditches, and slow-moving rivers in 23 States and nine provinces surrounding the United States/Canada border and is continuing to expand outward. Flowering rush displaces native plant species, impedes water flow, alters habitat structure and nutrient cycling, damages fishing, hunting, boating, and other recreational sectors, and is difficult to control. In western North America, it provides habitat for highly damaging invasive and nuisance species.
Permitting the release of
Flowering rush is very difficult to control. Conventional management strategies are often costly to implement, vary in their effectiveness, and sometimes result in extensive non-target damage. However, flowering rush is an excellent target for biological control because it is a perennial plant growing in stable habitats and because it is the only species in its family, Butomaceae, in North America. Classical biological control is a potentially useful management strategy for an invasive pest species whenever effective resident natural enemies are lacking in the new distribution range.
APHIS' review and analysis of the potential environmental impacts associated with the proposed release are documented in an environmental assessment (EA) titled “Field release of the weevil
The EA may be viewed on the
The EA has been prepared in accordance with: (1) The National Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321
Forest Service, Agriculture (USDA).
Notice.
The National Forests in Florida are proposing to establish a recreation fee site. Proposed recreation fees collected at the proposed recreation fee site would be used for operation, maintenance, and improvement of the site. An analysis of nearby recreation fee sites with similar amenities shows the proposed recreation fees that would be charged at the proposed recreation fee site are reasonable and typical of similar recreation fee sites in the area.
If approved, the proposed recreation fees would be established no earlier than six months following the publication of this notice in the
National Forests of Florida, Attention: Recreation Fees, 325 John Knox Road Building F, Suite 210, Tallahassee, FL 32303.
Derrick Washington, Recreation Program Manager, 850-523-8500 or
The Federal Lands Recreation Enhancement Act (16 U.S.C. 6803(b)) requires the Forest Service to publish in the
A proposed standard amenity recreation fee of $5 per day per vehicle and $40 per season or year per vehicle would be charged at Prospect Bluff Historic Site. The National Forests of Florida Day Use Pass and the America the Beautiful—the National Parks and Federal Recreational Lands Pass would be honored at this proposed standard amenity recreation fee site.
Expenditures of recreation fees collected at the proposed recreation fee site would enhance recreation opportunities, improve customer service, and address maintenance needs. Once public involvement is complete, the proposed recreation fee site and proposed recreation fees will be reviewed by a Recreation Resource Advisory Committee prior to a final decision and implementation.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Every five years, pursuant to the Tariff Act of 1930, as amended (the Act), the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission automatically initiate and conduct reviews to determine whether revocation of a countervailing or antidumping duty order or termination of an investigation suspended under sections 704 or 734 of the Act would be likely to lead to continuation or recurrence of dumping or a countervailable subsidy (as the case may be) and of material injury.
Pursuant to section 751(c) of the Act, the following Sunset Reviews are scheduled for initiation in October 2024 and will appear in that month's
No Sunset Review of countervailing duty proceedings is scheduled for initiation in October 2024.
No Sunset Review of suspended investigations is scheduled for initiation in October 2024.
Commerce's procedures for the conduct of Sunset Review are set forth in 19 CFR 351.218. The
Pursuant to 19 CFR 351.103(c), Commerce will maintain and make available a service list for these proceedings. To facilitate the timely preparation of the service list(s), it is requested that those seeking recognition as interested parties to a proceeding contact Commerce in writing within 10 days of the publication of the Notice of Initiation.
Please note that if Commerce receives a Notice of Intent to Participate from a member of the domestic industry within 15 days of the date of initiation, the review will continue.
Thereafter, any interested party wishing to participate in the Sunset Review must provide substantive comments in response to the notice of initiation no later than 30 days after the date of initiation. Note that Commerce has amended certain of its requirements pertaining to the service of documents in 19 CFR 351.303(f).
This notice is not required by statute but is published as a service to the international trading community.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
In accordance with the Tariff Act of 1930, as amended (the Act), the U.S. Department of Commerce (Commerce) is automatically initiating the five-year reviews (Sunset Reviews) of the antidumping and countervailing duty (AD/CVD) order(s) and suspended investigation(s) listed below. The U.S. International Trade Commission (the ITC) is publishing concurrently with this notice its notice of
Applicable September 3, 2024.
Commerce official identified in the
Commerce's procedures for the conduct of Sunset Reviews are set forth in its
In accordance with section 751(c) of the Act and 19 CFR 351.218(c), we are initiating the Sunset Reviews of the following antidumping and countervailing duty order(s) and suspended investigation(s):
As a courtesy, we are making information related to sunset proceedings, including copies of the pertinent statute and Commerce's regulations, Commerce's schedule for Sunset Reviews, a listing of past revocations and continuations, and current service lists, available to the public on Commerce's website at the following address:
In accordance with section 782(b) of the Act, any party submitting factual information in an AD/CVD proceeding must certify to the accuracy and completeness of that information. Parties must use the certification formats provided in 19 CFR 351.303(g). Commerce intends to reject factual submissions if the submitting party does not comply with applicable revised certification requirements.
Pursuant to 19 CFR 351.103(d), Commerce will maintain and make available a public service list for these proceedings. Parties wishing to participate in any of these five-year reviews must file letters of appearance as discussed at 19 CFR 351.103(d). To facilitate the timely preparation of the public service list, it is requested that those seeking recognition as interested parties to a proceeding submit an entry of appearance within 10 days of the publication of the Notice of Initiation. Because deadlines in Sunset Reviews can be very short, we urge interested parties who want access to proprietary information under administrative protective order (APO) to file an APO application immediately following publication in the
Domestic interested parties, as defined in sections 771(9)(C), (D), (E), (F), and (G) of the Act and 19 CFR 351.102(b), wishing to participate in a Sunset Review must respond not later than 15 days after the date of publication in the
If we receive an order-specific notice of intent to participate from a domestic interested party, Commerce's regulations provide that
This notice of initiation is being published in accordance with section 751(c) of the Act and 19 CFR 351.218(c).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Brenda E. Brown, Office of AD/CVD Operations, Customs Liaison Unit, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, telephone: (202) 482-4735.
Each year during the anniversary month of the publication of an antidumping duty (AD) or countervailing duty (CVD) order, finding, or suspended investigation, an interested party, as defined in section 771(9) of the Tariff Act of 1930, as amended (the Act), may request, in accordance with 19 CFR 351.213, that the U.S. Department of Commerce (Commerce) conduct an administrative review of that AD or CVD order, finding, or suspended investigation.
All deadlines for the submission of comments or actions by Commerce discussed below refer to the number of calendar days from the applicable starting date.
In the event Commerce limits the number of respondents for individual examination for administrative reviews initiated pursuant to requests made for the orders identified below, Commerce intends to select respondents based on U.S. Customs and Border Protection (CBP) data for U.S. imports during the period of review (POR). We intend to release the CBP data under administrative protective order (APO) to all parties having an APO within five days of publication of the initiation notice and to make our decision regarding respondent selection within 35 days of publication of the initiation
In the event Commerce decides it is necessary to limit individual examination of respondents and conduct respondent selection under section 777A(c)(2) of the Act:
In general, Commerce finds that determinations concerning whether particular companies should be “collapsed” (
Pursuant to 19 CFR 351.213(d)(1), a party that requests a review may withdraw that request within 90 days of the date of publication of the notice of initiation of the requested review. The regulation provides that Commerce may extend this time if it is reasonable to do so. Determinations by Commerce to extend the 90-day deadline will be made on a case-by-case basis.
Section 504 of the Trade Preferences Extension Act of 2015 amended the Act by adding the concept of particular market situation (PMS) for purposes of constructed value under section 773(e) of the Act.
Neither section 773(e) of the Act nor 19 CFR 351.301(c)(2)(v) set a deadline for the submission of PMS allegations and supporting factual information. However, in order to administer section 773(e) of the Act, Commerce must receive PMS allegations and supporting factual information with enough time to consider the submission. Thus, should an interested party wish to submit a PMS allegation and supporting new factual information pursuant to section 773(e) of the Act, it must do so no later than 20 days after submission of initial Section D responses.
In accordance with 19 CFR 351.213(b), an interested party as defined by section 771(9) of the Act may request in writing that Commerce conduct an administrative review. For both AD and CVD reviews, the interested party must specify the individual producers or exporters covered by an AD finding or an AD or CVD order or suspension agreement for which it is requesting a review. In addition, a domestic interested party or an interested party described in section 771(9)(B) of the Act must state why it desires Commerce to review those particular producers or exporters. If the interested party intends for Commerce to review sales of merchandise by an exporter (or a producer if that producer also exports merchandise from other suppliers) which was produced in more than one country of origin and each country of origin is subject to a separate order, then the interested party must state specifically, on an order-by-order basis, which exporter(s) the request is intended to cover.
Note that, for any party Commerce was unable to locate in prior segments, Commerce will not accept a request for an administrative review of that party absent new information as to the party's location. Moreover, if the interested party who files a request for review is unable to locate the producer or exporter for which it requested the review, the interested party must provide an explanation of the attempts it made to locate the producer or exporter at the same time it files its request for review, in order for Commerce to determine if the interested party's attempts were reasonable, pursuant to 19 CFR 351.303(f)(3)(ii).
As explained in
Commerce no longer considers the non-market economy (NME) entity as an exporter conditionally subject to an AD administrative review.
All requests must be filed electronically in Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS) on Enforcement and Compliance's ACCESS website at
Commerce will publish in the
For the first administrative review of any order, there will be no assessment of antidumping or countervailing duties on entries of subject merchandise entered, or withdrawn from warehouse, for consumption during the relevant provisional-measures “gap” period of the order, if such a gap period is applicable to the period of review.
Establishment of and Updates to the Annual Inquiry Service List
On September 20, 2021, Commerce published the final rule titled “
In accordance with the
As mentioned in the
Interested parties have 30 days after the date of this notice to submit new or amended entries of appearance. Commerce will then finalize the annual inquiry service lists five business days thereafter. For ease of administration, please note that Commerce requests that law firms with more than one attorney representing interested parties in a proceeding designate a lead attorney to be included on the annual inquiry service list.
Commerce may update an annual inquiry service list at any time as needed based on interested parties' amendments to their entries of appearance to remove or otherwise modify their list of members and representatives, or to update contact information. Any changes or announcements pertaining to these procedures will be posted to the ACCESS website at
In the
This notice is not required by statute but is published as a service to the international trading community.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; corrections to public meeting agenda.
The Western Pacific Fishery Management Council (Council) will hold its Fishery Rights of Indigenous People Standing Committee (SC), Executive and Budget SC, and its 200th Council meetings to take actions on fishery management issues in the Western Pacific Region.
The meetings will be held between September 20 and September 25, 2024. For specific times and agendas, see
The Fishery Rights of Indigenous People SC, Executive and Budget SC, and 200th Council meetings will be held as a hybrid meeting for members and the public, with a remote participation option available via Webex. In-person attendance for the Fishery Rights of Indigenous People SC and Executive and Budget SC meetings will be hosted at the Council office, 1164 Bishop Street, Suite 1400, Honolulu, HI 96813. In-person attendance for the 200th Council meeting will be hosted at the Ala Moana Hotel, Hibiscus Ballroom, 410 Atkinson Drive, Honolulu, HI 96814.
Specific information on joining the meeting, connecting to the web conference and providing oral public comments will be posted on the Council website at
Kitty M. Simonds, Executive Director, Western Pacific Fishery Management Council; phone: (808) 522-8220.
The original notice published in the
Agenda items noted as “Final Action” refer to actions that may result in Council transmittal of a proposed fishery management plan, proposed plan amendment, or proposed regulations to the U.S. Secretary of Commerce, under Sections 304 or 305 of the Magnuson-Stevens Act (MSA). In addition to the agenda items listed here, the Council and its advisory bodies will hear recommendations from Council advisors. An opportunity to submit public comment will be provided throughout the agendas. The order in which agenda items are addressed may change and will be announced in advance at the Council meeting. The meetings will run as late as necessary to complete scheduled business.
Background documents for the 200th Council meeting will be available at
Non-emergency issues not contained in this agenda may come before the Council for discussion and formal Council action during its 200th meeting. However, Council action on regulatory issues will be restricted to those issues specifically listed in this document and any regulatory issue arising after publication of this document that requires emergency action under section 305(c) of the Magnuson-Stevens Act, provided the public has been notified of the Council's intent to take action to address the emergency.
These meetings are accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Kitty M. Simonds, (808) 522-8220 (voice) or (808) 522-8226 (fax), at least 5 days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; withdrawal of application.
Notice is hereby given that the Institute of Marine Sciences, University of California at Santa Cruz, 130 McAllister Way, Santa Cruz, CA 95060 (Responsible Party: Daniel Costa, Ph.D.) has withdrawn their application for an amendment to Scientific Research Permit No. 23188-03.
This notice was published on September 3, 2024.
The application and related documents are available for review upon written request via email to
Sara Young or Shasta McClenahan, Ph.D., (301) 427-8401.
On November 20, 2023, a notice was published in the
The United States Patent and Trademark Office (USPTO) will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. The USPTO invites comments on this information collection renewal, which helps the USPTO assess the impact of its information collection requirements and minimize the public's reporting burden. Public comments were previously requested via the
The USPTO administers these statutes through 37 CFR 2.146, 2.171, and 37 CFR part 3. These regulations permit the public, corporations, other federal agencies, and government-owned or government-controlled corporations to submit patent and trademark assignment documents and other documents related to title transfers to the USPTO to be recorded. In accordance with 37 CFR 3.54, the recording of an assignment document by the USPTO is an administrative action and not a determination of the validity of the document or of the effect that the document has on the title to an application, patent, or trademark.
Once the assignment documents are recorded, they are available for public inspection. The only exceptions are those documents that are sealed under secrecy orders according to 37 CFR 3.58, or related to unpublished patent applications maintained in confidence under 35 U.S.C. 122 and 37 CFR 1.14. The public uses these records to conduct ownership and chain-of-title searches. The public may view these records either at the USPTO Public Search Facility or at the National Archives and Records Administration, depending on the date they were recorded. The public may also search patent and trademark assignment information online through the USPTO website.
This information collection covers the recordation of patent and trademark assignments. In order to record an assignment, the respondent must submit an assignment document along with the appropriate cover sheet. The USPTO provides two forms for this purpose, the Recordation Form Cover Sheet—Trademarks Only (PTO-1594), and the Recordation Form Cover Sheet—Patents Only (PTO-1595), which capture all of the necessary data for accurately recording various assignments. Customers may submit assignments electronically by using Assignment Center, which is available on the USPTO website.
For this 30-day notice, the non-hourly cost burdens have been adjusted, for an overall increase of $27, due to an increase in the postage rate since the 60-day notice was published. Additionally, in response to public comments, the USPTO has added an additional 10 minutes to this information collection burden estimate.
This information collection request may be viewed at
Written comments and recommendations for this information collection should be submitted within 30 days of the publication of this notice on the following website,
Further information can be obtained by:
•
• Mail: Justin Isaac, Office of the Chief Administrative Officer, United States Patent and Trademark Office, P.O. Box 1450, Alexandria, VA 22313-1450.
United States Patent and Trademark Office, Department of Commerce.
Notice of closed meeting.
The National Medal of Technology and Innovation (NMTI or Medal) is the nation's highest honor for technological achievement, bestowed by the President of the United States on the nation's leading innovators. The Medal is awarded to individuals, teams (up to four individuals), companies, or divisions of companies for their outstanding contributions to America's economic, environmental, and social well-being. The NMTI Nomination Evaluation Committee will meet in a closed session on September 26, 2024. The primary purpose of the meeting is to discuss the relative merits of the people, teams, and companies nominated for the NMTI.
The meeting will convene on September 26, 2024, at approximately 9 a.m. and adjourn at approximately 4 p.m.
The meeting will take place at the United States Patent and Trademark Office (USPTO), 600 Dulany St., Alexandria, VA 22314.
Linda Hosler, Program Manager, National Medal of Technology and Innovation Program, USPTO, at 600 Dulany St., Alexandria, VA 22314; 571-272-8514; or
Pursuant to the Federal Advisory Committee Act (FACA), 5 U.S.C. 1001
Through a September 26, 2023, Delegation of Authority from the Secretary of Commerce to the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (Director), the Director is responsible for recommending to the President prospective NMTI recipients. The NMTI Nomination Evaluation Committee evaluates the nominations received via public solicitation and makes its recommendations for the Medal to the Director. Committee members are distinguished experts in the fields of science, technology, business, and patent law. They come from both the public and private sectors and are appointed by the Secretary for three-year terms.
The NMTI Nomination Evaluation Committee was established in accordance with the FACA. The Committee meeting will be closed to the public, in accordance with the FACA and 5 U.S.C. 552b(c)(6) and (9)(B), because the discussion of the relative merits of the Medal nominations is likely to disclose information of a personal nature that, if shared widely, would constitute an unwarranted invasion of the personal privacy of the nominees. Premature disclosure of the Committee's recommendations would also likely significantly frustrate the implementation of the Medal program. Pursuant to 41 CFR 102-3.150(a)(6), you may submit written comments to the Committee. Please contact Linda Hosler at
The Deputy Assistant Secretary for Administration, performing the non-exclusive functions and duties of the Chief Financial Officer and Assistant Secretary for Administration, United States Department of Commerce, formally determined on August 22, 2024, pursuant to section 1009(d) of the FACA, that the meeting may be closed because Committee members are concerned with matters that are within the purview of 5 U.S.C. 552b(c)(6) and (9)(B). Due to the closure of this meeting, copies of any meeting minutes will not be available. A copy of the Notice of Determination for Closure of Meeting is available for public inspection at the USPTO.
Federal Student Aid, Department of Education.
Notice.
The Secretary announces the annual updates to the tables used in the statutory Federal Need Analysis Methodology (Need Analysis) that determines a student's Student Aid Index (SAI) for award year (AY) 2025-26 for student financial aid programs, Assistance Listing Numbers (ALN) 84.007, 84.033, 84.063, 84.268, and 84.379. The intent of this notice is to alert the financial aid community and the broader public to these required annual updates used in the determination of student aid eligibility.
Heather Hall Lewis. Telephone: (202) 453-6519. Email:
If you are deaf, hard of hearing, or have a speech disability and wish to access telecommunications relay services, please dial 7-1-1.
Part F of title IV of the Higher Education Act of 1965, as amended (HEA), specifies the criteria, data elements, calculations, and tables that make up the Need Analysis.
Enacted into law as part of the Consolidated Appropriations Act, 2021, Division FF, Title VII (116 Pub. L. 260), the FAFSA Simplification Act makes many significant changes to the Need Analysis, including how the Secretary must update the tables.
Section 478 of the HEA requires the Secretary to annually update the following five tables for inflation: the Income Protection Allowance (IPA), the Adjusted Net Worth (NW) of a Business or Farm, the Asset Protection Allowance, the Assessment Schedules and Rates, and the Employment Expense Allowance. The updates are based, in general, upon increases in items such as, but not limited to, the Consumer Price Index (CPI).
The Secretary updates the above tables to account for inflation that took place between April 2020 and April in the year prior to the beginning of each award year. The increases in the tables must be based on a percentage equal to the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U) for April of the applicable year.
This notice includes the 2025-26 AY values for the tables in sections 1 (Income Protection Allowance), 2 (Adjusted Net Worth of a Business or Farm), 3 (Asset Protection Allowance), 4 (Assessment Schedules and Rates), and 5 (Employment Expense Allowance).
1. Income Protection Allowance (IPA). This allowance is the amount of living expenses associated with the maintenance of an individual or family that offset the family's income. The allowance varies by family size and marital status. The IPA for dependent students is $11,510. The IPAs for parents of dependent students and independent students are listed in the tables below.
2. Adjusted Net Worth (NW) of a Business or Farm. A portion of the full NW (assets less debts) of a business or farm is excluded from the calculation of a SAI because (1) the income produced from these assets is already assessed in another part of the formula; and (2) the formula protects a portion of the value of the assets.
The portion of these assets included in the contribution calculation is computed according to the following schedule. This schedule is used for parents of dependent students, independent students without dependents other than a spouse, and independent students with dependents other than a spouse.
3. Asset Protection Allowance (APA). This allowance protects a portion of NW (assets less debts) from being considered available for postsecondary educational expenses. There is one asset protection allowance table for parents of dependent students, independent students with dependents other than a spouse, and independent students without dependents other than a spouse.
4. Assessment Schedules and Rates. Two schedules that are subject to updates—one for parents of dependent students and one for independent students with dependents other than a spouse—are used to further limit how much of the family financial resources are considered to go toward educational expenses. For dependent students, the SAI is derived from an assessment of the parents' adjusted available income (AAI). For independent students with dependents other than a spouse, the SAI is derived from an assessment of the family's AAI. The AAI represents a measure of a family's financial strength, which considers both income and assets.
The contribution of parents of dependent students, and independent students with dependents other than a spouse, is computed according to the following schedule:
5. Employment Expense Allowance. This allowance for employment-related expenses recognizes additional expenses incurred by working individuals. For parents of dependent students, the employment expense allowance is the lesser of $4,890 or 35% of the total earned income of the student's parent and parent's spouse, if applicable. The employment expense allowance for independent students with dependents other than a spouse is also the lesser of $4,890 or 35% of the combined earned income for the student and student spouse, if applicable. The allowance is the same for independent students without dependents other than a spouse if they are married, but if they are not married, the allowance is zero.
You may also access documents of the Department published in the
Office of Science, Department of Energy.
Notice of open meeting.
This notice announces an in-person meeting of the Basic Energy Sciences Advisory Committee (BESAC). The Federal Advisory Committee Act requires that public notice of these meetings be announced in the
Tuesday, September 24, 2024; 10 a.m. to 5:10 p.m. EDT.
Wednesday, September 25, 2024; 10 a.m. to 12:15 p.m. EDT.
Hilton Washington DC/Rockville Hotel & Executive Meeting Center, 1750 Rockville Pike, Rockville, Maryland 20852, (301) 468-1100.
Information to participate can be found on the website at:
Kerry Hochberger; Office of Basic Energy Sciences; U.S. Department of Energy; Germantown Building, 1000 Independence Avenue SW, Washington,
U.S. Energy Information Administration (EIA), Department of Energy (DOE).
Notice and request for comments.
EIA invites public comments on the proposed three-year extension, without changes, to the Uranium Data Program (UDP) as required under the Paperwork Reduction Act of 1995. The UDP consists of three surveys: Form EIA-851A
EIA must receive all comments on this proposed information collection no later than November 4, 2024. If you anticipate any difficulties in submitting your comments by the deadline, contact the person listed in
You may submit comments, identified by OMB control number 1905-0160, by email
Kenneth Pick, EIA Clearance Officer, at (202) 586-5562. The form and instructions are available at
This information collection request contains:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information has practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
This constitutes notice, in accordance with 18 CFR 385.2201(b), of the receipt of prohibited and exempt off-the-record communications.
Order No. 607 (64 FR 51222, September 22, 1999) requires Commission decisional employees, who make or receive a prohibited or exempt off-the-record communication relevant to the merits of a contested proceeding, to deliver to the Secretary of the Commission, a copy of the communication, if written, or a summary of the substance of any oral communication.
Prohibited communications are included in a public, non-decisional file associated with, but not a part of, the decisional record of the proceeding. Unless the Commission determines that the prohibited communication and any responses thereto should become a part of the decisional record, the prohibited off-the-record communication will not be considered by the Commission in reaching its decision. Parties to a proceeding may seek the opportunity to respond to any facts or contentions made in a prohibited off-the-record communication and may request that the Commission place the prohibited communication and responses thereto in the decisional record. The Commission will grant such a request only when it determines that fairness so requires. Any person identified below as having made a prohibited off-the-record communication shall serve the document on all parties listed on the official service list for the applicable proceeding in accordance with Rule 2010, 18 CFR 385.2010.
Exempt off-the-record communications are included in the decisional record of the proceeding, unless the communication was with a cooperating agency as described by 40 CFR 1501.6, made under 18 CFR 385.2201(e) (1) (v).
The following is a list of off-the-record communications recently received by the Secretary of the Commission. Each filing may be viewed on the Commission's website at
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection:
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The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person whose name appears on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
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n. Individuals desiring to be included on the Commission's mailing list should so indicate by writing to the Secretary of the Commission.
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q. The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
The filings are accessible in the Commission's eLibrary system (
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
Take notice that the Commission received the following electric reliability filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
The Commission's Office of Public Participation (OPP) supports meaningful public engagement and participation in Commission proceedings. OPP can help members of the public, including landowners, environmental justice communities, Tribal members and others, access publicly available information and navigate Commission processes. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, the public is encouraged to contact OPP at (202) 502-6595 or
Environmental Protection Agency (EPA).
Notice.
EPA has received a specific exemption request from the National Aeronautics and Space Administration (NASA) to use the pesticide ortho-phthalaldehyde (OPA, CAS No. 643-79-8) to treat the coolant fluid of the internal active thermal control system of the International Space Station to control aerobic/microaerophilic bacteria in the aqueous coolant. The applicant proposes the use of a new chemical which has not been registered by EPA. Therefore, in accordance with the Code of Federal Regulations, EPA is soliciting public comment before making the decision whether to grant the exemption.
Comments must be received on or before September 18, 2024.
Submit your comments, identified by docket identification (ID) number EPA-HQ-OPP-2024-0406, through the
Charles Smith, Director, Registration Division (7505T), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001; main telephone number: (202) 566-1030; email address:
You may be potentially affected by this action if you are a pesticide manufacturer, North American Industrial Classification System (NAICS) (Code 32532) or involved with the International Space Station. This listing is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Other types of entities not listed could also be affected.
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Under section 18 of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) (7 U.S.C. 136p), at the discretion of the EPA Administrator, a Federal or State agency may be exempted from any provision of FIFRA if the EPA Administrator determines that emergency conditions exist which require the exemption. NASA has requested the EPA Administrator to issue a specific exemption for the use of ortho-phthalaldehyde (OPA) in the coolant of the internal active thermal control system (IATCS) of the Internal Space Station (ISS) to control aerobic/microaerophilic bacteria in the aqueous coolant. Information in accordance with 40 CFR part 166 was submitted as part of this request.
As part of this request, the applicant asserted that it has considered the registered biocide alternatives and concluded that OPA is the most effective biocide that meets the requisite criteria including: The need for safe, non-intrusive implementation and operation in a functioning system; the ability to control existing planktonic and biofilm-residing microorganisms; a negligible impact on system wetted materials of construction; and a negligible reactivity with existing coolant additives. The ISS would not have an adequate long-term solution for controlling the microorganisms in the IATCS coolant without the use of OPA. The OPA is incorporated into a porous resin material contained in a stainless-steel canister. The canister containing the OPA-incorporated resin is inserted into a coolant system loop, using flexible hose and quick disconnects and is placed in line for 8 hours to deliver the OPA into the fluid. As the coolant fluid flows through the cannister, the OPA elutes from the resin material into the coolant fluid. The total volume of the circulatory loops of the IATCS is 829 liters. The maximum concentration would be 350 milligrams (mg) of OPA per liter of coolant fluid. A total of 290,150 mg would be needed for the entire system. The OPA is incorporated into the resin at 210 mg of OPA per cm
This notice does not constitute a decision by EPA on the application itself. The regulations governing FIFRA section 18 require publication of a notice of receipt of an application for a specific exemption proposing the use of a new chemical (
The notice provides an opportunity for public comment on the application. The Agency will review and consider all comments received during the comment period in determining whether to issue the specific exemption requested by the NASA.
Environmental Protection Agency (EPA).
Notice of proposed settlement; request for public comment.
In accordance with the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), notice is hereby given that the Environmental Protection Agency (“EPA”), has entered into a proposed settlement, embodied in an Administrative Settlement Agreement for Recovery of Past Response Costs (“Settlement Agreement”), with the Glendale Respondents Group (“GRG”). Under the Settlement Agreement, the GRG agrees to pay $3,261,293 to reimburse EPA for costs paid at or in connection with the San Fernando Valley Basin-Wide Remedial Investigation between December 31, 1997, and September 30, 2016, that were allocated by EPA to the San Fernando Valley (Area 2) Superfund Site, Glendale North and South Operable Units (“GNOU” and “GSOU,” collectively the “GOUs”).
Comments must be received on or before October 3, 2024.
The Settlement Agreement is available for public inspection on EPA's web page at
Stephanie Oehler, Assistant Regional Counsel, Office of Regional Counsel (ORC-3), U.S. Environmental Protection Agency, 75 Hawthorne Street, San Francisco, California 94105;
Notice of this proposed Settlement Agreement is made in accordance with section 122(i) of CERCLA, 42 U.S.C. 9622(i). The Settlement Agreement concerns costs paid by EPA for the San Fernando Valley Basin-Wide Remedial Investigation, in connection with the San Fernando Valley (Area 2) Superfund Site and the GOUs. These are CERCLA response actions taking place in Los Angeles County, California, where groundwater contamination has come to be located. The GRG, which agrees to pay $3,261,293, is the only party to the Settlement Agreement. EPA intends to seek to recover the remaining
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA or Agency) is announcing the availability of and seeking public comment on a draft risk evaluation under the Toxic Substances Control Act (TSCA) for di-isononyl phthalate (DINP) (1,2-Benzene- dicarboxylic acid, 1,2- diisononyl ester) (CASRN 28553-12-0). The purpose of risk evaluations under TSCA is to determine whether a chemical substance presents an unreasonable risk of injury to health or the environment, without consideration of costs or non-risk factors, including unreasonable risk to potentially exposed or susceptible subpopulations identified as relevant to the risk evaluation by EPA, under the conditions of use (COU). EPA has used the best available science to prepare this draft risk evaluation and to preliminarily determine that DINP poses unreasonable risk to human health.
Written comments: Comments must be received on or before November 4, 2024.
This action is directed to the public in general and may be of particular interest to those involved in the manufacture, processing, distribution, use, and disposal of the chemical being evaluated, related industry trade organizations, non-governmental organizations with an interest in human and environmental health, state and local governments, Tribal Nations, and/or those interested in the assessment of risks involving chemical substances and mixtures regulated under TSCA. As such, the Agency has not attempted to describe all the specific entities that this action might apply to. If you need help determining applicability, consult the technical contact listed under
The Agency is conducting this risk evaluation under TSCA section 6, 15 U.S.C. 2605, which requires that EPA conduct risk evaluations on chemical substances and identifies the minimum components EPA must include in all chemical substance risk evaluations. Each risk evaluation must be conducted consistent with the best available science, be based on the weight of the scientific evidence, and consider reasonably available information. 15 U.S.C. 2625(h), (i), and (k). See also the implementing procedural regulations at 40 CFR part 702.
EPA is announcing the availability of and seeking public comment on a draft risk evaluation under TSCA for DINP (CASRN 28553-12-0). The purpose of
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When preparing and submitting your comments, see the commenting tips at
DINP is a common chemical name for the category of chemical substances that includes the following substances: 1,2-benzenedicarboxylic acid, 1,2-isononyl ester (CASRN 28553-12-0) and 1,2-benzenedicarboxylic acid, di-C9-11-branched alkyl esters, C9-rich (CASRN 68515-48-0). Both CASRNs contain mainly C9 dialkyl phthalate esters. Both DINP, and another phthalate also undergoing TSCA risk evaluation, DIDP (1,2-Benzene- dicarboxylic acid, 1,2- diisodecyl ester, CASRN 26761-40-0 and 68515-49-1), are primarily used as plasticizers in polyvinyl chloride (PVC) in consumer, commercial, and industrial applications. DIDP and DINP are both structurally similar phthalates, and therefore many aspects of physical-chemical (p-chem) properties and exposure (to humans and ecological species) are similar, as described further in the draft physical chemical and fate assessments for both chemical substances.
On May 24, 2019, EPA received requests to conduct risk evaluations for both DINP and DIDP from ExxonMobil Chemical Company, Evonik Corporation, and Teknor Apex, through the American Chemistry Council's High Phthalates Panel (ACC HPP). In December 2019, EPA notified ACC HPP that the Agency had granted their manufacturer requested risk evaluations. See [insert cite to the FRN that announced this]. On May 17, 2024, EPA released for public comment and peer review draft technical support documents on DINP's physical chemical properties, fate and transport in the environment, environmental hazard for terrestrial and aquatic species, human health non-cancer hazards, and human health cancer hazards. See 89 FR 43847, May 20, 2024 (FRL-11760-02-OCSPP). The draft documents and public comments are in docket ID number EPA-HQ-OPPT-2024-0073.
Given the similar exposure and physical chemical properties of DIDP and DINP, EPA is developing these individual risk evaluations in parallel, and similarly the external peer review of the methods and novel analyses for the draft risk evaluations are occurring concurrently. Due to these similarities, EPA sought external peer review of technical portions of the DINP draft physical chemical properties, the fate and transport in the environment, environmental hazard for terrestrial and aquatic species, human health non-cancer hazards, and human health cancer hazards technical support documents, along with the DIDP draft risk evaluation. Thus, the focus of this public comment period is to solicit feedback regarding DINP-specific exposure analyses and the integration of these analyses with previously peer reviewed data.
DINP exhibits extremely low water solubility and will be preferentially sorbed into sediments, soils, and suspended solids in surface water and wastewater. It is expected to be persistent in anaerobic environments. Under indoor settings, DINP is expected to partition to airborne particles and is expected to have extended lifetime compared to outdoor settings. Liver and developmental toxicity are indicated as the most sensitive and robust non-cancer hazards for DINP. Developmental toxicity results in androgen insufficiency (phthalate syndrome), and effects on the liver include cancer.
The Agency has evaluated the health and environmental risks of DINP under TSCA section 6. In its draft risk evaluation, EPA's protective, screening-level approaches demonstrated that DINP does not pose risk to the environment or the general population. Of the 45 COUs that EPA evaluated, two COUs have risk estimates that raise concerns for workers' exposure and one COU has risk estimates that raise concerns for consumers. Based on these concerns, EPA preliminarily finds that DINP presents an unreasonable risk of injury to human health.
After this draft risk evaluation is informed by public comment, EPA will issue a final risk evaluation that includes its determination as to whether DINP presents unreasonable risk to health or the environment under its COUs. EPA also continues to work on the draft risk evaluations of five additional high-priority chemical substance phthalates, in addition to a draft cumulative risk assessment (CRA) for DINP and the other five phthalates.
EPA seeks feedback on the assessment of risk presented in the draft risk evaluation, a copy of which is available in the docket, and encourages all potentially interested parties, including individuals, governmental and non-governmental organizations, non-profit organizations, academic institutions, research institutions, and private sector entities to comment on the draft risk evaluation. To the extent possible, the Agency asks commenters to please cite any public data related to or that supports comments, and to the extent permissible, describe any supporting data that is not publicly available.
Because many of the DINP technical support documents have undergone public comment and are currently undergoing external peer review, input on the following is of particular interest to the EPA:
• Sections 3, 4 and 5 of the Draft Risk Evaluation for DINP;
• Draft Environmental Release and Occupational Exposure Assessment for DINP;
• Draft Consumer and Indoor Exposure Assessment for DINP;
• Draft Environmental Media and General Population Screening for DINP;
• Draft Environmental Exposure Assessment for DINP;
• Whether high-pressure spray applications of DINP-containing adhesives and sealants and paints and coatings are currently in use in industrial settings, or may be used in the future due to changing industrial practices.
At the conclusion of the risk evaluation phase, EPA must use the risk evaluation as a basis to determine whether the chemical presents an unreasonable risk to health or the environment under the chemical's COUs. TSCA prohibits EPA from considering non-risk factors (
If at the end of the risk evaluation process, EPA determines that a chemical substance presents an unreasonable risk to health or the environment, the chemical substance must immediately move to risk management rulemaking action under TSCA. At the risk management stage, EPA is required to implement, via regulation, regulatory restrictions on the manufacture, processing, distribution, use or disposal of the chemical substance to eliminate the unreasonable risk. EPA is given a range of risk management options under TSCA, including labeling, recordkeeping or notice requirements, actions to reduce human exposure or environmental release, and a ban of the chemical substance or of certain uses. Like the prioritization and risk evaluation processes, there is an opportunity for public comment on any proposed risk management actions.
For more information about the TSCA risk evaluation process for existing chemicals, go to
Environmental Protection Agency (EPA).
Notice of proposed settlement; request for public comment.
In accordance with the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), notice is hereby given that the Environmental Protection Agency (“EPA”) has entered into a proposed settlement, embodied in an Administrative Settlement Agreement and Order on Consent (“Settlement Agreement”), with Wells Cargo, Inc. (“Wells Cargo”). Under the Settlement Agreement, Wells Cargo agrees to take response actions and pay a portion of EPA's past response costs at the Max Johnson No. 9, Manuel Denetsone No. 2, and Juan Horse No. 3 abandoned uranium mine sites (“Sites”) in the Navajo Nation in Coconino County, Arizona.
Comments must be received on or before October 3, 2024.
The proposed settlement agreement is available for public inspection at
Gregory Krauss, Assistant Regional Counsel (ORC-3), Office of Regional Counsel, U.S. EPA Region IX, 75 Hawthorne Street, San Francisco, CA 94105; Email:
Notice of this proposed administrative settlement is made in accordance with section 122(i) of CERCLA. The Settlement Agreement concerns the performance of response actions at the Sites and the recovery by EPA of past response costs. The Settlement Agreement requires Wells Cargo to perform removal site evaluations at the Max Johnson No. 9 and Manuel Denetsone No. 2 mines, conduct certain sampling at the Juan Horse No. 3 mine, and complete an Engineering Evaluation and Cost Analysis for each of the Sites as determined to be necessary by EPA. Wells Cargo will also pay $391,183.15 to resolve its liability for EPA's past response costs through March 31, 2019. The Settlement Agreement includes a compromise of around $75,000 on interest payments and some indirect costs and provides Wells Cargo contribution protection and a covenant not to sue regarding response costs incurred through March 31, 2019, and the work to be performed. EPA will consider all comments received on the Settlement Agreement in accordance with the
10 a.m., Thursday, September 12, 2024.
You may observe this meeting in person at 1501 Farm Credit Drive, McLean, Virginia 22102-5090, or virtually. If you would like to observe, at least 24 hours in advance, visit FCA.gov, select “Newsroom,” then select “Events.” From there, access the linked “Instructions for board meeting visitors” and complete the described registration process.
This meeting will be open to the public.
The following matters will be considered:
If you need more information or assistance for accessibility reasons, or have questions, contact Ashley Waldron, Secretary to the Board. Telephone: 703-883-4009. TTY: 703-883-4056.
Notice is given that a complaint has been filed with the Federal Maritime Commission (the “Commission”) by International Lumber Imports, Inc. (the “Complainant”) against CEVA Freight, LLC; ZIM Integrated Shipping Service Ltd.; and ZIM American Integrated Shipping Services Company Co. LLC. Complainant states that the Commission has subject matter jurisdiction over the complaint pursuant to the Shipping Act of 1984, as amended, 46 U.S.C. 40101
Complainant is a corporation organized and existing under the laws of the State of Florida with its principal place of business in Sarasota, Florida.
Complainant identifies Respondent CEVA Freight, LLC as having an address in Miami, Florida and as acting as a delivery agent for Pyramid Lines Ltd., d/b/a Pyramid Lines, and as consignee on Respondent ZIM bills of lading for the shipments that are subject to the complaint.
Complainant identifies Respondent ZIM Integrated Shipping Service Ltd. as a global ocean carrier with a corporate address in Haifa, Israel, and as conducting business in the United States through ZIM American Integrated Shipping Services Company Co. LLC, with its principal corporate office in Norfolk, Virginia.
Complainant alleges that Respondent ZIM violated 46 U.S.C. 41102(c) and 46 CFR 545.5. Complainant alleges these violations arose from the assessment of detention charges during the period in which the containers were subject to a government hold, the assessment of demurrage charges that serve no incentivizing principle and do not promote freight fluidity, and a refusal to extend free time or waive or reduce demurrage charges for containers that were unavailable for pickup. Complainant alleges that Respondent CEVA Freight, LLC is interwound with the violations of Respondent ZIM and is a necessary and indispensable party.
An answer to the complaint must be filed with the Commission within 25 days after the date of service.
The full text of the complaint can be found in the Commission's electronic Reading Room at
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled Coal Workers' Health Surveillance Program (CWHSP). The CWHSP is a congressionally-mandated medical examination program for monitoring the health of coal miners and was originally established under the Federal Coal Mine Health and Safety Act of 1969 with all subsequent amendments (the Act).
CDC must receive written comments on or before November 4, 2024.
You may submit comments, identified by Docket No. CDC-2024-0060 by either of the following methods:
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To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who
5. Assess information collection costs.
Coal Workers' Health Surveillance Program (CWHSP) (OMB Control No. 0920-0020, Exp. 03/31/2025)—Extension—National Institute for Occupational Safety and Health (NIOSH), Centers for Disease Control and Prevention (CDC).
The Coal Workers' Health Surveillance Program (CWHSP) is a congressionally-mandated medical examination program for monitoring the health of coal miners and was originally established under the Federal Coal Mine Health and Safety Act of 1969 with all subsequent amendments (the Act). The Act provides the regulatory authority for the administration of the CWHSP. This Program, which operates in accordance with 42 CFR part 37, is useful in providing information for protecting the health of and in documenting trends and patterns in the prevalence of coal workers' pneumoconiosis (`black lung' disease) among U.S. coal miners. CDC requests an Extension for this data collection initiative. There are no changes requested at this time.
The total estimated annualized burden hours of 4,070 is based upon participation rates from the past five years (FY19-FY24) using the following data collection instruments:
• Coal Mine Operator Plan (2.10) and Coal Contractor Plan (2.18)—Under 42 CFR part 37, every coal operator and coal contractor in the U.S. must submit a plan approximately every four years, providing information on how they plan to notify their miners of the opportunity to obtain the medical examination. Completion of this form with all requested information (including a roster of current employees) takes approximately 30 minutes.
• Radiographic Facility Certification Document (2.11)—X-ray facilities seeking NIOSH approval to provide miner radiographs under the CWHSP must complete an approval packet including this form which requires approximately 30 minutes for completion.
• Miner Identification Document (2.9)—Miners who elect to participate in the CWHSP must fill out this document which requires approximately 20 minutes. This document records demographic and occupational history, as well as information required under the regulations in relation to the examinations.
• Chest Radiograph Classification Form (2.8)—NIOSH utilizes a radiographic classification system developed by the International Labour Office (ILO) in the determination of pneumoconiosis among coal miners. Physicians (B Readers) fill out this form regarding their interpretations of the radiographs (each image has at least two separate interpretations, and approximately 7% of the images require additional interpretations). Based on prior practice it takes the physician approximately three minutes per form.
Additionally, NIOSH approved radiograph facilities, per 42 CFR part 37, use the form to report the findings of the initial clinical read (required) for each radiograph. It takes the qualified and licensed physician approximately three minutes per form.
• Physician Application for Certification (2.12)—Physicians taking the B Reader examination are asked to complete this registration form which provides demographic information as well as information regarding their medical practices. It typically takes the physician about 10 minutes to complete this form.
• Spirometry Facility Certification Document (2.14)—This form is analogous to the Radiographic Facility Certification Document (2.11) and records the spirometry facility equipment/staffing information. Spirometry facilities seeking NIOSH approval to provide miner spirometry testing under the CWHSP must complete an approval packet which includes this form. It is estimated that it will take approximately 30 minutes for this form to be completed at the facility.
• Respiratory Assessment Form (2.13)—This form is designed to assess respiratory symptoms and certain medical conditions and risk factors. It is estimated that it will take approximately five minutes for this form to be administered to the miner by an employee at the facility.
• Spirometry Results Notification Form (2.15)—This form is used to: (1) collect information that will allow NIOSH to identify the miner in order to provide notification of the spirometry test results; (2) assure that the test can be done safely; (3) record certain factors that can affect test results; provide documentation that the required components of the spirometry examination have been transmitted to NIOSH for processing; and (4) conduct quality assurance audits and interpretation of results. It is estimated that it will take the facility approximately 20 minutes to complete this form.
• Pathologist Invoice—Under the NCWAS, the invoice submitted by the pathologist must contain a statement that the pathologist is not receiving any other compensation for the autopsy. Each participating pathologist may use their individual invoice as long as this statement is added. It is estimated that only five minutes are required for the pathologist to add this statement to the standard invoice that they routinely use.
• Pathologist Report—Under the NCWAS the pathologist must submit information found at autopsy, slides, blocks of tissue, and a final diagnosis indicating presence or absence of pneumoconiosis. The format of the autopsy reports is variable depending on the pathologist conducting the autopsy. Since an autopsy report is routinely completed by a pathologist, the only additional burden is the specific request for a clinical abstract of terminal illness and final diagnosis relating to pneumoconiosis. Therefore, only five minutes of additional burden is estimated for the pathologist's report.
• Consent, Release and History Form (2.6)—This form documents written authorization from the next-of-kin to perform an autopsy on the deceased miner. A minimum of essential information is collected regarding the deceased miner including an occupational history and a smoking history. From past experience, it is estimated that 15 minutes is required for the next-of-kin to complete this form.
• Authorization for Payment of Autopsy Form (2.19)—42 CFR part 37.204 outlines a need for a physician pathologist to obtain written authorization from NIOSH and agreement regarding payment amount for services specified in § 37.202(a) by completing the Authorization for Payment of Autopsy form and submitting it to the CWHSP for authorization prior to completing an autopsy on a coal miner. It will be completed by the pathologist who intends on conducting an autopsy and the form will collect: demographic information on the deceased miner, characteristics of the miner's pneumoconiosis (if known by the pathologist), demographic and medical licensure information from the requesting pathologist, and proposed payment amount to complete the autopsy in accordance with § 37.203. It is estimated that 15 minutes is required for the pathologist to complete this form.
• Request for Medical Records Form—Miners wishing to receive copies of their CWHSP chest x-rays and related files must fully complete, sign, and email this form to
There are no costs to respondents other than their time.
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled “Social and Economic Barriers to Receiving Optimal Services Along the Cancer Care Continuum” to the Office of Management and Budget (OMB) for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice on September 26, 2023 to obtain comments from the public and affected agencies. CDC did not receive comments related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected;
(d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(e) Assess information collection costs.
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570. Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Social and Economic Barriers to Receiving Optimal Services Along the Cancer Care Continuum—New—National Center for Chronic Disease Prevention and Health Promotion (NCCDPHP), Centers for Disease Control and Prevention (CDC).
The purpose of this project is to: (1) examine and better understand social and economic barriers faced by colorectal, breast, and cervical cancer survivors and their caregivers at each stage of the Cancer Care Continuum (CCC); and (2) quantify the impact of
CDC will incorporate cancer registry data into the quantitative data analysis, and triangulate findings from the quantitative and qualitative data collection efforts. Results will be used to inform efforts aimed at increasing access to cancer care services, reducing the burden of cancers and closing the disparities gap. CDC requests OMB approval for an estimated 1,681 annual burden hours. There are no costs to respondents other than their time to participate.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of meeting and request for comment.
In accordance with the Federal Advisory Committee Act, the Centers for Disease Control and Prevention (CDC) announces the following meeting for the Advisory Committee to the Director, Centers for Disease Control and Prevention (ACD, CDC). This is a hybrid meeting, accessible both in person and virtually (webcast live via the World Wide Web). It is open to the public and limited only by the space available.
The meeting will be held on October 22, 2024, from 9 a.m. to 3:30 p.m., EDT (times subject to change).
The public may submit written comments from September 3, 2024 through October 7, 2024.
Please note that the meeting location, the CDC Roybal Campus, is a federal facility and in-person access is limited to United States citizens unless prior authorizations, taking up to 30 to 60 days, have been made.
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Demetria Gardner, BA, Office of the Chief of Staff, Centers for Disease Control and Prevention, 1600 Clifton Road NE, Mailstop H21-10, Atlanta, Georgia 30329-4027, Telephone: (770) 488-4745; Email Address:
Interested persons or organizations are invited to participate by submitting written views, recommendations, and data. Please note that comments received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure. Comments will be posted on
The Director, Office of Strategic Business Initiatives, Office of the Chief Operating Officer, Centers for Disease Control and Prevention, has been delegated the authority to sign
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice.
This is to notify the public that the July 30, 2024, meeting of the Advisory Board on Radiation and Worker Health, Subcommittee for Procedure Reviews is cancelled.
Rashaun Roberts, Ph.D., National Institute for Occupational Safety and Health, CDC, 1090 Tusculum Avenue, Mailstop C-24, Cincinnati, Ohio 45226, Telephone: (513) 533-6800, Toll Free 1(800) CDC-INFO, Email:
Notice is hereby given of a change in the meeting of the Advisory Board on Radiation and Worker Health, Subcommittee for Procedure Reviews (ABRWH, SPR). The meeting was announced in the
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of meeting and request for comment.
In accordance with the Federal Advisory Committee Act, the Centers for Disease Control and Prevention (CDC) announces the following meeting for the World Trade Center Health Program Scientific/Technical Advisory Committee (STAC). This virtual meeting is open to the public. Time will be available for public comment.
The meeting will be held on September 23, 2024, from 11 a.m. to 3 p.m., EDT.
Written public comments must be received by September 23, 2024, at 11:59 p.m., EDT. Members of the public who wish to address the STAC during the oral public comment session must sign up to speak by September 16, 2024, at the email address provided in the Procedure for Oral Public Comment section below.
This is a virtual meeting conducted via Zoom. The public is welcome to follow the proceedings via YouTube Live at the following link:
You may submit comments, identified by Docket No. CDC-2024-0064; NIOSH 248-L by either of the methods listed below. CDC does not accept comments by email.
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Tania Carreón-Valencia, Ph.D., M.S., Designated Federal Officer, World Trade Center Health Program Scientific/Technical Advisory Committee, National Institute for Occupational Safety and Health, Centers for Disease Control and Prevention, 1600 Clifton Road NE, Mailstop R-12, Atlanta, Georgia 30329-4027. Telephone: (513) 841-4515; Email:
All references to the Administrator in this document mean the Director of the National Institute for Occupational Safety and Health (NIOSH), within the Centers for Disease Control and Prevention (CDC), or his or her designee.
The Administrator is responsible for the administration of the STAC. CDC and NIOSH provide funding, staffing, and administrative support services for the Committee. The STAC's charter was reissued on May 12, 2023, and will expire on May 12, 2025.
Background documents as well as the agenda for this meeting are available on the WTC Health Program website at
Interested parties may participate by submitting written views, opinions, recommendations, and data. You may submit comments on any topic related to the matters to be discussed by the Committee. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. If you include your name, contact information, or other information that identifies you in the body of your comments, that information will be on public display. CDC will review all submissions and may choose to redact, or withhold, submissions containing private or proprietary information such as Social Security numbers, medical information, inappropriate language, or duplicate/near-duplicate examples of a mass-mail campaign. CDC will carefully consider all comments submitted into the docket.
The Director, Office of Strategic Business Initiatives, Office of the Chief Operating Officer, Centers for Disease Control and Prevention, has been delegated the authority to sign
In accordance with the Paperwork Reduction Act of 1995, the Centers for Disease Control and Prevention (CDC) has submitted the information collection request titled “Information Collection for Tuberculosis Data from Panel Physicians” to the Office of Management and Budget (OMB) for review and approval. CDC previously published a “Proposed Data Collection Submitted for Public Comment and Recommendations” notice June 4, 2024 to obtain comments from the public and affected agencies. CDC received two comments related to the previous notice. This notice serves to allow an additional 30 days for public and affected agency comments.
CDC will accept all comments for this proposed information collection project. The Office of Management and Budget is particularly interested in comments that:
(a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(c) Enhance the quality, utility, and clarity of the information to be collected;
(d) Minimize the burden of the collection of information on those who are to respond, including, through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(e) Assess information collection costs.
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570. Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Information Collection for Tuberculosis Data from Panel Physicians (OMB Control No. 0920-1102, Exp. 12/31/2024)—Revision—National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention's (CDC), National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Division of Global Migration Health (DGMH), Immigrant and Refugee Health Branch (IRHB), requests approval for Revision to an approved information collection. CDC requests this data collection approval for three years.
Respondents for this data collection request are U.S. panel physicians. Panel physicians are medically trained, licensed, and experienced medical doctors practicing overseas who are appointed by the local U.S. Embassy or Consulate General to perform medical examinations for prospective immigrants to the United States. More than 760 panel physicians perform overseas pre-departure medical examinations at 333 panel sites, in accordance with requirements, referred to as Technical Instructions, provided by the CDC's DGMH, Quality Assessment Program (QAP). The QAP is housed in the IRHB. The role of QAP is to assist and guide panel physicians in the implementation of the Technical Instructions; evaluate the quality of the overseas medical examination for U.S.-bound immigrants and refugees; assess potential panel physician sites; and provide recommendations to the U.S. Department of State in matters of immigrant medical screening.
Screening for tuberculosis (TB) is a particularly important component of the immigration medical exam and allows panel physicians to diagnose active TB disease prior to arrival in the United States. As part of the Technical Instructions requirements, panel physicians perform chest x-rays and laboratory tests that aid in the identification of tuberculosis infection (Class B1 applicants) and diagnosis of active tuberculosis disease (Class A, inadmissible applicants). CDC uses these classifications to report new immigrant and refugee arrivals with a higher risk of developing TB disease to U.S. state and local health departments for further follow-up. Some information that panel physicians collect as part of the medical exam is not reported on the standard Department of State forms (DS-forms), thereby preventing CDC from evaluating TB trends in globally mobile populations and monitoring program effectiveness.
In 2007, CDC revised the Tuberculosis Technical Instructions to include several new requirements for Mycobacteria tuberculosis (MTB) testing and treatment. Important changes included the requirements for: (1) sputum cultures in addition to sputum smears; (2) tuberculin skin tests or interferon gamma release assays (beginning in 2009) for certain children aged 2-14 years examined in countries where the World Health Organization (WHO) estimated TB incidence is ≥20 per 100,000 persons; (3) drug-susceptibility testing of positive isolates; and (4) treatment being delivered as directly observed therapy (DOT) throughout the entire course.
Since implementation of these new Culture and Directly Observed Therapy TB Technical Instructions (CDOT TB TI), overseas TB case detection has increased by an estimated 60% and allowed U.S. public health programs to save millions of dollars annually. Overseas TB screening data (referred to by DGMH as `TB Indicator data') is critical to support the continued analysis of these trends and the monitoring of TB control efforts in the U.S. DGMH's TB Indicator data provides valuable epidemiologic data on globally mobile populations and allows CDC to monitor the effectiveness and impact of CDC's Technical Instructions in diagnosing applicants with TB disease. This data will be used to:
○ Improve quality assurance efforts and monitor proficiency of TB screening programs overseas
○ Estimate the impact of the CDOT TB TI on the immigrant screening program by analyzing the number of smear negative/culture positive TB
○ Compare TB Indicator incidence rates to WHO country-specific TB incidence rates for internal quality assessment purposes only.
○ Detect and resolve problems at panel sites demonstrating lower than expected TB detection rates.
Data will primarily be used internally to monitor program impact, but may also be shared with state and local health authorities involved in TB control. Information dissemination may include abstract submission to scientific conferences, including the Union World Conference on Lung Health, the National TB Controllers Association and the Panel Physician Training Summits.
Information will be collected from each Panel Physician site using a web form created with REDCap on an annual basis. The TB-related information that is sent to CDC is aggregate in nature, and no personal identifying information (PII) from any applicant for U.S. immigration is included. Information to be collected using the spreadsheet includes:
• number of applicants screened,
• age categories of applicants,
• number of abnormal chest x-rays,
• acid fast bacilli (AFB) smear results,
• mycobacterium tuberculosis (MTB) cultures,
• drug susceptibility test (DST) results, and
• TB treatment disposition.
The changes in this Revision include the additional collection of molecular testing data. CDC requests OMB approval for an estimated 999 annual burden hours. There is no cost to respondents other than their time to participate.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a proposed and/or continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled, Menthol-Flavored Tobacco Products Policy Evaluation. The proposed activity aims to collect data on menthol-flavored tobacco product use, any tobacco use, quit rates, and product switching behaviors among adults 18 years of age and older.
CDC must receive written comments on or before November 4, 2024.
You may submit comments, identified by Docket No. CDC-2024-0061 by either of the following methods:
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To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; Telephone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
Menthol-Flavored Tobacco Products Policy Evaluation—New—National Center for Chronic Disease Prevention and Health Promotion (NCCDPHP), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention (CDC) is submitting this new information collection request (ICR) for an evaluation of local policies restricting the sale of menthol and other flavored tobacco products on outcomes such as menthol-flavored tobacco product use, any tobacco use, quit rates, and product switching behaviors. The evaluation will also study the impact community education efforts associated with the flavored tobacco product sales restriction policies have on individuals' awareness of the policies and perceptions about the harms of tobacco use. This evaluation seeks to explore the effects of the policies on racial and ethnic groups (American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and Hispanic or Latino populations), and lesbian, gay, bisexual, transgender, queer, and/or questioning (LGBTQ+) communities specifically, as these populations are known to use menthol-flavored tobacco products at a higher prevalence than other populations and may therefore be most affected by policies addressing menthol-flavored tobacco use. Understanding how the aforementioned policies impact menthol-flavored tobacco product use may help to inform public health activities and decisions regarding tobacco control. Although some research on local tobacco policies indicates they are effective at limiting the availability of policy-restricted products, there is a lack of information on the policies' potential impact on tobacco use behaviors (
OMB approval is requested for three years. The total annualized burden hours is 3047 hours. There are no costs to respondents other than their time to participate.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice with comment period.
The Centers for Disease Control and Prevention (CDC), as part of its continuing effort to reduce public burden and maximize the utility of government information, invites the general public and other Federal agencies the opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995. This notice invites comment on a proposed information collection project titled CDC/ATSDR Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery. The information collection activities provide a means to garner qualitative customer and stakeholder feedback in an efficient, timely manner, in accordance with the Federal Government's commitment to improving service delivery.
CDC must receive written comments on or before November 4, 2024.
You may submit comments, identified by Docket No. CDC-2024-0062 by either of the following methods:
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To request more information on the proposed project or to obtain a copy of the information collection plan and instruments, contact Jeffrey M. Zirger, Information Collection Review Office, Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H21-8, Atlanta, Georgia 30329; phone: 404-639-7570; Email:
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. In addition, the PRA also requires Federal agencies to provide a 60-day notice in the
The OMB is particularly interested in comments that will help:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected;
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
5. Assess information collection costs.
CDC/ATSDR Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery (OMB Control No. 0920-1050, Exp. 6/30/2025) — Extension — Office of Science (OS), Centers for Disease Control and Prevention (CDC).
The information collection activities associated with this Generic Clearance provide a means to garner qualitative customer and stakeholder feedback in an efficient, timely manner, in accordance with the Federal Government's commitment to improving service delivery. Customers of CDC services will give qualitative feedback information that provides useful insights on perceptions and opinions, but are not statistical surveys that yield quantitative results that can be generalized to the population of study. Feedback from respondents will provide insights into customer or stakeholder perceptions, experiences and expectations, provide an early warning of issues with service, or focus attention on areas where communication, training or changes in operations might improve delivery of products or services. These collections will allow for ongoing, collaborative and actionable communications between CDC and its customers and stakeholders. It will also allow feedback to contribute directly to the improvement of program management.
The solicitation of feedback will target areas such as: timeliness, appropriateness, accuracy of information, courtesy, efficiency of service delivery, and resolution of issues with service delivery. Responses will be assessed to plan and inform efforts to improve or maintain the quality of service offered to the public. If this information is not collected, vital feedback from customers and stakeholders on CDC's services will be unavailable.
CDC will only submit an individual collection for approval under this Generic clearance mechanism if it meets the following conditions:
• The collection is voluntary;
• The collection is low-burden for respondents (based on considerations of total burden hours, total number of respondents, or burden-hours per respondent) and are low-cost for both the respondents and the Federal Government;
• The collection is non-controversial and does not raise issues of concern to other Federal agencies;
• The collection is targeted to the solicitation of opinions from respondents who have experience with the program or may have experience with the program in the near future;
• Personally identifiable information (PII) is collected only to the extent necessary and is not retained;
• Information gathered is intended to be used only internally for general service improvement and program management purposes and is not intended for release outside of the agency (if released, the agency must indicate the qualitative nature of the information);
• Information gathered will not be used for the purpose of substantially informing influential policy decisions; and
• Information gathered will yield qualitative information (the collection will not be designed or expected to yield statistically reliable results or used as though the results are generalizable to the population of study).
Feedback collected under this CDC Generic Clearance provides useful information, but it does not yield data that can be generalized to the overall population. This type of Generic Clearance for qualitative information will not be used for quantitative information collections that are designed to yield reliably actionable results, such as monitoring trends over time or documenting program performance. Such data uses require more rigorous designs that address: (1) the target population to which generalizations will be made; (2) the sampling frame; (3) the sample design (including stratification and clustering); (4) the precision requirements or power calculations that justify the proposed sample size; (5) the expected response rate; (6) methods for assessing potential non-response bias; (7) the protocols for data collection; and (8) any testing procedures that were or will be undertaken prior to fielding the study. Depending on the degree of influence the results are likely to have, such collections may still be eligible for submission for other Generic Clearance
As a general matter, individual information collections will not result in any new system of records containing privacy information and will not ask questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private. Based on the number of burden hours used during the previous approval period and the number of respondents involved in this, and other expiring collections, CDC requests OMB approval for an estimated 22,250 annual burden hours. There are no costs to respondents other than their time to participate.
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, please access the CMS PRA website by copying and pasting the following web address into your web browser:
William Parham at (410) 786-4669.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
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Office of the Secretary of Health and Human Services, HHS.
Notice.
This notice acknowledges receipt and review by the Secretary of the Department of Health and Human Services (the Secretary) of the 2023 Consensus Based Entity Annual Report to Congress as mandated by section 1890(b)(5) of the Social Security Act (the Act). The Secretary has reviewed and is publishing the report in the
Charlayne Van, (410) 786-8659.
The United States (U.S.) Department of Health and Human Services (HHS) has long recognized that a high functioning health care system that provides higher quality care requires accurate, valid, and reliable measurement of quality and efficiency. The Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275) added section 1890 of the Social Security Act (the Act), which requires the Secretary of HHS (the Secretary) to contract with a consensus-based entity (CBE) to help improve performance measurement. Section 3014 of the Patient Protection and Affordable Care Act (the Affordable Care Act) (Pub. L. 111-148) expanded the duties of the CBE to include the identification of gaps in available measures and to improve the selection of measures used in health care programs. The Secretary extends his appreciation to the CBE in their partnership for the fulfillment of these statutory requirements.
Section 1890(b) of the Act requires the following:
• The implementation of quality and efficiency measurement initiatives and the coordination of such initiatives with quality and efficiency initiatives implemented by other payers;
• Recommendations on an integrated national strategy and priorities for health care performance measurement;
• Performance of the CBE's duties required under its contract with the Secretary;
• Gaps in endorsed quality and efficiency measures, including measures that are within priority areas identified by the Secretary under the national strategy established under section 399HH of the Public Health Service Act (National Quality Strategy), and where quality and efficiency measures are unavailable or inadequate to identify or address such gaps;
• Areas in which evidence is insufficient to support endorsement of quality and efficiency measures in priority areas identified by the Secretary under the National Quality Strategy, and where targeted research may address such gaps; and
• The convening of multi-stakeholder groups to provide input on: (1) the selection of quality and efficiency measures from among such measures that have been endorsed by the CBE and such measures that have not been considered for endorsement by the CBE but are used or proposed to be used by the Secretary for the collection or reporting of quality and efficiency measures; and (2) national priorities for improvement in population health and the delivery of health care services for consideration under the National Quality Strategy.
Section 50206(c)(1) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) amended section 1890(b)(5)(A) of the Act to require the CBE's annual report to Congress to include the following: (1) an itemization of financial information for the previous fiscal year ending September 30th, including annual revenues of the entity, annual expenses of the entity, and a breakdown of the amount awarded per contracted task order and the specific projects funded in each task order assigned to the entity; and (2) any updates or modifications to internal policies and procedures of the entity as they relate to the duties of the CBE including specifically identifying any modifications to the disclosure of interests and conflicts of interests for committees, work groups, task forces, and advisory panels of the entity, and information on external stakeholder participation in the duties of the entity.
The statutory requirements for the CBE to annually report to Congress and the Secretary also specify that the Secretary must review and publish the CBE's annual report in the
This
As part of its core mission, HHS seeks to stabilize and improve the quality of health care throughout the country. In response to recent public health crises and to prudently prepare for imminent threats in the future, HHS must continue to focus on advancing equity and inclusion, strengthening public trust, and building meaningful engagement and learning across the health care system. By embedding the cross-cutting principles
Over the past year, the CBE has supported HHS' commitment to promoting a resilient, high value, and safe health care system for all Americans. In 2023, HHS supported the work conducted by the CBE to identify health care quality measurement priorities and to provide consensus-based recommendations about measures to use for assessing and improving quality. As the new CBE beginning in 2023, Battelle established the PQM and continued the use of rigorous standards to review measures for quality measure endorsement and maintain highly reliable and scientifically sound measures across priority health care topic areas.
The PQM is comprised of diverse representatives in health care that engage with the health care quality improvement community. Members of the PQM help shape the future of health care by taking an active role in the quality measurement process, using
The CBE focused on four key initiatives, including Endorsement & Maintenance (E&M) of clinical quality measures, Pre-Rulemaking Measure Review, Measure Set Review and Core Quality Measures Collaborative (CQMC). In 2023, the CBE completed three endorsement cycles. A combined 81 measures were submitted for endorsement consideration in the first two cycles (Fall 2022 and Spring 2023) that were started under the previous CBE. The third cycle (Fall 2023) which launched the revised process, began in October 2023 and was completed in March 2024.
Over the past year, the CBE expanded committee and public engagement by creating five new project committees that are focused on a patient's journey through the health care system. A description of these five new committees can be found on the CBE's website at
HHS recognizes that, concurrent with the CBE's efforts to engage the quality measurement community on enhancing the E&M process, the CBE engaged the same community on ways to create a more transparent and impactful measure review process to support quality reporting and value-based purchasing programs as evidenced in the CBE's Annual Report and feedback received by CMS. Like E&M, enhancements were centered around increasing efficiency in the process while expanding committee and public engagement. HHS believes that these process enhancements resulted in increased quantity and quality of the feedback CMS received on quality measures.
The CBE convened the CQMC Full Collaborative in late 2023 to set priorities for the upcoming year. The goal of the meeting was to explore the CQMC's role in three key areas, including health equity measurement, movement to digital measures and alignment around measurement models. In addition, the CQMC discussed the leading barriers to adoption of measures within the core sets and achieving the desired impact of the core sets and how these can be overcome. The CQMC also began to develop a vision and strategy for the next phases of work.
HHS and the CBE both recognize the importance of clinical quality and cost/resource use measures in improving U.S. health care. Maintaining these measures through transparent, periodic, and consensus-based reviews is critical for ensuring health care quality performance can not only be measured but can also be improved upon. HHS and the CBE recognize that a true consensus process must be transparent, reliable, and equitable. The CBE is building relationships within the health care quality community, including patients and clinicians, necessary to advancing the national goal of attaining the highest level of health and wellness for the widest range of individuals possible as evidenced by its Annual Report and feedback received by CMS.
This document does not impose information collection requirements, that is, reporting, recordkeeping, or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
In this Addendum, we are publishing the
Office of Community Services, Administration for Children and Families, U.S. Department of Health and Human Services.
Request for public comments.
The Office of Community Services (OCS), Administration for Children and Families (ACF), U.S. Department of Health and Human Services, is requesting an extension of approval for a recently approved information collection: OCS Affordable Housing and Supportive Services Demonstration (Office of Management and Budget (OMB) #: 0970-0628, Expiration Date: September 30, 2024). This information collection was originally approved for 6 months as an emergency approval. In addition to extending the approval, OCS seeks to update the burden estimates to accommodate an anticipated increase in the number of grant recipients, as well as to collect additional responses to several of the instruments. OCS also seeks to make updates to approved forms.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
OCS is seeking to continue collecting the information requested from grant recipients under OMB #: 0970-0628. In order to determine best practices in the implementation of supportive services in the affordable housing context and describe how supportive services help residents to improve well-being and economic mobility, OCS will engage in the following activities:
• Conducting interviews with program directors and caseworkers to understand program implementation.
• Conducting focus groups with residents to understand their needs and how the services funded by this grant impacted their lives.
• Administering a self-sufficiency matrix to residents receiving intensive services to understand the impact of the program on various domains of well-being.
• Conducting a questionnaire with residents, to see if they were able to access more services due to the funding.
• Collecting information from program officers about the number and types of services/events provided, aggregate demographics of residents served, partner organizations and referrals, and how the housing community was impacted by the grant funding.
• Collecting narrative reports from program officers about the progress of implementation of the program.
This request is to extend the approved collection period to 3 years, which will permit OCS to complete the collection with current grant recipients as well as future grant recipients. With an extended timeline, OCS will request additional responses for several approved instruments to observe activities over the course of the full project period for grant recipients. The self-sufficiency matrix and service receipt questionnaires will be administered every 6 months during the project period. The semi-annual quantitative report mandatory and optional forms will be required every 6 months, with a final cumulative report. The quarterly narrative PPR will be requested every quarter of the project period.
OCS has developed substantially revised 2024 versions of the semi-annual quantitative report forms for the mandatory and optional reports to broaden the measures of service delivery and outcomes to better accommodate the universe of potential services offered by future cohorts of grant recipients. The new mandatory form combines the direct services and referrals tabs of the original form into a single tab where grant recipients will report the number of individuals receiving services through AHSSD funding and through the organization's other funding sources, alongside the information reported about referrals. The new optional form broadens the list of outcome measures that grant recipients can choose to report for the individuals they serve. In consideration of the overall reporting burden for grant recipients, the 2024 version of the forms continue draw upon the service and outcome categories that grant recipients already use to report their Community Services Block Grant-related activities (OMB# 0970-0492). Additionally, the 2024 version of the forms request cumulative counts across the grant period, negating the need for a separate final report.
Current grant recipients will be able to choose between using the current 2023 version of the forms and the revised 2024 version of the forms through the completion of their current project. New grant recipients will be required to use the 2024 version of the forms.
Burden estimates show the total number of responses per respondent over the next 3 years. The current grant recipients (9 total) will be able to choose between using the 2023 version of the semi-annual quantitative report forms and the 2024 version of those forms through the completion of their current project. New grant recipients (9 new recipients estimated) will be required to use the 2024 version of the forms.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the revocation of the Emergency Use Authorization (EUA) (the Authorization) issued to Roche Molecular Systems, Inc, for the cobas SARS-CoV-2 & Influenza A/B nucleic acid test for use on the cobas Liat System, that includes the cobas SARS-CoV-2 & Influenza A/B Quality Control Kit. FDA revoked the Authorization under the Federal Food, Drug, and Cosmetic Act (FD&C Act) as requested by the Authorization holder. The revocation, which includes an explanation of the reasons for revocation, is reprinted at the end of this document.
The revocation of the Authorization for the Roche Molecular Systems, Inc.'s for the cobas SARS-CoV-2 & Influenza A/B nucleic acid test for use on the cobas Liat System, that includes the cobas SARS-CoV-2 & Influenza A/B Quality Control Kit is effective as of July 3, 2024.
Submit written requests for a single copy of the revocation to the Office of Policy, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 5431, Silver Spring, MD 20993-0002. Send one self-addressed adhesive label to assist that office in processing your request or include a fax number to which the revocation may be sent. See the
Kim Sapsford-Medintz, Office of Product Evaluation and Quality, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 3216, Silver Spring, MD 20993-0002, 301-796-0311 (this is not a toll-free number).
Section 564 of the FD&C Act (21 U.S.C. 360bbb-3) as amended by the Project BioShield Act of 2004 (Pub. L. 108-276) and the Pandemic and All-Hazards Preparedness Reauthorization Act of 2013 (Pub. L. 113-5) allows FDA to strengthen the public health protections against biological, chemical, radiological, or nuclear agent or agents. Among other things, section 564 of the FD&C Act allows FDA to authorize the use of an unapproved medical product or an unapproved use of an approved medical product in certain situations.
On September 14, 2020, FDA issued the Authorization to Roche Molecular Systems, Inc, for the cobas SARS-CoV-2 & Influenza A/B nucleic acid test for use on the cobas Liat System, subject to the terms of the Authorization. Notice of the issuance of this Authorization was published in the
Subsequent updates to the Authorization were made available on FDA's website. The authorization of a device for emergency use under section 564 of the FD&C Act may, pursuant to section 564(g)(2) of the FD&C Act, be revoked when the criteria under section 564(c) of the FD&C Act for issuance of such authorization are no longer met (section 564(g)(2)(B) of the FD&C Act), or other circumstances make such revocation appropriate to protect the public health or safety (section 564(g)(2)(C) of the FD&C Act).
In a request received by FDA on June 21, 2024, Roche Molecular Systems, Inc., requested the revocation of, and on July 3, 2024, FDA revoked, the Authorization for the Roche Molecular Systems, Inc.'s cobas SARS-CoV-2 & Influenza A/B nucleic acid test for use on the cobas Liat System, that includes the cobas SARS-CoV-2 & Influenza A/B Quality Control Kit. Because Roche Molecular Systems, Inc., notified FDA that they have ceased the manufacture and distribution of the cobas SARS-CoV-2 & Influenza A/B nucleic acid test for use on the cobas Liat System, that includes the cobas SARS-CoV-2 & Influenza A/B Quality Control Kit and requested FDA revoke Roche Molecular Systems, Inc.'s, cobas SARS-CoV-2 & Influenza A/B nucleic acid test for use on the cobas Liat System, that includes the cobas SARS-CoV-2 & Influenza A/B Quality Control Kit, FDA has determined that it is appropriate to protect the public health or safety to revoke this Authorization.
An electronic version of this document and the full text of the
Having concluded that the criteria for revocation of the Authorization under section 564(g)(2)(C) of the FD&C Act are met, FDA has revoked the EUA of Roche Molecular Systems, Inc.'s cobas SARS-CoV-2 & Influenza A/B nucleic acid test for use on the cobas Liat System, that includes the cobas SARS-CoV-2 & Influenza A/B Quality Control Kit. The revocation in its entirety follows and provides an explanation of the reasons for revocation, as required by section 564(h)(1) of the FD&C Act.
Food and Drug Administration, HHS.
Notice; request for Information.
The Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER) within the Food and Drug Administration (FDA or Agency) are announcing a request for information (RFI) for advancing model-informed drug development (MIDD). The purpose of this request is to obtain feedback on how to increase application of established MIDD approaches in regulatory decision making, to identify how emerging MIDD approaches are being incorporated within drug product development, and to identify opportunities to enhance interactions with FDA when discussing MIDD approaches. We intend to use the information submitted in response to this request to identify and prioritize potential focus areas for future policy or guidance development and enhance engagement with interested parties, including interactions as part of the
Either electronic or written comments on the notice must be submitted by November 4, 2024.
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Yvonne Knight, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 2142, Silver Spring, MD 20993, 301-796-2133,
FDA is announcing a request for information entitled “Identifying Priority Focus Areas for Future Guidance Development and Engagement with Interested Parties in Model-Informed Drug Development.” Information submitted in response to this notice will be used by CDER, including by its Quantitative Medicine Center of Excellence, and CBER to assist in identifying and prioritizing potential focus areas for future policy or guidance development and engagement with interested parties.
MIDD approaches integrate exposure-based biological and statistical models derived from nonclinical and clinical data sources in drug development and decision making. MIDD applications span the life cycle of new drug product development. MIDD approaches use a variety of quantitative methods (
Beginning with Prescription Drug User Fee Act (PDUFA) VI, FDA began granting focused meetings as part of the MIDD Paired Meeting Pilot to: (1) provide a forum for regulatory interaction between drug developers and FDA on the application of MIDD approaches in specific drug development programs; and (2) provide
FDA is interested in detailed comments on the topics listed in this section below to identify and inform future priorities for MIDD-related policy, including guidance development and engagement with interested parties. The topics identified in this section are not meant to be exhaustive. FDA is also interested in any other pertinent information that interested parties would like to share related to guidance and enhancing MIDD-related interactions with FDA. FDA encourages interested parties to provide the specific rationale and basis for their comments, including any available supporting data and information.
Several quantitative approaches, such as popPK, E-R, and PBPK, are routinely employed in drug development and regulatory assessment. The Agency aims to identify areas within these approaches that would benefit from the development of additional policies or guidance on methodology and best practices. In addition, with this RFI, the Agency is seeking input to explore potential guidance needs and appropriately identify and prioritize potential topics for guidance development in all emerging MIDD approaches for drug and biological products, including but not limited to, AI/ML used in both drug design and evaluation and digital-twin technology.
MIDD approaches that leverage comprehensive information—including disease and patient population characteristics (
Building on the success of the MIDD Paired Meeting Program, FDA is interested in better understanding ways to facilitate discussion around MIDD approaches outside the MIDD Paired Meeting Program as part of regulatory meetings and regulatory submissions. This includes identifying what is currently working well and what are the barriers (
FDA continues to engage on MIDD approaches as part of external workshops with interested parties, including workshops described and completed under PDUFA VI. FDA seeks to identify and prioritize potential topics and better ways for communication and engagement with interested parties.
Health Resources and Services Administration (HRSA), Department of Health and Human Services.
Notice.
In accordance with the Federal Advisory Committee Act, the Department of Health and Human Services is hereby giving notice that the charter for the Advisory Committee on Organ Transplantation (ACOT or Committee) is renewed. The effective date of the renewed charter is August 31, 2024.
Shelley Tims Grant, Division of Transplantation, HRSA, 5600 Fishers Lane, 08W67, Rockville, Maryland 20857; 301-443-8036; or
ACOT provides advice and recommendations to the Secretary of Health and Human Services on policy, program development, and other matters of significance concerning the activities under 42 U.S.C. 217a; Section 222 of the Public Health Service Act, as amended. ACOT provides advice and recommendations on proposed or implemented Organ Procurement and Transplantation Network policies (including those related to organ donation, procurement, allocation, transplantation, patient safety, and data collection, among other policy topics), and on such other matters that the Secretary of Health and Human Services determines. ACOT ensures checks and balances, transparency, and a focus on patient-centered practices. The topics covered by ACOT may be broad and cross-sectional.
The renewed charter for ACOT was approved on August 9, 2024. The filing date is August 31, 2024. Renewal of the ACOT charter gives authorization for the Committee to operate until August 31, 2026.
A copy of the ACOT charter is available on the ACOT website at
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Notice is hereby given of a change in the meeting of the National Cancer Advisory Board, September 03, 2024, 06:00 p.m. to September 05, 2024, 12:00 p.m., National Cancer Institute, Shady Grove, 9609 Medical Center Drive, Room TE406 & 408, Bethesda, MD 20892, (In Person and Virtual Meeting), which was published in the
This meeting notice is being amended to change the meeting time of the National Cancer Advisory Board (NCAB) Subcommittee Meetings; the date and time of the open session of the NCAB Meeting; and the time of the closed session of the NCAB. The NCAB Subcommittee Meetings on September 3, 2024, will now be held from 6:00 p.m. to 8:15 p.m. instead of from 6:00 p.m. to 9:00 p.m. The open session of the NCAB will now be held on September 4, 2024, from 9:00 a.m. to 3:15 p.m. instead of on September 4-5, 2024, from 9:00 a.m. to 12:00 p.m. The closed session of the NCAB on September 3, 2024, will now be held from 3:30 p.m. to 4:30 p.m. instead of from 3:50 p.m. to 5:00 p.m. The open session of the NCAB can be accessed from the NIH Videocast at the following link:
Pursuant to section 1009 of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Substance Abuse and Mental Health Services Administration, HHS.
Notice.
The Department of Health and Human Services (HHS) notifies Federal agencies of the laboratories and Instrumented Initial Testing Facilities (IITFs) currently certified to meet the standards of the Mandatory Guidelines for Federal Workplace Drug Testing Programs (Mandatory Guidelines) using Urine and the laboratories currently certified to meet the standards of the Mandatory Guidelines using Oral Fluid.
Anastasia Flanagan, Division of Workplace Programs, SAMHSA/CSAP, 5600 Fishers Lane, Room 16N06B, Rockville, Maryland 20857; 240-276-2600 (voice);
The Department of Health and Human Services (HHS) publishes a notice listing all HHS-certified laboratories and Instrumented Initial Testing Facilities (IITFs) in the
If any laboratory or IITF has withdrawn from the HHS National Laboratory Certification Program (NLCP) during the past month, it will be listed at the end and will be omitted from the monthly listing thereafter.
This notice is also available on the internet at
HHS separately notifies Federal agencies of the laboratories and IITFs currently certified to meet the standards of the Mandatory Guidelines using Urine and of the laboratories currently certified to meet the standards of the Mandatory Guidelines using Oral Fluid.
The Mandatory Guidelines using Urine were first published in the
The Mandatory Guidelines using Oral Fluid were first published in the
The Mandatory Guidelines were initially developed in accordance with Executive Order 12564 and section 503 of Public Law 100-71 and allowed urine drug testing only. The Mandatory Guidelines using Urine have since been revised, and new Mandatory Guidelines allowing for oral fluid drug testing have been published. The Mandatory Guidelines require strict standards that laboratories and IITFs must meet in order to conduct drug and specimen validity tests on specimens for Federal agencies. HHS does not allow IITFs to conduct oral fluid testing.
To become certified, an applicant laboratory or IITF must undergo three rounds of performance testing plus an on-site inspection. To maintain that certification, a laboratory or IITF must participate in a quarterly performance testing program plus undergo periodic, on-site inspections.
Laboratories and IITFs in the applicant stage of certification are not to be considered as meeting the minimum requirements described in the HHS Mandatory Guidelines using Urine and/or Oral Fluid. An HHS-certified laboratory or IITF must have its letter of certification from HHS/SAMHSA (formerly: HHS/NIDA), which attests that the test facility has met minimum standards. HHS does not allow IITFs to conduct oral fluid testing.
In accordance with the Mandatory Guidelines using Oral Fluid effective October 10, 2023 (88 FR 70814), the following HHS-certified laboratories meet the minimum standards to conduct drug and specimen validity tests on oral fluid specimens:
At this time, there are no laboratories certified to conduct drug and specimen validity tests on oral fluid specimens.
In accordance with the Mandatory Guidelines using Urine effective February 1, 2024 (88 FR 70768), the following HHS-certified IITFs meet the minimum standards to conduct drug and specimen validity tests on urine specimens:
In accordance with the Mandatory Guidelines using Urine effective February 1, 2024 (88 FR 70768), the following HHS-certified laboratories meet the minimum standards to conduct drug and specimen validity tests on urine specimens:
* The Standards Council of Canada (SCC) voted to end its Laboratory Accreditation Program for Substance Abuse (LAPSA) effective May 12, 1998. Laboratories certified through that program were accredited to conduct forensic urine drug testing as required by U.S. Department of Transportation (DOT) regulations. As of that date, the certification of those accredited Canadian laboratories continued under DOT authority. The responsibility for conducting quarterly performance testing plus periodic on-site inspections of those LAPSA-accredited laboratories was transferred to the U.S. HHS, with the HHS' NLCP contractor continuing to have an active role in the performance testing and laboratory inspection processes. Other Canadian laboratories wishing to be considered for the NLCP may apply directly to the NLCP contractor just as U.S. laboratories do.
Upon finding a Canadian laboratory to be qualified, HHS will recommend that DOT certify the laboratory as meeting the minimum standards of the current Mandatory Guidelines published in the
Coast Guard, DHS.
Sixty-day notice requesting comments.
In compliance with the Paperwork Reduction Act of 1995, the U.S. Coast Guard intends to submit an Information Collection Request (ICR) to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), requesting an extension of its approval for the following collection of information: 1625-0084, Audit Reports under the International Safety Management Code; without change. Our ICR describes the information we seek to collect from the public. Before submitting this ICR to OIRA, the Coast Guard is inviting comments as described below.
Comments must reach the Coast Guard on or before November 4, 2024.
You may submit comments identified by Coast Guard docket number [USCG-2024-0738] to the Coast Guard using the Federal eRulemaking Portal at
A copy of the ICR is available through the docket on the internet at
A.L. Craig, Office of Privacy Management, telephone 202-475-3528, fax 202-372-8405, or email
This notice relies on the authority of the Paperwork Reduction Act of 1995; 44 U.S.C. 3501
The Coast Guard invites comments on whether this ICR should be granted based on the Collection being necessary for the proper performance of Departmental functions. In particular, the Coast Guard would appreciate comments addressing: (1) the practical utility of the Collection; (2) the accuracy of the estimated burden of the Collection; (3) ways to enhance the quality, utility, and clarity of information subject to the Collection; and (4) ways to minimize the burden of the Collection on respondents, including the use of automated collection techniques or other forms of information technology.
In response to your comments, we may revise this ICR or decide not to seek an extension of approval for the Collection. We will consider all comments and material received during the comment period.
We encourage you to respond to this request by submitting comments and related materials. Comments must contain the OMB Control Number of the ICR and the docket number of this request, USCG-2024-0738, and must be received by November 4, 2024.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. Comments we post to
Coast Guard, DHS.
Sixty-Day notice requesting comments.
In compliance with the Paperwork Reduction Act of 1995, the U.S. Coast Guard intends to submit an Information Collection Request (ICR) to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA), requesting an extension of its approval for the following collection of information: 1625-0081, Alternate Compliance Program; without change. Our ICR describes the information we seek to collect from the public. Before submitting this ICR to OIRA, the Coast Guard is inviting comments as described below.
Comments must reach the Coast Guard on or before November 4, 2024.
You may submit comments identified by Coast Guard docket number [USCG-2024-0736] to the Coast Guard using the Federal eRulemaking Portal at
A copy of the ICR is available through the docket on the internet at
A.L. Craig, Office of Privacy Management, telephone 202-475-3528, fax 202-372-8405, or email
This notice relies on the authority of the Paperwork Reduction Act of 1995; 44 U.S.C. 3501
The Coast Guard invites comments on whether this ICR should be granted based on the Collection being necessary for the proper performance of Departmental functions. In particular, the Coast Guard would appreciate comments addressing: (1) the practical utility of the Collection; (2) the accuracy of the estimated burden of the Collection; (3) ways to enhance the quality, utility, and clarity of information subject to the Collection; and (4) ways to minimize the burden of the Collection on respondents, including the use of automated collection techniques or other forms of information technology.
In response to your comments, we may revise this ICR or decide not to seek an extension of approval for the Collection. We will consider all comments and material received during the comment period.
We encourage you to respond to this request by submitting comments and related materials. Comments must contain the OMB Control Number of the ICR and the docket number of this request, USCG-2024-0736, and must be received by November 4, 2024.
We encourage you to submit comments through the Federal eRulemaking Portal at
We accept anonymous comments. Comments we post to
The Paperwork Reduction Act of 1995; 44 U.S.C. chapter 35, as amended.
U.S. Customs and Border Protection (CBP), Department of Homeland Security.
60-Day notice and request for comments.
The Department of Homeland Security, U.S. Customs and Border Protection (CBP) will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). The information collection is published in the
Comments are encouraged and must be submitted (no later than November 4, 2024) to be assured of consideration.
Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0NEW in the subject line and the agency name. Please submit written comments and/or suggestions in English. Please use the following method to submit comments:
Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number 202-325-0056 or via email
CBP invites the general public and other Federal agencies to comment on the proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Further, the need for confidentiality of transactional data among private parties means there are limitations on CBP's and the trade's visibility into product origin traceability through the supply chain to establish Free Trade Agreement (FTA) eligibility. The absence of a system or technology capable of tracking changes in ownership and destination of pipeline-borne goods such as crude oil, from wellhead to refinery, has resulted in CBP creating a patchwork of policies for data collection from carriers and importers over the decades.
The Silicon Valley Innovation Program (SVIP), part of the Department of Homeland Security's Science and Technology Directorate, helps develop and find new technologies that strengthen national security with the goal of reshaping how government and industry work together to find cutting-edge solutions to problems such as those involved in pipeline-borne goods. A private company SVIP participant has a platform to document the movement (including ownership changes) of crude oil. The platform will monitor Canadian crude oil, a continuous flow commodity, using global interoperability standards (GIS) adopted by test participants who will supply the GIS data to the platform where CBP will be able to view the data in near real time. GIS data utilizes decentralized identifiers (DIDs) and verifiable credentials (VCs) to help in identifying legitimate products and associated companies to build a transparent supply chain.
A transparent supply chain will be achieved in the platform through the recordation of bi-lateral transaction data at each step in a supply chain, allowing for dynamic updates of ownership and destination information, securing it from disclosure to unauthorized parties, and making this data available to CBP in near real time while creating an immutable chain of custody from wellhead to refinery.
If successful, the test could result in the ability to potentially eliminate all port-level paper processes as well as create an automation environment in which pre-arrival data collection, in-bond tracking, and Free Trade Agreement compliance traceability no longer pose issues.
Therefore, the purpose of the test is to measure the usefulness and accuracy of the platform's global interoperability
This collection of information is authorized by 19 U.S.C. 1411 National Customs Automation Program.
Federal Emergency Management Agency, Department of Homeland Security.
30-Day notice of extension and request for comments.
The Federal Emergency Management Agency (FEMA), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public to take this opportunity to comment on the extension, without change, of a currently approved information collection. In accordance with the Paperwork Reduction Act of 1995, this notice seeks comments concerning FEMA's Individuals and Households Program, providing financial assistance to individuals whose primary residences were destroyed as a result of a Presidentially-declared disaster. This renewal primarily includes the addition of new forms/form updates from the IA Equity review, the Other Needs Assistance (ONA) Standard Operating Procedures (SOP) update, and a review of all forms from the Office of Management and Budget's (OMB's) Collection Review project that specifically targeted accuracy, plain language, and updates due to policy and business practice changes.
Comments must be submitted on or before October 3, 2024.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Brian Thompson, Supervisory Program Specialist, FEMA, Recovery Directorate at 540-686-3602 or
The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) (Pub. L. 93-288, as amended) is the legal basis for FEMA to provide financial assistance and services to individuals applying for disaster assistance benefits in the event of a Presidentially-declared disaster. Regulations in 44 CFR 206.110, “Federal Assistance to Individuals and Households” implement the policy and procedures set forth in Section 408 of the Stafford Act (42 U.S.C. 5174, as amended) and govern FEMA's Individuals and Households Program (IHP). This program provides financial assistance and, if necessary, direct assistance to eligible individuals and households who, as a direct result of a major disaster or emergency, have uninsured or under-insured necessary expenses, and serious needs, and are unable to meet such expenses or needs through other means.
This proposed information collection previously published in the
Comments may be submitted as indicated in the
Transportation Security Administration, DHS.
30-Day notice; correction.
This document makes a correction to a 30-day notice published in the
Applicable October 3, 2024.
Christina A. Walsh, TSA PRA Officer, Information Technology (IT), TSA-11, Transportation Security Administration, 6595 Springfield Center Drive, VA 22150; telephone (571) 227-2062; email
On August 23, 2024 (89 FR 68183), TSA published a 30-day notice giving notice to the public of TSA's intent to submit the TSA PreCheck® Information Collection Request to OIRA for review. The Information Collection Request concerns the submission of biographic and biometric information by individuals seeking to enroll in the TSA PreCheck® (also known as TSA Pre✓®) Application Program, as well as optional surveys related to customer service and enrollment processes.
In the section titled, “
In the 30-day notice FR Doc. 2024-19001, published on August 23, 2024 (89 FR 68183), make the following corrections:
On page 68184, in the third column, line 54, correct the section titled “
The introduction of additional enrollment providers, as discussed in the previous ICR revision, allows enrollment providers to offer multiple price points for TSA PreCheck® enrollment and renewal as well as additional enrollment locations, which will allow the public to select the best option for their needs. TSA plans to explore new enrollment capabilities to include remote proctored enrollment
U.S. Citizenship and Immigration Services, Department of Homeland Security.
Notice.
The Department of Homeland Security (DHS), U.S. Citizenship and Immigration (USCIS) will be submitting this collection of information to the Office of Management and Budget (OMB) with a request for review and approval in accordance with the Paperwork Reduction Act of 1995. USCIS is requesting that OMB approve this emergency revision by September 20, 2024.
(1)
(2)
(3)
(4)
In this request, USCIS will require submission of biometrics by supporters as a condition of submission and require payment of a biometric services fee of $30. These changes are needed to enable USCIS to better validate the identity and qualifications of the supporter(s) and perform additional background checks and security vetting. Within the 6-month period following emergency approval, USCIS will seek public comment of the information collection package as provided under 5 CFR part 1320 and the Paperwork Reduction Act.
Office of Policy Development and Research, HUD.
Notice.
HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comment from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 60 days of public comment.
Interested persons are invited to submit comments regarding this proposal.
Written comments and recommendations for the proposed information collection can be submitted within 60 days of publication of this notice to
Anna Guido, Reports Management Officer, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; email;
Copies of available documents submitted to OMB may be obtained from Ms. Guido.
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A.
Increasing field costs and declining response rates have led HUD to adopt a continuous data collection model as opposed to the periodic 5-month data collection every other year. HUD believes continuous data collection will be more effective, primarily because: (1) it eliminates the expensive, time-consuming Regional Office AHS ramp-up costs every two years, and (2) it puts in place a more experienced AHS workforce with a constant workload. An added benefit is that we will be able to increase the frequency of national and metro AHS estimates, allowing for more current estimates and better
The survey will continue to be longitudinal, interviewing the same housing unit every two years. The sample will be divided into 12 cohorts where each cohort has a 2-month data collection period. Data collection will begin May 2025.
In addition to the “core” data, HUD plans to collect supplemental data on climate adaptation and mitigation, arts and culture, accessibility, doubling up, and accessory dwelling units. Additionally wording variations related to sexual orientation and gender will be tested in support of the American Community Survey Content Test.
The 2025 survey will begin a new longitudinal sample consisting of approximately 175,000 housing units. The sample is designed to provide estimates twenty metropolitan areas and at least seventeen states. An oversample of HUD-assisted housing units is included in the sample design. For the first survey cycle (2025-26) a bridge sample will be fielded. The bridge sample will be drawn from housing units that were successfully interviewed in 2023.
The bridge sample serves as an evaluation tool. If something unforeseen were to happen with the 2025 sample, the estimates from the bridge sample can measure what the 2025 estimates would have looked like if we had not redesigned the AHS sample. The bridge sample size will be 8,500. Approximately seven percent of all interviews will be reinterviewed for the purpose of interviewer quality control (an estimated total of 12,845 housing units).
To help reduce respondent burden on households in the longitudinal sample, the 2025 AHS will make use of dependent interviewing techniques, which will decrease the number of questions asked. Policy analysts, program managers, budget analysts, and Congressional staff use AHS data to advise executive and legislative branches about housing conditions and the suitability of public policy initiatives. Academic researchers and private organizations also use AHS data in efforts of specific interest and concern to their respective communities.
The Department of Housing and Urban Development (HUD) needs the AHS data for the following two reasons:
1. With the data, policy analysts can monitor the interaction among housing needs, demand and supply, as well as changes in housing conditions and costs, to aid in the development of housing policies and the design of housing programs appropriate for different target groups, such as first-time home buyers and the elderly.
2. With the data, HUD can evaluate, monitor, and design HUD programs to improve efficiency and effectiveness.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected, and
(4) Ways to minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comments in response to these questions.
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the Science Museum of Minnesota has completed an inventory of human remains and associated funerary objects and has determined that there is a cultural
Repatriation of the human remains and associated funerary objects in this notice may occur on or after October 3, 2024.
Alison Rempel Brown, President and CEO, Science Museum of Minnesota, 120 W Kellogg Boulevard, St. Paul, MN 55102, telephone (651) 221-9415, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the Science Museum of Minnesota, and additional information on the determinations in this notice, including the results of consultation, can be found in its inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Human remains representing, at least, 19 individuals have been identified. The 479 associated funerary objects are bone harpoon points, bone beads, shell gorgets, shell ornaments/pendants, stone tools, pottery sherds, antler tine, shells, lithic flakes, bark fragments, and soil and rocks.
The following have been determined to be culturally affiliated with the Prairie Island Indian Community based upon geographic location and oral tradition. One human cranium donated in 1949, found at Mendota, Minnesota (SMM Accession 2011). Two bone fragments and 16 teeth representing at least one individual from excavation at the Lee Mill Cave site (21DK0002) in Dakota County, Minnesota, by the Science Museum of Minnesota in 1953 (SMM Accession 2102). Six artifacts from excavation of Mound 1 and 2 at the Bremer Mounds site (21DK0005) in Dakota County, Minnesota, by the Science Museum of Minnesota in 1955 (SMM Accession 2158). Twenty-two cranial fragments and 50+ small bone fragments representing at least one individual, and 14 artifacts from excavation of Mound 1 at the Schilling site (21WA0001) in Washington County, Minnesota, by the Science Museum of Minnesota in 1958 (SMM Accession 2167). Seven bone fragments and two (2) teeth from excavation in 1959-1960 (SMM Accession 2354) and two teeth from excavation in 2015 (SMM Accession A2015:4) at the Sheffield site (21WA0001) in Washington County, Minnesota, by the Science Museum of Minnesota. Four-hundred and forty-eight artifacts from excavation of Mounds 1, 2, 3, 4, and 5 at the Fort Sweney site (21GD0086) in Goodhue County, Minnesota, by the Science Museum of Minnesota in 1960-1962 (SMM Accession 2416). Eleven artifacts from excavation of burials at the Pemton/River Hills site (21DK0041) in Dakota County, Minnesota, by the Science Museum of Minnesota in 1968. Thirteen human bone fragments, 2+ likely human bone fragments, and 110 teeth/tooth fragments representing at least four individuals from excavation at the Mero site (47PI0002) in Pierce County, Minnesota, by the Institute for Minnesota Archaeology in 1991-1992, and transferred to the Science Museum of Minnesota in 2001 (SMM Accession A2001:11). Twenty-five human bone fragments and eight bone fragments that are likely human representing at least one individual from excavation at the Energy Park site (21GD0158) in Goodhue County, Minnesota, by the Institute for Minnesota Archaeology in 1986-1990, and transferred to the Science Museum of Minnesota in 2001 (SMM Accession A2001:13). Four human cranial fragments and 11+ tooth fragments from representing at least one individual from excavation at the Silvernale site (21GD0003) in Goodhue County, Minnesota, by archaeologists affiliated with the Minnesota Archaeological Society, Carlton Summer Institute, and Hamline University in 1974, 1976, and 1977. The collection had been held by the Institute for Minnesota Archaeology until 2001 when it was transferred to the Science Museum of Minnesota (SMM Accession A2017:1). Five human bone fragments and six tooth fragments representing at least one individual from excavation at the Burnside School site (21GD0159) in Goodhue County, Minnesota, by the Institute for Minnesota Archaeology in 1995, and transferred to the Science Museum of Minnesota in 2001 (SMM Accession A2018:1). One human cranial fragment from the Science Museum of Minnesota's educational collection (not accessioned) from southeastern Minnesota. No additional information is available.
The following have no provenience information and appear to be archaeological. The Prairie Island Indian Community “recognizes that there is limited or no known provenience for these ancestral remains, and it is therefore highly unlikely that any clear descendant groups or relatives may claim them. The Prairie Island Indian Community is willing to accept these individuals into their family so that they can be reburied, rather than languishing without relatives in a museum.”—Letter from Noah White, Tribal Historic Preservation Officer, 22-June-2024. Two human crania donated in 1958 without provenience (SMM Accession 2283). One human long-bone fragment donated in 1964 (SMM Accession A64:6). Unknown provenience. No additional information is available. Two cranial fragments that refit (not accessioned). Unknown provenience. No additional information is available. Thirty-three human bones stored together in a tray representing at least two individuals (not accessioned). Unknown provenience. No additional information is available. One human cranium and mandible. Unknown provenience. No additional information is available.
Based on the information available and the results of consultation, cultural affiliation is reasonably identified by the geographical location or acquisition history of the human remains and associated funerary objects described in this notice.
The Science Museum of Minnesota has determined that:
• The human remains described in this notice represent the physical remains of 19 individuals of Native American ancestry.
• The 479 objects described in this notice are reasonably believed to have been placed intentionally with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• There is a connection between the human remains and associated funerary objects described in this notice and the Prairie Island Indian Community in the State of Minnesota.
Written requests for repatriation of the human remains and associated funerary objects in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or an Indian Tribe or Native Hawaiian organization with cultural affiliation.
Repatriation of the human remains and associated funerary objects
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), Wesleyan University intends to repatriate certain cultural items that meet the definition of unassociated funerary objects and that have a cultural affiliation with the Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the cultural items in this notice may occur on or after October 3, 2024.
Wendi Field Murray, Wesleyan University (Archaeology & Anthropology Collections), 265 Church Street, Exley Science Building, Middletown, CT 06459, telephone (860)-685-2085, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of Wesleyan University and additional information on the determinations in this notice, including the results of consultation, can be found in the summary or related records. The National Park Service is not responsible for the determinations in this notice.
A total of five cultural items have been jointly requested for repatriation. The five unassociated funerary objects are two stone mortars (1972.103.1; 1971.24.1) and three stone pestles (1971.364.1; 1971.365.1; 1971.367.1). All five objects were taken by Paul Schumacher from San Nicolas Island, CA during the 1870s (likely 1877) while he was employed as an archaeologist for the National Park Service. Schumacher's collecting was prolific in the Channel Islands during the 1870s. The looting of Native American burials figures prominently in the documentation of his work via reports and his personal journals, making it probable that these items are from funerary contexts. They were initially delivered to the Smithsonian Institution, and in 1878, they were included in a large (Smithsonian) transfer of cultural objects originating in the Channel Islands and other parts of California to Wesleyan University's natural history museum. It should also be noted that there was a sixth object (a stone pestle, 1971.446.1) from San Nicolas Island taken by Schumacher and originally included in the 1878 transfer paperwork (as well as a 1971 collections inventory), but was discovered to be missing by Wesleyan collections staff in 1999. It has not yet been found, but for future reference this object has the same provenance and cultural affiliation as the five objects listed above. No cultural affiliation information was included in the records of the taking or the transfer, though their geographical origin and the well-documented cultural, historical, geographical, and linguistic connections between the claimants and the southern Channel Islands indicates a cultural affiliation with the Payómkawichum (Luiseño) Tribal Bands and the Santa Ynez Band of Chumash Indians.
The presence of potentially hazardous substances (
Wesleyan University has determined that:
• The five unassociated funerary objects described in this notice are reasonably believed to have been placed intentionally with or near human remains, and are connected, either at the time of death or later as part of the death rite or ceremony of a Native American culture according to the Native American traditional knowledge of a lineal descendant, Indian Tribe, or Native Hawaiian organization. The unassociated funerary objects have been identified by a preponderance of the evidence as related to human remains, specific individuals, or families, or removed from a specific burial site or burial area of an individual or individuals with cultural affiliation to an Indian Tribe or Native Hawaiian organization.
• There is a reasonable connection between the cultural items described in this notice and the La Jolla Band of Luiseno Indians, California; Pala Band of Mission Indians; Pauma Band of Luiseno Mission Indians of the Pauma & Yuima Reservation, California; Pechanga Band of Indians (
Additional, written requests for repatriation of the cultural items in this notice must be sent to the authorized representative identified in this notice
Repatriation of the cultural items in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, Wesleyan University must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the cultural items are considered a single request and not competing requests. Wesleyan University is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice and to any other consulting parties.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the Denver Museum of Nature & Science intends to repatriate certain cultural items that meet the definition of sacred objects and that have a cultural affiliation with the Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the cultural items in this notice may occur on or after October 3, 2024.
Chris Patrello, Denver Museum of Nature & Science, 2001 Colorado Boulevard, Denver, CO 80205, telephone (303) 370-6378, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the Denver Museum of Nature & Science, and additional information on the determinations in this notice, including the results of consultation, can be found in the summary or related records. The National Park Service is not responsible for the determinations in this notice.
A total of 14 cultural items have been requested for repatriation. The 14 sacred objects are five baskets, five wooden plaques, one dance shield, one T-necklace, one beaded shawl, and one dance cane. 13 of the 14 sacred objects were purchased by Mary and Francis Crane, who donated their collection to the Denver Museum of Nature & Science between 1968 and 1983. In 1954, Mary and Francis Crane purchased two woven plates (AC.58 and AC.106), identified as White Mountain Apache, from Kohlberg's Antiques and Indian Arts in Denver, Colorado. In 1958, Mary and Francis Crane purchased two woven plates (AC.3047 and AC.3152) from Julian D. Pyatt of Trenton, Missouri. In 1959, Mary and Francis Crane purchased a White Mountain Apache beaded shawl (AC.4353) from National News and Gift Shop in Globe, Arizona. In 1964, Mary and Francis Crane purchased one dance shield (AC.7619), one T-necklace (AC.7621), one dance cane (AC.8088), and five wooden plaques (AC.8090A-E) from the Forestdale Trading post in Show Low, Arizona, all of which are identified as White Mountain Apache. In 2003, the estate of Donald Graham donated one White Mountain Apache basket (AN-2003-91.1) to the Denver Museum of Nature & Science.
The Denver Museum of Nature & Science has determined that:
• The 14 sacred objects described in this notice are specific ceremonial objects needed by a traditional Native American religious leader for present-day adherents to practice traditional Native American religion, according to the Native American traditional knowledge of a lineal descendant, Indian Tribe, or Native Hawaiian organization.
• There is a reasonable connection between the cultural items described in this notice and the White Mountain Apache Tribe of the Fort Apache Reservation, Arizona.
Additional, written requests for repatriation of the cultural items in this notice must be sent to the authorized representative identified in this notice under
Repatriation of the cultural items in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, the Denver Museum of Nature & Science must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the cultural items are considered a single request and not competing requests. The Denver Museum of Nature & Science is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice and to any other consulting parties.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the University of Michigan has completed an inventory of human remains and associated funerary objects and has determined that there is a cultural affiliation between the human remains and associated funerary objects and Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the human remains and associated funerary objects in this notice may occur on or after October 3, 2024.
Dr. Ben Secunda, NAGPRA Office Manager, University of Michigan, Office of Research, Suite G269, Lane Hall, Ann Arbor, MI 48109-1274,
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the University of Michigan, and additional information on the determinations in this notice, including the results of consultation, can be found in its inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Human remains representing, at least, eight individuals have been identified. The one lot of associated funerary objects are one lot of faunal bone, charcoal, bark, snail shell, and stone. The Burnt Bluff site (20DE3) is a series of rock shelters and caves located at Big Bay de Noguet/Big Bay de Noc, Delta County, Michigan. Human remains from Burnt Bluff were recovered from two separate caves on two different occasions. Remains were removed from Spider cave in 1953 by an amateur collector and remains were removed from B-95 cave by a University led excavation in 1965. The Ancestors are one adult male, two adults, one infant six months to 1.5 years, one neonate infant, two children, and one adolescent 14-17 years.
Human remains representing, at least, one individual have been identified. No associated funerary objects are present. The human remains from the Chalk Hill Mound site (20ME50) were donated to UMMA in July of 1953 by John Mitchell, who collected them in March of 1953 from a mound at Chalk Hills on the Menominee River, just downstream from Nathan on the Michigan side of the river. No known information as to how the site was found or excavated, or any specific time period for the site. The Ancestor is an adult 30-45 years male.
Human remains representing, at least, one individual have been identified. No associated funerary objects are present. The human remains from the Menominee School site (20ME) were donated to UMMAA by the superintendent of schools for Menominee county; no name is listed on any records. There is very little information regarding the circumstances of how the human remains were found or if they were recovered from a school in Menominee County. The Ancestor is an adult 35-60 years male.
The University of Michigan has no record of, nor do its officials have any knowledge of, any treatment of items with pesticides, preservatives, or other substances that represent a potential hazard to the collection(s) or to persons handling the collection(s).
Based on the information available and the results of consultation, cultural affiliation is reasonably identified by the geographical location or acquisition history of the human remains and associated funerary objects described in this notice.
The University of Michigan has determined that:
• The human remains described in this notice represent the physical remains of 10 individuals of Native American ancestry.
• The one lot of objects described in this notice are reasonably believed to have been placed intentionally with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• There is a connection between the human remains and associated funerary objects described in this notice and the Bad River Band of the Lake Superior Tribe of Chippewa Indians of the Bad River Reservation, Wisconsin; Bay Mills Indian Community, Michigan; Chippewa Cree Indians of the Rocky Boy's Reservation, Montana; Citizen Potawatomi Nation, Oklahoma; Forest County Potawatomi Community, Wisconsin; Grand Traverse Band of Ottawa and Chippewa Indians, Michigan; Hannahville Indian Community, Michigan; Keweenaw Bay Indian Community, Michigan; Lac Courte Oreilles Band of Lake Superior Chippewa Indians of Wisconsin; Lac du Flambeau Band of Lake Superior Chippewa Indians of the Lac du Flambeau Reservation of Wisconsin; Lac Vieux Desert Band of Lake Superior Chippewa Indians of Michigan; Little River Band of Ottawa Indians, Michigan; Little Shell Tribe of Chippewa Indians of Montana; Little Traverse Bay Bands of Odawa Indians, Michigan; Match-e-be-nash-she-wish Band of Pottawatomi Indians of Michigan; Menominee Indian Tribe of Wisconsin; Minnesota Chippewa Tribe, Minnesota (Six component reservations: Bois Forte Band (Nett Lake); Fond du Lac Band; Grand Portage Band; Leech Lake Band; Mille Lacs Band; White Earth Band); Nottawaseppi Huron Band of the Potawatomi, Michigan; Ottawa Tribe of Oklahoma; Pokagon Band of Potawatomi Indians, Michigan and Indiana; Prairie Band Potawatomi Nation; Red Cliff Band of Lake Superior Chippewa Indians of Wisconsin; Red Lake Band of Chippewa Indians, Minnesota; Saginaw Chippewa Indian Tribe of Michigan; Sault Ste. Marie Tribe of Chippewa Indians, Michigan; Sokaogon Chippewa Community, Wisconsin; St. Croix Chippewa Indians of Wisconsin; and the Turtle Mountain Band of Chippewa Indians of North Dakota.
Written requests for repatriation of the human remains and associated funerary objects in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or an Indian Tribe or Native Hawaiian organization with cultural affiliation.
Repatriation of the human remains and associated funerary objects described in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, the University of Michigan must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the human remains and associated funerary objects are considered a single request and not competing requests. The University of Michigan is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), Indiana University intends to repatriate certain
Repatriation of the cultural items in this notice may occur on or after October 3, 2024.
Dr. Jayne-Leigh Thomas, Indiana University, NAGPRA Office, Student Building 318, 701 E. Kirkwood Avenue, Bloomington, IN 47405, telephone (812) 856-5315, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of Indiana University, and additional information on the determinations in this notice, including the results of consultation, can be found in the summary or related records. The National Park Service is not responsible for the determinations in this notice.
A total of eight cultural items have been requested for repatriation.
The four unassociated funerary objects are shaman's objects, and the four objects of cultural patrimony are a mask, rattle, blanket, and ceremonial knife. Museum records and consultation both identified Tlingit cultural affiliation for these eight items. Available records do not include geographical locations for any of these cultural items. The Indiana University Art Museum (IUAM), now the Eskenazi Museum of Art, acquired a shaman's box from Origins Gallery in 1962. The IUAM received additional three shaman's objects as a donation from the Raymond and Laura Wielgus Collection in 2010. Prior ownership for these objects include: JJ. Klejman, George Thorton Emmons, Harry Georffrey Beasley, the Cranmore Ethnographical Museum, Merton Simpson, and Reverend Robert Richard Arthur Doolan. The IUAM acquired a rattle and chief's blanket from Michael R. Johnson Gallery in 1975; prior ownership for the blanket includes John H. Hauberg. The IUAM acquired a mask from Raymond Wielgus in 1977; prior ownership history includes Julius Carlebach, Andre Breton, and Paul Eluard. The IUAM acquired a ceremonial knife from Damon Brandt in 1980.
Indiana University has determined that:
• The four unassociated funerary objects described in this notice are reasonably believed to have been placed intentionally with or near human remains, and are connected, either at the time of death or later as part of the death rite or ceremony of a Native American culture according to the Native American traditional knowledge of a lineal descendant, Indian Tribe, or Native Hawaiian organization. The unassociated funerary objects have been identified by a preponderance of the evidence as related to human remains, specific individuals, or families, or removed from a specific burial site or burial area of an individual or individuals with cultural affiliation to an Indian Tribe or Native Hawaiian organization.
• The four objects of cultural patrimony described in this notice have ongoing historical, traditional, or cultural importance central to the Native American group, including any constituent sub-group (such as a band, clan, lineage, ceremonial society, or other subdivision), according to the Native American traditional knowledge of an Indian Tribe or Native Hawaiian organization.
• There is a reasonable connection between the cultural items described in this notice and the Central Council of the Tlingit & Haida Indian Tribes.
Additional, written requests for repatriation of the cultural items in this notice must be sent to the authorized representative identified in this notice under
Repatriation of the cultural items in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, Indiana University must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the cultural items are considered a single request and not competing requests. Indiana University is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice and to any other consulting parties.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the Hood Museum of Art, Dartmouth College has completed an inventory of human remains and associated funerary objects and has determined that there is a cultural affiliation between the human remains and associated funerary objects and Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the human remains and associated funerary objects in this notice may occur on or after October 3, 2024.
Jami C. Powell, Associate Director of Curatorial Affairs & Curator of Indigenous Art, Hood Museum of Art, 6 East Wheelock Street, Hanover, NH 03755, telephone (603) 646-2822, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the Hood Museum of Art, Dartmouth College, and additional information on the determinations in this notice, including the results of consultation, can be found in its inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Human remains representing, at least, one individual were removed from Campbell County, SD.
The human remains include one individual that was removed from the Anton Rygh site (39CA4). During the
Human remains, representing, at minimum seven individuals were likely removed the Sully site (39SL4) from Sully County, SD, the Truman site (39BF224) and the McBride II Mounds site (39BF270) from Buffalo County, SD, and/or the Anton Rygh site (39CA4) Campbell County, SD. The human remains include three adults and four juveniles. Previously housed in the Physical Anthropology Lab on the campus of Dartmouth College, these remains were located and identified during a 2022 reinventory conducted by the Hood Museum NAGPRA Office. While there is no direct documentation linking these human remains to these sites, they share a unique color and patina with other human remains which are known to have been removed from these sites. Through tribal consultation, it has been determined that these human remains should be associated with these specific sites. No known individuals were identified. No associated funerary objects are present.
No known substances were used to treat the Ancestors described in this notice.
Based on the information available and the results of consultation, cultural affiliation is reasonably identified by the geographical location or acquisition history of the human remains and associated funerary objects described in this notice.
The Hood Museum of Art, Dartmouth College has determined that:
• The human remains described in this notice represent the physical remains of eight individuals of Native American ancestry.
• The four objects described in this notice are reasonably believed to have been placed intentionally with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• There is a connection between the human remains and associated funerary objects described in this notice and the Three Affiliated Tribes of the Fort Berthold Reservation, North Dakota.
Written requests for repatriation of the human remains and associated funerary objects in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or an Indian Tribe or Native Hawaiian organization with cultural affiliation.
Repatriation of the human remains and associated funerary objects described in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, the Hood Museum of Art, Dartmouth College must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the human remains and associated funerary objects are considered a single request and not competing requests. The Hood Museum of Art, Dartmouth College is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), Hartwick College has completed an inventory of human remains and associated funerary objects and has determined that there is a cultural affiliation between the human remains and associated funerary objects and Indian Tribes or Native Hawaiian organizations in this notice. The remains were recovered from Oneonta, NY, and Hyndesville, NY, respectively.
Repatriation of the human remains and associated funerary objects in this notice may occur on or after October 3, 2024.
Dr. Quentin Lewis, Yager Museum, Hartwick College, 1 Hartwick Drive, Oneonta, NY 13820, telephone (607) 431-4481, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of Hartwick College, and additional information on the determinations in this notice, including the results of consultation, can be found in the inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Based on the information available, human remains representing, at least, two individuals have been reasonably identified. In 1923, Adrian G. Blanchard of Oneonta uncovered a burial in Oneonta, NY, in an area known as the Oneonta Plains, between the Susquehanna River and the current railroad tracks along what is today Highway 205. This burial consisted of fragmentary human remains of one or more individuals and 84 associated funerary objects. The 84 associated funerary objects consist of 29 stone tools, three gorgets, one antler flaker, 13 sherds of pottery, one lot of fragments of mica schist, one tubular shell bead, one hammered copper pendant, five fish vertebrae beads, and 30 rolled copper beads. These materials were given or sold to Willard Yager before 1929, and have been in Hartwick College's possession since that time.
In 1971, the remains of one individual were uncovered by Hartwick College Professor Bruce Raemsch near Hyndsville, NY as part of an archaeological field school at the Pleasant Brooke locus of the Timlin site. One associated funerary object was also uncovered. Excavated from disturbed fill near a state highway, Raemsch was told by local informants that highway construction crews had uncovered a Native burial some decades prior and
Based on the information available and the results of consultation, cultural affiliation is reasonably identified by the geographical location or acquisition history of the human remains and associated funerary objects described in this notice.
Hartwick College has determined that:
• The human remains described in this notice represent the physical remains of three individuals of Native American ancestry.
• The 85 objects described in this notice are reasonably believed to have been placed intentionally with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• There is a reasonable connection between the human remains and associated funerary objects described in this notice and the Saint Regis Mohawk Tribe.
Written requests for repatriation of the human remains and associated funerary objects in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or a culturally affiliated Indian Tribe or Native Hawaiian organization.
Repatriation of the human remains and associated funerary objects in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, Hartwick College must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the human remains and associated funerary objects are considered a single request and not competing requests. Hartwick College is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the Field Museum has completed an inventory of human remains and has determined that there is a cultural affiliation between the human remains and Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the human remains in this notice may occur on or after October 3, 2024.
June Carpenter, NAGPRA Director, Field Museum, 1400 S Lake Shore Drive, Chicago, IL 60605, telephone (312) 665-7820, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the Field Museum, and additional information on the determinations in this notice, including the results of consultation, can be found in its inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Human remains representing, at least, two individuals have been identified. No associated funerary objects are present. In 1935, Byron W. Knoblock removed the two individuals from Sacramento County. The individuals were accessioned by the Museum on January 17, 1936 as part of a larger collection. There is no known presence of any potentially hazardous substances.
Based on the information available and the results of consultation, cultural affiliation is reasonably identified by geographic location or acquisition history of the human remains described in this notice.
The Field Museum has determined that:
• The human remains described in this notice represent the physical remains of two individuals of Native American ancestry.
• There is a connection between the human remains described in this notice and the Wilton Rancheria, California.
Written requests for repatriation of the human remains in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or an Indian Tribe or Native Hawaiian organization with cultural affiliation.
Repatriation of the human remains described in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, the Field Museum must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the human remains are considered a single request and not competing requests. The Field Museum is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the U.S. Army Corps of Engineers, Walla Walla District intends to carry out the disposition of human remains removed from Federal or Tribal lands to the lineal descendants, Indian Tribe, or Native Hawaiian organization with priority for disposition in this notice.
Disposition of the human remains in this notice may occur on or after October 3, 2024. If no claim for disposition is received by September 3, 2025, the human remains in this notice will become unclaimed human remains.
Scott M. Hall, Supervisory Archaeologist, U.S. Army Corps of Engineers, Walla Walla District, 201 North Third Avenue, Walla Walla, WA 99362-1876, telephone (509) 527-7274, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the U.S. Army Corps of Engineers, Walla Walla District and additional information on the human remains or cultural items in this notice, including the results of consultation, can be found in the related records. The National Park Service is not responsible for the identifications in this notice.
Based on the information available, human remains representing, at least one individual have been reasonably identified. No associated funerary objects are present. The human remains are of one adult, found eroding from the riverbank in Garfield County, Washington. The burial was oriented to the east, and the remnants of a rock cairn was present along the south and west sides of the burial. The remains were discovered by archaeological site monitors from the Nez Perce Tribe on May 9, 2024.
The U.S. Army Corps of Engineers, Walla Walla District has determined that:
• The human remains described in this notice represent the physical remains of one individual of Native American ancestry.
• The Confederated Tribes and Bands of the Yakama Nation; Confederated Tribes of the Colville Reservation; Confederated Tribes of the Umatilla Indian Reservation; and the Nez Perce Tribe have priority for disposition of the human remains or cultural item described in this notice.
Written claims for disposition of the human remains in this notice must be sent to the appropriate official identified in this notice under
1. Any lineal descendant, Indian Tribe, or Native Hawaiian organization identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that they have priority for disposition.
Disposition of the human remains in this notice may occur on or after October 3, 2024. If competing claims for disposition are received, the U.S Army Corps of Engineers, Walla Walla District must determine the most appropriate claimant prior to disposition. Requests for joint disposition of the human remains are considered a single request and not competing requests. The U.S. Army Corps of Engineers, Walla Walla District is responsible for sending a copy of this notice to the lineal descendants, Indian Tribes, and Native Hawaiian organizations identified in this notice and to any other consulting parties.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the U.S. Army Corps of Engineers, Omaha District, and the Hood Museum of Art, Dartmouth College, Hanover, NH has completed an inventory of human remains and has determined that there is a cultural affiliation between the human remains and Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the human remains in this notice may occur on or after October 3, 2024.
Ms. Livia Taylor, U.S. Army Corps of Engineers, Omaha District, ATTN: CENWO-PMA-C, 1616 Capitol Avenue, Omaha, NE 68102, telephone (402) 995-2434, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the U.S. Army Corps of Engineers, Omaha District, and additional information on the determinations in this notice, including the results of consultation, can be found in its inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Human remains representing, at least, one individual were removed from Buffalo County, SD. The human remains include one individual that was removed from the Truman site (39BF224). The site was first documented in 1956 by Harold Huscher in 1956 as part of the Smithsonian Institution's River Basin Survey project and is part of the Fort Thompson Mounds Archaeological District. Site 39BF224 consists of at least six mounds
Human remains representing, at least, two individuals were removed from Buffalo County, SD. The human remains include two individuals that were removed from the McBride II Mounds site (39BF270). The site was first documented in 1958 by Robert Neuman during the Smithsonian Institution's River Basin Survey project and is part of the Fort Thompson Mounds Archaeological District. Site 39BF270 consists of three circular mounds and dates to the Woodland period (1500 B.C.-A.D. 900). No known individuals were identified. No associated funerary objects are present.
Human remains representing, at least, two individuals were removed from Campbell County, SD. The human remains include two individuals that were removed from the Anton Rygh site (39CA4). During the summers of 1965, 1966, 1968, 1969, 1970, and 1973, human remains were removed from site 39CA4 under the direction of William Bass. Site 39CA4 is a large, multi-component earth lodge village, part of the Plains Village Tradition. It is a fortified village site covering around 11-12 acres. At least two occupations are suggested by archeological evidence. The first occupation dates to the Extended Middle Missouri period (A.D. 1000-1500), while the second occupation dates to the Extended Coalescent (A.D. 1500-1675), and Post Contact Coalescent (A.D. 1675-1780) periods. No known individuals were identified. No associated funerary objects are present.
Human remains, representing, at minimum five individuals were removed from Sully County, SD. The human remains include two adults and three infants. The Sully site was excavated in by William Bass and crews from the Smithsonian Institution River Basin Surveys (in 1957, 1958, and 1961) and KU (in 1962). Following excavation, the burial remains were transferred to the Smithsonian Institution and examined by Bass, who served as physical anthropologist for the Smithsonian Institution River Basin Surveys. The Sully site was one of the largest identified Arikara villages and contained four distinct cemeteries. The site dates to A.D. 1477-1678. No known individuals were identified. No associated funerary objects are present.
No known substances were used to treat the Ancestors described in this notice.
Based on the information available and the results of consultation, cultural affiliation is reasonably identified by the geographical location or acquisition history of the human remains described in this notice.
The U.S. Army Corps of Engineers, Omaha District has determined that:
• The human remains described in this notice represent the physical remains of 10 individuals of Native American ancestry.
• There is a connection between the human remains described in this notice and the Three Affiliated Tribes of the Fort Berthold Reservation, North Dakota.
Written requests for repatriation of the human remains in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or an Indian Tribe or Native Hawaiian organization with cultural affiliation.
Repatriation of the human remains described in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, the U.S. Army Corps of Engineers, Omaha District must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the human remains are considered a single request and not competing requests. The U.S. Army Corps of Engineers, Omaha District is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the Museum of Texas Tech University has completed an inventory of human remains and associated funerary objects and has determined that there is a cultural affiliation between the human remains and associated funerary objects and Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the human remains and associated funerary objects in this notice may occur on or after October 3, 2024.
Dr. Eileen Johnson, Museum of Texas Tech University, 3301 4th Street, Lubbock, TX 79415, telephone (806) 742-2442, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the Museum of Texas Tech University, and additional information on the determinations in this notice, including the results of consultation, can be found in the inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Based on the information available, human remains representing, at least, 106 individuals have been reasonably identified. The 249 associated funerary objects are: a bowl; Olivella shell beads; lithic objects; potsherds; bone tools; faunal remains; clam/mussel shell; wood; and unworked stone.
In 1930 and 1931, human skeletal remains representing at least 20 adult and juvenile individuals were unearthed under the supervision of Dr. William Curry Holden (Museum Director 1929-1969) from the Ancestral Pueblo of Tecolte (LA296) in San Miguel County, New Mexico. Accessioned by the Museum between
In 1939, human skeletal remains representing at least five adult individuals were unearthed under the supervision of Dr. William Curry Holden (Museum Director 1929-1969) from the Ancestral Pueblo of Arrowhead (LA251) near Glorietta, New Mexico. Accessioned by the Museum in 1939 and 1940. The one associated funerary object is a non-human vertebra.
In 1950 through 1954, human skeletal remains representing at least 40 adult, juvenile, and infant individuals were unearthed under the supervision of Jane Holden Kelley (Museum employee) from the Ancestral Pueblo of Bonnell (LA612) near Glencoe, New Mexico. Accessioned by the Museum in 1950 and 1951. The 201 associated funerary objects include a Chupadero Black-on-White bowl found covering the face of a juvenile individual and 200 Olivella shell beads found around the neck of the same individual.
A human skull representing one juvenile individual was stolen from the Museum by a student worker in 1970 and returned anonymously by mail in 1994 with a hand-written note of explanation. No identifying information was present with the skull. Four juvenile burials described by Jane Holden Kelley from the Ancestral Pueblo of Bonnell have not been matched conclusively with Bonnell material. Based on the age profile of the unmatched burials from Bonnell, the overall age demographic of the human skeletal remains from Bonnell, and the age of this individual, it is highly likely that this skull is from the Bonnell Collection and may be associated with other skeletal elements in the collection.
In 1955, human skeletal remains representing at least one juvenile individual were unearthed under the supervision of Jane Holden Kelley (Museum employee) from the Ancestral Pueblo of Bonnell B near Glencoe, New Mexico. Bonnell B is directly next to the main Bonnell excavation and is described by Kelley as contemporaneous. Accessioned by the Museum in 1955. No associated funerary objects are present.
In 1955, human skeletal remains representing at least one adult individual were unearthed under the supervision of Jane Holden Kelley (Museum employee) from the Ancestral Pueblo of Turner/Phillips (LA1537) near White Oaks, New Mexico.
Additionally, human skeletal remains representing at least one juvenile individual have been identified as possibly from the Ancestral Pueblo of Turner/Phillips (LA1537). Accessioned by the Museum in 1955. No associated funerary objects are present.
In 1954, human skeletal remains representing at least 10 adult and juvenile individuals were unearthed under the supervision of Jane Holden Kelley (Museum employee) from the Ancestral Pueblo of Bloom Mound (LA2528), 14 miles southwest of Roswell, New Mexico. Kelley notes that none of the human remains from Bloom Mound were intentional burials. Most were found under collapsed roofs, in roof debris, or in room fill, often in sprawled positions, and with evidence of burning. Accessioned by the Museum in 1955. No associated funerary objects are present.
In 1954, human skeletal remains representing at least two individuals (one adult and one juvenile) were unearthed under the supervision of Jane Holden Kelley (Museum employee) from the Ancestral Pueblo of Hiner (LA176565) near Corona, New Mexico. Accessioned by the Museum in 1958. No associated funerary objects are present.
In the 1950s, human skeletal remains representing at least three individuals (one adult, one juvenile, and one infant) were unearthed under the supervision of Jane Holden Kelley (Museum employee) from Ancestral Pueblo sites along the Upper and Middle Peñasco River. The remains have been identified as coming from one of two possible sites (Site 2000 or Mayhill Site 2). Accessioned by the Museum in 1958. No associated funerary objects are present.
In 1956, human skeletal remains representing at least 18 adults, juveniles, and infants were unearthed under the supervision of Jane Holden Kelley (Museum employee) from the Ancestral Pueblo of Block Lookout (LA2112) in Lincoln County, New Mexico. Kelley noted that the site was badly looted and many human skeletal elements were found scattered around pot-holes. Only six individuals were found in-situ. Accessioned by the Museum in 1958. No associated funerary objects are present.
In the 1950, human skeletal remains representing four individuals were unearthed from various sites in the Sierra Blanca region of New Mexico under the supervision of Jane Holden Kelley (Museum employee). The human skeletal remains representing one adult, one juvenile, and two infant individuals from the Sierra Blanca Collection cannot be associated to specific sites. All the Sierra Blanca Collection sites with human remains are Ancestral Pueblos. No associated funerary objects are present.
Based on the information available and the results of consultation, cultural affiliation is clearly identified by the information available about the human remains and associated funerary objects described in this notice.
The Museum of Texas Tech University has determined that:
• The human remains described in this notice represent the physical remains of 106 individuals of Native American ancestry.
• The 249 objects described in this notice are reasonably believed to have been placed intentionally with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• There is a reasonable connection between the human remains and associated funerary objects described in this notice and the Hopi Tribe of Arizona; Ohkay Owingeh, New Mexico; Pueblo of Acoma, New Mexico; Pueblo of Cochiti, New Mexico; Pueblo of Isleta, New Mexico; Pueblo of Jemez, New Mexico; Pueblo of Laguna, New Mexico; Pueblo of Nambe, New Mexico; Pueblo of Picuris, New Mexico; Pueblo of Pojoaque, New Mexico; Pueblo of San Felipe, New Mexico; Pueblo of San Ildefonso, New Mexico; Pueblo of Sandia, New Mexico; Pueblo of Santa Ana, New Mexico; Pueblo of Santa Clara, New Mexico; Pueblo of Taos, New Mexico; Pueblo of Tesuque, New Mexico; Pueblo of Zia, New Mexico; Santo Domingo Pueblo; Ysleta del Sur Pueblo; and the Zuni Tribe of the Zuni Reservation, New Mexico.
Written requests for repatriation of the human remains and associated funerary objects in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or a culturally affiliated Indian Tribe or Native Hawaiian organization.
Repatriation of the human remains and associated funerary objects in this
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the Museum of Texas Tech University has completed an inventory of human remains and associated funerary objects and has determined that there is a cultural affiliation between the human remains and associated funerary objects and Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the human remains and associated funerary objects in this notice may occur on or after October 3, 2024.
Dr. Eileen Johnson, Museum of Texas Tech University, 3301 4th Street, Lubbock, TX 79415, telephone (806) 742-2442, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the Museum of Texas Tech Univresity, and additional information on the determinations in this notice, including the results of consultation, can be found in the inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Based on the information available, human remains representing, at least, 17 individuals have been reasonably identified. The 31,401 associated funerary objects are: an awl; awl case; beads; bear claws; bells; belt; bridle parts; bowl; bracelets; bridle ornaments; buckles; bugle; buttons; canisters; chains; cloth; conchos cordage; decorated fringe; elk horn scrapers with blades; faunal material; files; fossil; hammer; handles; harmonica; horse hair; bone tubes; jingles; leather; lithics; pieces of metal; metal pipe; mirrors; nails; necklaces; soapstone pipe; pouch with vermillion; rings; rivets; robe; saddle; saddle horns; saddle ornaments; saddle parts; shell hair pipes; sinew; spoons; stirrups; tacks; tinklers; unidentified organic materials; unworked stone; whip; whistle; wood pieces; and wood tubes.
Between 1929 and 1939, human skeletal remains representing at least one juvenile individual were found near Paducah, Texas and removed by Mac Biddy. Biddy donated the human skeletal remains and associated funerary objects to the Museum between 1929 and 1939. The 294 associated funerary objects include: beads; cloth; a harmonica; buttons; studs and tacks; bells; stirrups; bridle bits; chain; bracelets; metal rings; metal files; handles; conchos; saddle ornaments; buckles; a spoon; a hammer head; canisters; leather pieces; sinew pieces; wood pieces; a ceremonial whip handle; a can; and metal pieces.
In 1940, human remains representing at least two adult individuals were found by the Civilian Conservation Corps working on the Dean Ranch near Lamesa, Texas. The human skeletal remains and associated funerary objects were removed by Porter Montgomery (Museum employee) and accessioned in 1940. The 56 associated funerary objects include: bracelets; spoon; metal pipe; cone jingles; metal pieces; beads; leather pieces; elk horn scrapers with metal blades; incised bone tube; and a Mesozoic tooth segment.
In the 1930s, human skeletal remains representing at least four individuals (two adult, one juvenile, and one infant) were found and removed by Dr. Cyrus N. Ray at Berry Farm, 20 miles west of Colorado City, Texas. Ray donated the human skeletal remains and associated funerary objects to the Museum in 1946. The four associated funerary objects are: three bridle ornaments; and a jackrabbit bone.
In 1955, human skeletal remains representing at least four individuals (one adult, one subadult, and two juvenile) were found in a rock shelter near Stanton, Texas and removed by Claude McKaskle. McKaskle donated the human skeletal remains and associated funerary objects to the Museum in 1956. The 1,387 funerary objects include: a soapstone pipe; saddle; hide robe; leather pieces; gourd bowl; buttons; bracelets; textile pieces representing saddle blankets and trade cloth; bear claws; bone whistle; wooden pieces; stirrup; bead necklaces; beads; horse hair; metal rings; conchos; lithics; faunal remains; and organic material.
In 1955, human skeletal remains representing at least one juvenile individual were found by J.D. White in a field heavily disturbed by plowing in the southwest portion of Yoakum County, Texas, approximately seven miles west and two miles north of Denver City. The human skeletal remains and associated funerary objects were unearthed by Jane Holden Kelley (Museum employee) in 1955 and subsequently lent to the University of Texas in Austin for research in 1961. The collection was not returned until 1988 and was accessioned in 1996. The 1,954 associated funerary objects include: shell hair pipes; textile fragments; cordage; fringe; parts of a bridle; bridle ornaments; metal pieces; a bugle; buttons; bracelets; saddle horn; saddle nails; buckles; rivets and tacks; a ring; bells; conchos; beads; leather with beads; leather; a scabbard; copper jingles; wood pieces; leather belt; leather pouch containing vermillion; and a partial horse skeleton.
Between 1995 and 2001, human skeletal remains representing at least three individuals (two adult and one juvenile) were found in a rock shelter in Blanco Canyon on the Overstreet Ranch. The human skeletal remains were donated to the Museum by Joyce Owens and accessioned in 2001. Associated funerary objects were removed but were retained by the landowner. These objects included: horse trappings; beads; conchos; hair pipes; tinklers; and bracelets.
In 1960, human skeletal remains representing at least one adult individual were found in a small re-entrant creek valley in the canyon breaks near Post, Texas and removed by Zoe Kirkpatrick. Kirkpatrick donated the human skeletal remains and associated funerary objects to the Museum in 2007. The 26,645 associated funerary objects include: a metal ring;
In 1984, human skeletal remains representing at least one adult were removed by Robert C. Palmer on his property in Martin County, Texas. The burial was located in Mustang Draw, between Mustang Pond and Mustang Springs on the upper valley margin. Palmer donated the burial to the Museum of the Southwest who transferred the burial to the Museum of Texas Tech University in 2012 for NAGPRA reporting purposes. The 1,061 associated funerary objects include beads and faunal material. Additional funerary objects were removed but were retained by the landowner. These objects included: horse trappings; a bone flute; other metal objects including a strike a light, metal knife, and metal projectile point; lithic material including shaft straighteners; and additional glass beads.
Based on the information available and the results of consultation, cultural affiliation is clearly identified by the information available about the human remains and associated funerary objects described in this notice.
The Museum of Texas Tech University has determined that:
• The human remains described in this notice represent the physical remains of 17 individuals of Native American ancestry.
• The 31,401 objects described in this notice are reasonably believed to have been placed intentionally with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• There is a reasonable connection between the human remains and associated funerary objects described in this notice and the Comanche Nation, Oklahoma.
Written requests for repatriation of the human remains and associated funerary objects in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or a culturally affiliated Indian Tribe or Native Hawaiian organization.
Repatriation of the human remains and associated funerary objects in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, the Museum of Texas Tech University must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the human remains and associated funerary objects are considered a single request and not competing requests. The Museum of Texas Tech University is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice.
National Park Service, Interior.
Notice.
In accordance with the Native American Graves Protection and Repatriation Act (NAGPRA), the Eastern Washington University has completed an inventory of human remains and associated funerary objects and has determined that there is a cultural affiliation between the human remains and associated funerary objects and Indian Tribes or Native Hawaiian organizations in this notice.
Repatriation of the human remains and associated funerary objects in this notice may occur on or after October 3, 2024.
Kate Valdez, NAGPRA Coordinator, Eastern Washington University, 214 Showalter Hall, Cheney, WA 99004, telephone (509) 359-3116, email
This notice is published as part of the National Park Service's administrative responsibilities under NAGPRA. The determinations in this notice are the sole responsibility of the Eastern Washington University, and additional information on the determinations in this notice, including the results of consultation, can be found in its inventory or related records. The National Park Service is not responsible for the determinations in this notice.
Human remains representing, at least, two individuals have been identified. The one associated funerary object is a deer ulna awl.
Human remains representing two individuals were removed from the summer property of W.H. Cowles, Jr. Casco Bay on Lake Coeur d'Alene. They were accessioned by the Eastern Washington State Historical Society (EWSHS). On April 3, 1987, these remains were legally transferred to Eastern Washington University. No known individuals were identified. The one associated funerary object is one deer ulna awl.
Based on the information available and the results of consultation, cultural affiliation is reasonably identified by the geographical location or acquisition history of the human remains and associated funerary objects described in this notice.
The Eastern Washington University has determined that:
• The human remains described in this notice represent the physical remains of two individuals of Native American ancestry.
• The one object described in this notice are reasonably believed to have been placed intentionally with or near individual human remains at the time of death or later as part of the death rite or ceremony.
• There is a connection between the human remains and associated funerary objects described in this notice and the Coeur D'Alene Tribe.
Written requests for repatriation of the human remains and associated funerary objects in this notice must be sent to the authorized representative identified in this notice under
1. Any one or more of the Indian Tribes or Native Hawaiian organizations identified in this notice.
2. Any lineal descendant, Indian Tribe, or Native Hawaiian organization not identified in this notice who shows, by a preponderance of the evidence, that the requestor is a lineal descendant or an Indian Tribe or Native Hawaiian organization with cultural affiliation.
Repatriation of the human remains and associated funerary objects described in this notice to a requestor may occur on or after October 3, 2024. If competing requests for repatriation are received, the Eastern Washington University must determine the most appropriate requestor prior to repatriation. Requests for joint repatriation of the human remains and associated funerary objects are considered a single request and not competing requests. The Eastern Washington University is responsible for sending a copy of this notice to the Indian Tribes and Native Hawaiian organizations identified in this notice.
Bureau of Ocean Energy Management, Interior.
Final sale notice.
This final sale notice (FSN) contains information pertaining to the areas available for commercial wind power leasing during Pacific Wind Lease Sale 2 (PACW-2) on the Outer Continental Shelf (OCS) offshore Oregon. Specifically, this FSN details certain provisions and conditions of the leases, auction details, the lease form, criteria for evaluating competing bids, and procedures for award, appeal, and lease execution. The Bureau of Ocean Energy Management (BOEM) will offer two lease areas using an ascending clock auction with multiple-factor bidding: Lease OCS-P 0566 and Lease OCS-P 0567 (Lease Areas). Bidders will be subject to a `one-per-customer' rule, as explained below. The Lease Areas are in the previously identified wind energy areas (WEAs) Brookings and Coos Bay. The issuance of any lease resulting from this sale will not constitute approval of project-specific plans to develop offshore wind energy. If submitted by the lessee, such plans, will be subject to environmental, technical, and public reviews prior to a BOEM decision on whether the proposed activity should be authorized.
BOEM will hold an online mock auction for potential bidders starting at 7:00 a.m. Pacific Time (PT)/10:00 a.m. Eastern Time (ET) on October 10, 2024. The monetary auction will be held online and will begin at 7:00 a.m. PT/10:00 a.m. ET on October 15, 2024. Additional details are provided in the section entitled “Deadlines and Milestones for Bidders.”
Jean Thurston-Keller, Bureau of Ocean Energy Management, Office of Strategic Resources, 760 Paseo Camarillo, Suite 102 (CM102), Camarillo, California 93010-6002 or
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On August 15, 2023, BOEM announced a 60-day public comment period on the two draft WEAs offshore Oregon, covering approximately 219,547 acres. BOEM later extended the comment period for an additional 15 days for a total 75-day public comment period.
BOEM considered the following information sources, among others, when identifying the draft WEAs: comments and nominations received on the Call; input from the BOEM Oregon Intergovernmental Renewable Energy Task Force; results of the “Data Gathering and Engagement Summary Report: Oregon Offshore Wind Planning” input from Tribes, Oregon State agencies, and Federal agencies; comments from stakeholders and ocean users, including the maritime community, offshore wind developers, and the commercial and recreational fishing industry; State renewable energy goals; information on domestic and global offshore wind markets and technological trends; and the data and information found in OROWindMap at:
After the close of the draft WEA comment period on October 31, 2023, BOEM reviewed the input from all parties mentioned above and finalized the Area ID memorandum. BOEM announced the designation of the two final WEAs on February 13, 2024. The first WEA (Brookings) is 133,792 acres and located approximately 18 miles from shore. The second WEA (Coos Bay) is 61,203 acres and located approximately 32 miles from shore. If fully developed, both final WEAs combined could support approximately 3.16 gigawatts of wind energy capacity. The Oregon Area ID documentation can be found at
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BOEM has determined that the following 5 entities are legally, technically, and financially qualified to bid in the PACW-2 auction, pursuant to 30 CFR 585.107 and 585.108:
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i. They own or have common ownership of more than 50 percent of the voting securities, or instruments of ownership or other forms of ownership, of another bidding entity. Ownership of less than 10 percent of another bidding entity constitutes a presumption of non-control that BOEM may rebut.
ii. They own or have common ownership of between 10 and 50 percent of the voting securities or instruments of ownership, or other forms of ownership, of another bidding entity, and BOEM determines that there is control upon consideration of factors including the following:
a. The extent to which there are common officers or directors.
b. With respect to the voting securities, or instruments of ownership or other forms of ownership: The percentage of ownership or common ownership, the relative percentage of ownership or common ownership compared to the percentage(s) of ownership by other bidding entities, if a bidding entity is the greatest single owner, or if there is an opposing voting bloc of greater ownership.
c. Shared ownership, operation, or day-to-day management of a lease, grant, or facility, as those terms are defined in BOEM's regulations at 30 CFR 585.113.
iii. They are both direct or indirect subsidiaries of the same parent company.
iv. With respect to any lease(s) offered in this auction, they have entered into an agreement prior to the auction regarding the shared ownership, operation, or day-to-day management of such lease. Such an agreement need not be formalized to establish affiliated entities.
v. Other evidence that indicates the existence of power to exercise control, such as evidence that one bidding entity has power to exercise control over the other, or that multiple bidders collectively have the power to exercise control over another bidding entity or entities.
Affiliated entities are not permitted to compete against each other in the auction. Where two or more affiliated entities have qualified to bid in the auction, the affiliated entities must decide prior to the auction which one (if any) will participate in the auction. If two or more affiliated entities attempt to participate in the auction, BOEM will disqualify those bidders from the auction.
This section describes the major deadlines and milestones in the auction process from publication of this FSN to execution of a lease issued pursuant to this sale.
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The two Lease Areas included in this FSN are the same size and orientation as were described in the Proposed Sale Notice (PSN). BOEM's designation of the two Lease Areas offered in the FSN is informed by coordination with BOEM's intergovernmental task force members, consultation and engagement with Tribes, stakeholder engagement, a partnership with NOAA's NCCOS to use spatial modeling to inform the identification of WEAs, and consideration of the 281 comments that BOEM received in response to the PSN. The two areas BOEM is offering for lease are: the Brookings Lease Area, OCS-P 0567, which consists of 133,792 acres and is approximately 18 miles from shore; and the Coos Bay Lease Area, OCS-P 0566, which consists of 61,203 acres and is approximately 32 miles from shore.
Descriptions of the proposed Lease Areas can be found in Addendum A of the proposed leases, which can be found on BOEM's website at:
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BOEM is including several lease stipulations in Addendum C of each lease related to reporting requirements, avoiding and minimizing potential future user conflicts and environmental impacts, project labor agreements, national security, and project design. BOEM is also including conditions of the Oregon Department of Land, Conservation and Development's conditional concurrence with the federal consistency determination pursuant to the Coastal Zone Management Act for the Oregon proposed Lease Areas. Requirements pertaining to a single activity may arise from more than one consultation process and may also, in some instances, be slightly different; where this has occurred, BOEM incorporated the most protective measure in the lease. BOEM has also refined some stipulations identified in the PSN and proposed leases in response to comments on the PSN.
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The stipulations include requirements for lessees to engage in ways that minimize linguistic, technological, cultural, capacity, or other obstacles. The stipulations encourage lessees to work collaboratively with governments, community leadership and organizations, and Tribes and to develop specific frameworks for capacity building.
In acknowledgment of the existing and growing consultation burden placed on many of the Tribes and parties, the stipulation also requires, to the maximum extent practicable, that lessees coordinate with one another on engagement activities. It is BOEM's intention that this requirement for lessees to coordinate their engagement apply not only to meetings proposed by lessees, but also to reasonable requests to coordinate engagement made by Tribes and parties. Coordinated engagement among Tribes and lessees is strongly encouraged and is in addition to BOEM's responsibilities to federally recognized Tribes under E.O. 13175.
Lastly, the progress report must include an update on activities executed under any survey plan and any meteorological and/or oceanographic buoy deployment planned or undertaken within the leased area that includes confirmation of the measures the lessee took, or will take, to satisfy the conditions of any applicable lease stipulations.
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i. As part of its safety requirements, lessees must maintain all places of employment for activities in compliance with occupational safety and health standards, free from recognized hazards to employees of the lessee or of any contractor or subcontractor operating under this lease, and free from retaliation or discrimination against any employee or contractor who raises a health and safety concern on the job.
ii. A second stipulation requires lessees to make every reasonable effort to enter into a PLA covering the construction stage of any project for the Lease Areas.
iii. The third stipulation requires lessees to establish a Statement of Goals in which the lessee describes its plans for contributing to the creation of a robust and resilient U.S.-based floating offshore wind industry supply chain that would facilitate this or other renewable energy projects permitted by BOEM.
The lessee is also required to provide regular progress updates on the achievement of those goals to BOEM, and BOEM will make those updates publicly available.
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BOEM has made available the terms, conditions, and stipulations for the commercial wind leases that will be offered through this sale. BOEM reserves the right to require compliance with additional terms and conditions associated with the approval of a COP. The lease forms are on BOEM's website at:
1. Addendum A (“Description of Leased Area and Lease Activities”);
2. Addendum B (“Lease Term and Financial Schedule”);
3. Addendum C (“Lease-Specific Terms, Conditions, and Stipulations”);
4. Addendum D (“Project Easement”).
Addenda A, B, and C provide detailed lease terms and conditions. Addendum D will be completed at the time of COP approval or approval with modifications if a COP is approved.
This section provides an overview of the required annual payments under the lease. Potential bidders should review the lease for more detailed information, including any changes from leases issued in previous sales.
a.
If the lessee submits an application for relinquishment of a portion of its leased area within the first 45-calendar days after receiving the lease copies from BOEM and BOEM approves that application, no rent payment will be due on the relinquished portion of the Lease Area. Later relinquishments of any portion of the Lease Area will reduce the lessee's rent payments starting in the year following BOEM's approval of the relinquishment.
A lease issued under 30 CFR part 585 confers on the lessee the right to one or more project easements, without further competition, for the purpose of installing, maintaining, repairing and replacing: gathering, transmission, and distribution, and inter-array cables; power and pumping stations; facility anchors; pipelines; and associated facilities and other appurtenances on the OCS as necessary for the full enjoyment of the lease. A lessee must apply for the project easement as part of the COP, as provided under subpart G of 30 CFR part 585.
The lessee also must pay rent for any project easement associated with the lease. Rent commences on the date that BOEM approves the COP that describes the project easement (or any modification of such COP that affects the easement acreage), as outlined in 30 CFR 585.507. Annual rent for a project easement is the greater of $5 per acre per year, or $450 per year. If a COP revision results in increased easement acreage, BOEM will require the appropriate amount of additional rent when it approves the revised COP.
b.
The subsequent annual operating fee payments will be calculated by multiplying the operating fee rate by the imputed wholesale market value of the projected annual electric power production. For the purposes of this calculation, the imputed market value will be the product of the project's annual nameplate capacity, the total number of hours in a year (8,760), the capacity factor, and the annual average price of electricity derived from a regional wholesale power price index. For example, the annual operating fee for a 976 megawatt (MW) wind facility operating at a 40 percent capacity (
i.
ii.
iii.
iv.
c.
BOEM will base the amount of all SAP, COP, and decommissioning financial assurance on cost estimates for meeting all accrued lease obligations at the respective stages of development. The required amount of supplemental and decommissioning financial assurance will be determined on a case-by-case basis.
The payment terms described above can be found in Addendum “B” of the lease, which is available at:
Each bidder must submit to BOEM the information required in the BFF referenced in this FSN. A copy of the form is available at:
For the PACW-2, BOEM will accept bidders' BFFs and Conceptual Strategies electronically or by mail. Instructions for submission can be found in the BFF. The BFF must be executed on paper with a wet signature or with the application of a digital signature by an authorized representative listed on the legal qualification card currently on file with BOEM as authorized to bind the company. Winning bidders who have committed to bidding credit(s) must meet the bidding credit requirements no later than submission of their first Facility Design Report (FDR) or the tenth Lease Anniversary, whichever is sooner.
A bid deposit is an advance cash payment submitted to BOEM to participate in the auction. ONRR will notify the bidders that they have access to the Bid Deposit Form in
Following the auction, provisional winners' bid deposits will be applied against their winning cash bids. Once BOEM has announced the provisional winners, BOEM will coordinate with ONRR to refund bid deposits to the other bidders.
If BOEM offers a lease to a provisionally winning bidder and that bidder fails to timely return the signed lease form, establish financial assurance, or pay the balance of its bid, BOEM may retain the bidder's $2,000,000 bid deposit. In such a circumstance, BOEM may determine which bid would have won in the absence of the bid previously determined to be the winning bid and may offer a lease to this next highest bidder if this next highest bidder is not a provisionally winning bidder of the other Lease Area in the auction. This process may be repeated if needed.
The minimum bid is the lowest dollar amount per acre that BOEM will accept as a winning bid and is the amount at which BOEM will start the bidding in the auction. BOEM has established a minimum bid of $50.00 per acre for this lease sale.
a.
BOEM is not revising the bidding credit percentages from those proposed in the PSN: a 15 percent workforce training and/or supply chain bid credit, a 5 percent Lease Area Use Community Benefit Agreement (CBA) bid credit and a 5 percent general CBA bid credit. The total of all offered bidding credits remains at 25 percent. For this sale, BOEM is calculating bidding credits as a percentage of the whole bid, which is a change from the method used in prior sales, where bidding credits were calculated as a percentage of the cash portion of the bid. The intended purpose of this change is to simplify the bidding credit calculation.
BOEM will grant bidding credits to bidders that commit to one or more of the following, subject to review of the bidder's BFF and Conceptual Strategy.
i. Supporting workforce training programs for the floating offshore wind industry or supporting the development of a domestic supply chain for the floating offshore wind industry, or a combination of both; or
ii. Establishing a Lease Area Use Community Benefit Agreement (Lease Area Use CBA) with one or more communities, stakeholder groups, or Tribal entities whose use of the geographic space of the Lease Area, or whose use of resources harvested from that geographic space, is expected to be impacted by the lessee's potential offshore wind development; or
iii. Establishing a General Community Benefit Agreement (General CBA) with one or more communities, Tribes, or stakeholder groups that are expected to be affected by the potential impacts on the marine, coastal and/or human environment (such as impacts to visual or cultural resources) from activities resulting from lease development that are not otherwise addressed by the Lease Area Use CBA.
These bidding credits are intended to:
i. Enhance, through training, the floating offshore wind workforce and/or enhance the establishment of a domestic supply chain for floating offshore wind manufacturing, assembly, or services, both of which will contribute to the expeditious and orderly development of offshore wind resources on the OCS; and
ii. Minimize potential impacts to a community or stakeholder group from renewable energy activity or structures on the Lease Area, and particularly to assist fishing and related industries to manage transitions, gear changes, or other similar impacts which may arise from the development of the Lease Area; and
iii. Minimize any potential impacts to a Tribe, community or stakeholder group from floating offshore wind energy development, particularly to assist them in managing transitions, changes or other similar impacts which may arise from the development of the Lease Area.
b.
i. If a bidder decides to bid on a different Lease Area in a given round of the auction, it may submit a bid to reduce demand for the Lease Area it bid on in the previous round and, simultaneously, submit a bid to increase demand for another Lease Area. This allows a bidder the option to switch to another Lease Area if the price of the first Lease Area exceeds the bidder's specified bid price.
ii. Provisional winners will no longer be determined using a two-step process. The auction rules are implemented in a way such that, when the auction concludes, the bidder who remains on a Lease Area after the final round becomes its provisional winner. There will be no additional processing step.
iii. The auction will use a “second price” rule. A given Lease Area will be won by the bidder that submitted the highest bid amount for the Lease Area, but the winning bidder will pay the highest bid amount at which there was competition (
iv. Each bidder's bidding credit will be expressed directly as a percentage of the final price of the lease.
All potential bidders should review the Auction Procedures for Offshore Wind Lease Sales (Version 1) located at:
c.
The auction will be conducted in a series of rounds. Before each round, the auction system will announce the prices for each lease area offered in the auction. In Round 1, there is a single price for each lease area equal to the minimum bid price (also known as the `opening price' or `clock price of Round 1'). Each bidder can bid, at the opening price, for one lease area. After Round 1, the bidder's “processed demand” is one for the lease area (if any) for which the bidder bid in Round 1.
Starting in Round 2, each Lease Area is assigned a range of prices for the round. The start-of-round price is the lowest price in the range, and the clock price is the highest price in the range. A bidder still eligible to bid after the previous round can either continue bidding at the new round's clock price for the same Lease Area for which the bidder's processed demand is one or submit a bid at any price in the range for that round to reduce demand for that Lease Area. A bid to reduce demand at some price indicates that the bidder is not willing to acquire that Lease Area at a price exceeding the specified bid price. A bidder that bids to reduce demand for a Lease Area can optionally bid to increase demand for the other Lease Area in the same round.
If an eligible bidder does not place a bid during the round for the Lease Area for which the bidder's processed demand is one, the auction system will consider this a request to reduce demand for that Lease Area at the round's start-of-round price. That bidder can nonetheless win that Lease Area if it is the last remaining bidder for that Lease Area.
After each round, the auction system processes the bids and determines each bidder's processed demand for each Lease Area and the posted prices for the Lease Areas. The bidder's eligibility for the next round equals the number of Lease Areas for which the bidder had a processed demand of one. If, after any round, a bidder's processed demand is zero for both Lease Areas, the bidder's eligibility drops to zero and the bidder can no longer bid in the auction. The posted price is the price determined for each Lease Area after processing of all bids for a round. If only one bidder remains on a Lease Area, the posted price reflects the “second price” (
If, after the bids for the round have been processed, there is no Lease Area with excess demand, the auction will end. When this occurs, each bidder with a processed demand of one for a Lease Area will become the provisional winner for that Lease Area. Otherwise, the auction will continue with a new round in which the start-of-round price for each Lease Area equals the posted price of the previous round.
The increment by which the clock price exceeds the start-of-round price will be determined based on several factors including, but not limited to, the expected time needed to conduct the auction and the number of rounds that have already occurred. BOEM reserves the right to increase or decrease the increment as it deems appropriate.
The provisional winner of each Lease Area will pay the final posted price (less any applicable bidding credit) or risk forfeiting its bid deposit. A provisional winner will be disqualified if it is subsequently found to have violated auction rules or BOEM regulations, or otherwise engaged in conduct detrimental to the integrity of the competitive auction. If a bidder submits a bid that BOEM determines to be a provisionally winning bid, the bidder must sign the applicable lease documents, post financial assurance, and submit the outstanding balance (if any) of its winning bid (
BOEM will publish the names of the provisional winners of the Lease Areas and the associated prices shortly after the conclusion of the sale. Full bid results, including round-by-round results of the entire sale, will be published on BOEM's website after a review of the results and announcement of the provisional winners.
Additional Information Regarding the Auction Format:
i.
b.
i. The Contribution to workforce training must result in a better trained and/or larger domestic floating offshore wind workforce that provides for more efficient operations via increasing the supply of fully trained personnel. Training of existing lessee employees, lessee contractors, or employees of affiliated entities will not qualify.
ii. The Contribution to domestic supply chain development must result in overall benefits to the U.S. floating offshore wind supply chain available to all potential purchasers of floating offshore wind services, components, or subassemblies, not solely the lessee's project; and either: (i) the demonstrable development of new domestic capacity (including vessels) or the demonstrable buildout of existing capacity; or (ii) an improved floating offshore wind domestic supply chain by reducing the upfront capital or certification cost for manufacturing floating offshore wind components, including the building of facilities, the purchasing of capital equipment, and the certifying of existing manufacturing facilities.
iii. Contributions cannot be used to satisfy private cost shares for any federal tax or other incentive programs where cost sharing is a requirement. No portion of the Contribution may be used to meet the requirements of any other bidding credits for which the lessee qualifies.
iv. Bidders interested in obtaining a bidding credit could choose to contribute to workforce training programs, domestic supply chain initiatives, or a combination of both. The Conceptual Strategy must describe verifiable actions that the lessee will take that would allow BOEM to confirm compliance when the documentation for satisfying the bidding credit is submitted. The Contribution must be tendered in full, and the lessee must provide documentation evidencing it has made the Contribution and complied with applicable requirements, no later than the date the lessee submits its first FDR or before the tenth Lease Anniversary, whichever is sooner.
v. Contributions to workforce training must promote and support one or more of the following purposes: (i) union apprenticeships, labor management training partnerships, stipends for workforce training, or other technical training programs or institutions focused on providing skills necessary for the planning, design, construction, operation, maintenance, or decommissioning of floating offshore wind energy projects in the United States; (ii) maritime training necessary for the crewing of vessels to be used for the construction, servicing, and/or decommissioning of floating offshore wind energy projects in the United States; (iii) training workers in skills or techniques necessary to manufacture or assemble floating offshore wind components, subcomponents, or subassemblies. Examples of areas involving these skills and techniques include welding; wind energy technology; hydraulic maintenance; braking systems; mechanical systems, including blade inspection and maintenance; or computers and programmable logic control systems; (iv) Tribal floating offshore wind workforce development programs or training for employees of an Indian Economic Enterprise
vi. Contributions to domestic supply chain development must promote and support one or more of the following: (i) development of a domestic supply chain for the floating offshore wind industry, including manufacturing of components and subassemblies and the expansion of related services; (ii) domestic Tier 2 and Tier 3 floating offshore wind component suppliers and domestic Tier-1 supply chain efforts, including quay-side fabrication;
vii.
At a minimum, the documentation must include: all written agreements between the lessee and beneficiary(ies) of the Contribution, which must detail the amount of the Contribution(s) and how it will be used by the beneficiaries of the Contribution(s) to satisfy the goals of the bidding credit for which the Contribution was made; all receipts documenting the amount, date, financial institution, and the account and owner of the account to which the Contribution was made; and sworn statements by the entity that made the Contribution and the beneficiary(ies) of the Contribution attesting that all information provided in the above documentation is true and accurate. The documentation will need to describe how the funded initiative or program has advanced, or is expected to advance, U.S. floating offshore wind workforce training or supply chain development. The documentation must also provide qualitative and/or quantitative information that includes the estimated number of trainees or jobs supported, or
viii.
Bidders committing to use the Lease Area Use CBA bidding credit must submit their conceptual strategy, along with their BFF, as further described below and in the BFF addendum. The conceptual strategy must describe the actions that the lessee intends to take that will allow BOEM to verify compliance when the lessee seeks to demonstrate satisfaction of the requirements for the bidding credit. The lessee must provide documentation showing that the lessee has met the commitment and complied with the applicable bidding credit requirements before the lessee submits the lease's first FDR or before the tenth Lease Anniversary, whichever is sooner.
ix.
• All written agreements between the lessee and beneficiary(ies), including the executed Lease Area Use CBA;
• A description of work done with impacted communities, including the monetary and non-monetary commitments that reflect the value of the bidding credit received; and
• Sworn statements by the Lease Area Use CBA signatories or their assignees, attesting to the truth and accuracy of all the information provided in the above documentation.
The documentation must contain any information specified in the conceptual strategy that was submitted with the BFF. If the lessee's implementation of its conceptual strategy changes due to market needs or other factors, the lessee must explain this change. BOEM reserves the right to determine that the bidding credit has not been satisfied if changes from the lessee's conceptual strategy result in the lessee not meeting the criteria for the bidding credit described in addendum “C” of the lease.
x.
c.
(1) Documentation: As proposed, if a lease is awarded pursuant to a winning bid that includes a General CBA bidding credit, the lessee must provide written documentation to BOEM demonstrating execution of the General CBA commitment no later than submission of the lessee's first FDR or before the tenth Lease Anniversary, whichever is sooner. The documentation must enable BOEM to objectively verify that the Contribution has met all applicable requirements outlined in addendum “C” of the lease. At a minimum, this documentation must include:
The documentation must contain any information specified in the conceptual strategy that was submitted with the BFF. If the lessee's implementation of its conceptual strategy changes due to market needs or other factors, the lessee will need to explain this change. BOEM reserves the right to determine that the bidding credit has not been satisfied if changes from the lessee's conceptual strategy result in the lessee not meeting the criteria for the bidding credit described in addendum “C” of the lease.
d.
BOEM reserves the right to reject any and all bids that do not satisfy the requirements and rules of the auction, this FSN, or applicable regulations and statutes.
Bidding behavior in this lease sale is subject to federal antitrust laws. Following the auction, but before the acceptance of bids and the issuance of the lease, BOEM will “allow the Attorney General, in consultation with the Federal Trade Commission, thirty days to review the results of [the] lease sale.” 43 U.S.C. 1337(c)(1). If a provisionally winning bidder is found to have engaged in anti-competitive behavior in connection with this lease sale, BOEM will reject its provisionally winning bid. Compliance with BOEM's auction procedures and regulations is not an absolute defense to violations of antitrust laws.
Anti-competitive behavior determinations are fact specific. Such behavior may manifest itself in several different ways, including, but not limited to:
1. An express or tacit agreement among bidders not to bid in an auction, or to bid a particular price;
2. An agreement among bidders not to bid;
3. An agreement among bidders not to bid against each other; or
4. Other agreements among bidders that have the potential to affect the final auction price.
Pursuant to 43 U.S.C. 1337(c)(3), BOEM will decline to award a lease if the Attorney General, in consultation with the Federal Trade Commission, determines that awarding the lease would be inconsistent with antitrust laws.
For more information on whether specific communications or agreements could constitute a violation of federal antitrust law, please see
Once all post-auction reviews have been completed to BOEM's satisfaction, BOEM will provide an unsigned copy of the lease to each provisionally winning bidder. Within 10 business days after receiving the lease, the provisionally winning bidders must:
1. Sign and return the lease on the bidder's behalf;
2. File financial assurance, as required under 30 CFR 585.516-537; and
3. Pay by electronic funds transfer (EFT) the balance owed (the winning cash bid less the applicable bid deposit), if any. BOEM requires bidders to use EFT procedures (not
BOEM will not execute the lease until the three requirements above have been satisfied, BOEM has accepted the provisionally winning bidder's financial assurance, and BOEM has processed the provisionally winning bidder's payment. Pursuant to 30 CFR 585.225(d), a provisional winner may request in writing an extension of the 10-day time limit. BOEM, in its discretion, may grant such a request. If the provisionally winning bidder does not meet these requirements or otherwise fails to comply with applicable regulations or the terms of the FSN, BOEM reserves the right not to issue the lease to that bidder. In such a case, the provisional winner will forfeit its bid deposit. Also, in such a case, BOEM reserves the right to offer the lease to the next highest eligible bidder as determined by BOEM.
Within 45 calendar days of the date that a provisional winner receives an executed copy of the lease, each provisional winner is required to pay the first year's rent using the “ONRR Renewable Energy Initial Rental Payments” form available at:
Subsequent annual rent payments must be made following the detailed instructions available on ONRR's website at:
Pursuant to 43 CFR part 42, subpart C, an OCS renewable energy lessee will be required to comply with the Department of the Interior's non-procurement debarment and suspension regulations at 2 CFR parts 180 and 1400. The lessee must also communicate this requirement to persons with whom the lessee does business relating to this lease by including this requirement as a
BOEM has the discretion to change any auction detail specified in the FSN, including the date and time, if events outside BOEM's control may interfere with a fair and proper lease sale. Such events may include, but are not limited to, natural disasters (
BOEM reserves the right to withdraw all or portions of the Lease Areas prior to executing the leases with the winning bidders. If BOEM exercises this right, it will refund appropriate amounts of the bid deposits to winning bidders, without interest, as provided in 30 CFR 585.224(f).
Procedures to request reconsideration of rejected bids are provided in BOEM's regulations at 30 CFR 585.226(c) and 585.118(c). BOEM's decision on a bid is the final action of the Department of the Interior and is not subject to appeal to the Office of Hearings and Appeals. Under 30 CFR 585.224, if BOEM rejects your bid, BOEM will provide a written statement of the reasons and will refund any money deposited with your bid, without interest. You may ask the BOEM Director for reconsideration, in writing, within 15 business days of bid rejection, under 30 CFR 585.118(c)(1). The Director will send you a written response either affirming or reversing the rejection.
BOEM will protect privileged or confidential information that the lessee submits, as authorized by the Freedom of Information Act (FOIA), 30 CFR 585.114, or other applicable statutes. If the lessee wishes to protect the confidentiality of information, the lessee should clearly mark it “Contains Privileged or Confidential Information” and consider submitting such information as a separate attachment. BOEM will not disclose such information, except as required by FOIA. If your submission is requested under the FOIA, your information will only be withheld if a determination is made that one of the FOIA's exemptions to disclosure applies. Such a determination will be made in accordance with the Department's FOIA regulations and applicable law. Labeling information as privileged or confidential will alert BOEM to more closely scrutinize whether it warrants withholding. Further, BOEM will not treat as confidential aggregate summaries of otherwise nonconfidential information.
Section 50265(b)(2) of the IRA provides that “[d]uring the 10-year period beginning on the date of enactment of this Act . . . the Secretary may not issue a lease for offshore wind development under section 8(p)(1)(C) of the OCS Lands Act (43 U.S.C. 1337(p)(1)(C)) unless—(A) an offshore [oil and gas] lease sale has been held during the 1-year period ending on the date of the issuance of the lease for offshore wind development; and (B) the sum total of acres offered for lease in offshore [oil and gas] lease sales during the 1-year period ending on the date of the issuance of the lease for offshore wind development is not less than 60,000,000 acres.” Oil and Gas Lease Sale 261 was held on December 20, 2023, offering approximately 72 million acres, satisfying the requirements in section 50265(b)(2) of the IRA for any offshore wind lease issued by December 20, 2024. BOEM expects to issue any leases resulting from PACW-2 no later than the one-year anniversary of Lease Sale 261.
Office of Surface Mining Reclamation and Enforcement, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the Office of Surface Mining Reclamation and Enforcement (OSMRE), are proposing to renew an information collection.
Interested persons are invited to submit comments on or before November 4, 2024.
Send your comments on this information collection request (ICR) by mail to Mark Gehlhar, Office of Surface Mining Reclamation and Enforcement, 1849 C Street NW, Room 1544-MIB, Washington, DC 20240, or by email to
To request additional information about this ICR, contact Mark Gehlhar by email at
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
We are soliciting comments on the proposed ICR that is described below. We are especially interested in public comment addressing the following issues: (1) is the collection necessary to the proper functions of the agency; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the agency enhance the quality, utility, and clarity of the information to be collected; and (5) how might the agency minimize the burden of this collection on the respondents, including through the use of information technology.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Mark J. Gehlhar,
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted reviews pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the countervailing duty order of refillable stainless steel kegs from China and the antidumping duty orders of refillable stainless steel kegs from China and Mexico would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Instituted September 3, 2024. To be assured of consideration, the deadline for responses is October 3, 2024. Comments on the adequacy of responses may be filed with the Commission by November 12, 2024.
Alexis Yim (202-708-1446), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post-employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Charles Smith, Office of the General Counsel, at 202-205-3408.
Please note the Secretary's Office will accept only electronic filings at this time. Filings must be made through the Commission's Electronic Document Information System (EDIS,
No response to this request for information is required if a currently valid Office of Management and Budget (“OMB”) number is not displayed; the OMB number is 3117 0016/USITC No. 24-5-615, expiration date June 30, 2026. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436.
Those responding to this notice of institution are encouraged, but not required, to visit the USITC's website at
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping and countervailing duty orders on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping or countervailing duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (OPTIONAL) A statement of whether you agree with the above definitions of the
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted reviews pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty orders on uncovered innerspring units from China, South Africa, and Vietnam would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Instituted September 3, 2024. To be assured of consideration, the deadline for responses is October 3, 2024. Comments on the adequacy of responses may be filed with the Commission by November 12, 2024.
Rachel Devenney (202-205-3172), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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(2) The
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the
Please note the Secretary's Office will accept only electronic filings at this time. Filings must be made through the Commission's Electronic Document Information System (EDIS,
No response to this request for information is required if a currently valid Office of Management and Budget (“OMB”) number is not displayed; the OMB number is 3117 0016/USITC No. 24-5-616, expiration date June 30, 2026. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436.
Those responding to this notice of institution are encouraged, but not required, to visit the USITC's website at
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty orders on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (OPTIONAL) A statement of whether you agree with the above definitions of the
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted a review pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty order on certain welded large diameter line pipe from Japan would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Instituted September 3, 2024. To be assured of consideration, the deadline for responses is October 3, 2024. Comments on the adequacy of responses may be filed with the Commission by November 12, 2024.
Nitin Joshi (202-708-1669), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post-employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Charles Smith, Office of the General Counsel, at 202-205-3408.
Please note the Secretary's Office will accept only electronic filings at this time. Filings must be made through the Commission's Electronic Document Information System (EDIS,
No response to this request for information is required if a currently valid Office of Management and Budget (“OMB”) number is not displayed; the OMB number is 3117 0016/USITC No. 24-5-617, expiration date June 30, 2026. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436.
Those responding to this notice of institution are encouraged, but not required, to visit the USITC's website at
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty order on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (OPTIONAL) A statement of whether you agree with the above definitions of the
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted reviews pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping and countervailing duty orders on circular welded carbon quality steel line pipe from China would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Instituted September 3, 2024. To be assured of consideration, the deadline for responses is October 3, 2024. Comments on the adequacy of responses may be filed with the Commission by November 12, 2024.
Juan Carlos Pena Flores (202-205-3169), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post-employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Charles Smith, Office of the General Counsel, at 202-205-3408.
Please note the Secretary's Office will accept only electronic filings at this time. Filings must be made through the Commission's Electronic Document Information System (EDIS,
No response to this request for information is required if a currently valid Office of Management and Budget (“OMB”) number is not displayed; the OMB number is 3117 0016/USITC No. 24-5-613, expiration date June 30, 2026. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436.
Those responding to this notice of institution are encouraged, but not required, to visit the USITC's website at
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping and countervailing duty orders on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping or countervailing duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping and/or countervailing duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (OPTIONAL) A statement of whether you agree with the above definitions of the
By order of the Commission.
United States International Trade Commission.
Publication of summary of the Commission's report on the investigation.
Section 202(f)(3) of the Trade Act of 1974 requires that the United States International Trade Commission (“Commission”) publish in the
August 26, 2024: Transmittal of the Commission's report to the President.
United States International Trade Commission, 500 E Street SW, Washington, DC 20436. The public record for this investigation may be viewed on the Commission's electronic docket (EDIS) at
Kristina Lara (202-205-3386), Office of Investigations, U.S. International Trade Commission 500 E Street SW, Washington, DC 20436. The media should contact Jennifer Andberg, Office of External Relations (202-205-3404 or
Notice of the institution of the Commission's investigation and of the scheduling of public hearings to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the notice in the
The Commission submitted its report to the President on August 26, 2024. The report included the Commission's injury determination and remedy recommendations, an explanation of the basis for the determination and remedy recommendations, and a summary of the information obtained in the investigation.
Section 202(f)(3) of the Trade Act of 1974 (19 U.S.C. 2252(f)(3)) requires that the United States International Trade Commission (“Commission”) publish in the
Having made an affirmative injury determination pursuant to section 202(b) of the Trade Act of 1974, the Commission was required to make certain additional findings under the implementing statutes of certain free trade agreements (“FTAs”) or under statutory provisions related to certain preferential trade programs. Under section 301(a) of the United States-Mexico-Canada (“USMCA”) Implementation Act (19 U.S.C. 4551(a)), the Commission found that imports of fine denier PSF from neither Canada nor Mexico account for a substantial share of total imports or contribute importantly to the serious injury caused by imports. The Commission further found that imports of fine denier PSF from Australia, the U.S.-Dominican Republic—Central America Free Trade Agreement (“CAFTA DR”) countries, Colombia, Jordan, South Korea, Panama, Peru, and Singapore, individually, are not a substantial cause of serious injury or threat thereof, under the relevant FTA implementing statutes.
The Commission unanimously recommends a four-year period of relief. It also unanimously recommends that a quantitative restriction (“QR”), to be set at zero in the first year of relief increasing by one million pounds in each subsequent year over the duration of the safeguard, be imposed on imports of fine denier PSF entered free under bond as articles to be processed for export under the Temporary Importation under Bond (TIB) program. All Commissioners additionally recommend a tariff-rate quota (“TRQ”) be imposed on imports of fine denier PSF from all countries covered by their affirmative injury determination.
Commissioners Johanson and Schmidtlein recommend a TRQ with an in-quota volume level of 145,000,000 pounds (inclusive of any imports of the article under HTS statistical reporting number 9813.00.0520), with an in-quota tariff rate of 15 percent ad valorem and an out-of-quota tariff rate of 40 percent ad valorem. They recommend that the in-quota tariff rate decrease by 1 percentage point and the out-of-quota tariff rate decrease by 2 percentage points, in each subsequent year of the four-year relief period. Commissioners Johanson and Schmidtlein recommend that any imports of the article under HTS statistical reporting number 9813.00.0520 entered after the tariff-rate quota has filled for the year would be subject to the over-quota duty rate.
Chair Karpel recommends a TRQ with an in-quota volume level of 114,820,000 pounds, with an in-quota tariff rate of 15 percent ad valorem and an out-of-quota tariff rate of 45 percent ad valorem. Chair Karpel recommends that the in-quota and out-of-quota tariff rates decrease by 1 percentage point in each subsequent year of the four-year relief period. Chair Karpel recommends that the TRQ's in-quota volume level is inclusive of any imports of fine denier polyester staple fiber under HTS subheading 9813.00.05.
Commissioner Kearns recommends a TRQ with an in-quota volume level of 110,000,000 pounds (inclusive of any imports of the article under HTS statistical reporting number 9813.00.0520, with the exception of imports from countries that were not covered by the Commission's injury determination), with an in-quota tariff rate of 22 percent ad valorem in the first year, reduced to 20 percent ad valorem in the second and third years, and reduced to 18 percent ad valorem in the fourth year. Commissioner Kearns recommends an out-of-quota tariff rate of 50 percent ad valorem, reduced by three percentage points in each subsequent year of the four-year relief period. Commissioner Kearns recommends that fine denier PSF imported under HTS statistical reporting number 9813.00.0520, with the exception of TIB entries from the FTA and trade preference countries that were not covered by the Commission's injury determination, be subject to the in-quota and out-of-quota tariff rates.
Having made negative findings with respect to imports from Canada and Mexico under section 302 of the USMCA Implementation Act, and having made findings that imports from Australia, the CAFTA-DR countries, Colombia, Israel, Jordan, Panama, Peru, Singapore, South Korea, and the beneficiary countries under the Caribbean Basin Economic Recovery Act were not a substantial cause of the serious injury experienced by the domestic industry, the Commission recommends that the President exclude such countries from any form of the TRQ.
All Commissioners recommend that the QR imposed on imports of fine denier PSF entered under TIB under HTS statistical reporting number 9813.00.0520 apply to imports from all countries for which they recommend application of the TRQ. Chair Karpel and Commissioner Schmidtlein recommend that the QR also apply to imports from South Korea. Commissioner Kearns recommends that the QR be applied to all countries, including South Korea.
The Commission further recommends that the President authorize the establishment of an exclusion process to allow for importation of covered imports without application of the remedy measures in the case of a demonstrated lack of production in the United States for a particularized fine denier polyester staple fiber product or in the case of a critical short supply of a particularized fine denier polyester staple fiber product from domestic sources.
Chair Karpel, Commissioner Johanson, and Commissioner Schmidtlein recommend that the President consider programs to assist downstream users of fine denier PSF and to mitigate the potential impact of the remedy on such users.
Chair Karpel and Commissioner Schmidtlein recommend that the President submit to Congress, pursuant to his authority under section 203(a)(3)(H), a legislative proposal that would permanently preclude the importation of fine denier PSF under TIB to avoid payment of cash deposits and assessed antidumping and countervailing duties that would otherwise apply to the product.
Commissioner Kearns recommends that the President submit to Congress a legislative proposal to permanently preclude the ability to avoid payment of any antidumping or countervailing duty through the TIB provision provided for in HTS subheading 9813.00.0520.
Commissioner Kearns also recommends that the President submit to Congress a legislative proposal to distribute TRQ revenue generated by this action to downstream users of the article, to the extent necessary to reduce injury to domestic manufacturers of downstream products.
By order of the Commission.
United States International Trade Commission.
Notice.
The Commission hereby gives notice that it has instituted a review pursuant to the Tariff Act of 1930 (“the Act”), as amended, to determine whether revocation of the antidumping duty order on diffusion-annealed, nickel-plated flat-rolled steel products from Japan would be likely to lead to continuation or recurrence of material injury. Pursuant to the Act, interested parties are requested to respond to this notice by submitting the information specified below to the Commission.
Instituted September 3, 2024. To be assured of consideration, the deadline for responses is October 3, 2024. Comments on the adequacy of responses may be filed with the Commission by November 12, 2024.
Kenneth Gatten (202-708-1447), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
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Former Commission employees who are seeking to appear in Commission five-year reviews are advised that they may appear in a review even if they participated personally and substantially in the corresponding underlying original investigation or an earlier review of the same underlying investigation. The Commission's designated agency ethics official has advised that a five-year review is not the same particular matter as the underlying original investigation, and a five-year review is not the same particular matter as an earlier review of the same underlying investigation for purposes of 18 U.S.C. 207, the post-employment statute for Federal employees, and Commission rule 201.15(b) (19 CFR 201.15(b)), 79 FR 3246 (Jan. 17, 2014), 73 FR 24609 (May 5, 2008). Consequently, former employees are not required to seek Commission approval to appear in a review under Commission rule 19 CFR 201.15, even if the corresponding underlying original investigation or an earlier review of the same underlying investigation was pending when they were Commission employees. For further ethics advice on this matter, contact Charles Smith, Office of the General Counsel, at 202-205-3408.
Please note the Secretary's Office will accept only electronic filings at this time. Filings must be made through the Commission's Electronic Document Information System (EDIS,
No response to this request for information is required if a currently valid Office of Management and Budget (“OMB”) number is not displayed; the OMB number is 3117 0016/USITC No. 24-5-614, expiration date June 30, 2026. Public reporting burden for the request is estimated to average 15 hours per response. Please send comments regarding the accuracy of this burden estimate to the Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436.
Those responding to this notice of institution are encouraged, but not required, to visit the USITC's website at
(1) The name and address of your firm or entity (including World Wide Web address) and name, telephone number, fax number, and Email address of the certifying official.
(2) A statement indicating whether your firm/entity is an interested party under 19 U.S.C. 1677(9) and if so, how, including whether your firm/entity is a U.S. producer of the
(3) A statement indicating whether your firm/entity is willing to participate in this proceeding by providing information requested by the Commission.
(4) A statement of the likely effects of the revocation of the antidumping duty order on the
(5) A list of all known and currently operating U.S. producers of the
(6) A list of all known and currently operating U.S. importers of the
(7) A list of 3-5 leading purchasers in the U.S. market for the
(8) A list of known sources of information on national or regional prices for the
(9) If you are a U.S. producer of the
(a) Production (quantity) and, if known, an estimate of the percentage of total U.S. production of the
(b) Capacity (quantity) of your firm to produce the
(c) the quantity and value of U.S. commercial shipments of the
(d) the quantity and value of U.S. internal consumption/company transfers of the
(e) the value of (i) net sales, (ii) cost of goods sold (COGS), (iii) gross profit, (iv) selling, general and administrative (SG&A) expenses, and (v) operating income of the
(10) If you are a U.S. importer or a trade/business association of U.S. importers of the
(a) The quantity and value (landed, duty-paid but not including antidumping duties) of U.S. imports and, if known, an estimate of the percentage of total U.S. imports of
(b) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. commercial shipments of
(c) the quantity and value (f.o.b. U.S. port, including antidumping duties) of U.S. internal consumption/company transfers of
(11) If you are a producer, an exporter, or a trade/business association of producers or exporters of the
(a) Production (quantity) and, if known, an estimate of the percentage of total production of
(b) Capacity (quantity) of your firm(s) to produce the
(c) the quantity and value of your firm's(s') exports to the United States of
(12) Identify significant changes, if any, in the supply and demand conditions or business cycle for the
(13) (OPTIONAL) A statement of whether you agree with the above definitions of the
By order of the Commission.
On April 21, 2023, the Drug Enforcement Administration (DEA or Government) issued an Order to Show Cause (OSC) to Stephen McCarthy, P.A., (Respondent) of Allentown, Pennsylvania. OSC, at 1, 4. The OSC proposed the revocation of Respondent's DEA Certificate of Registration, Control No. MM3329578, alleging that Respondent's continued registration is inconsistent with the public interest.
A hearing was held before DEA Administrative Law Judge Paul E. Soeffing (the ALJ), who, on October 27, 2023, issued his Recommended Rulings, Findings of Fact, Conclusions of Law, and Decision (Recommended Decision or RD), which recommended revocation of Respondent's registration. RD, at 30. Following the issuance of the RD, Respondent filed his Exceptions to the Recommended Decision (Exceptions).
Respondent is a certified physician assistant licensed to practice in Pennsylvania and has been practicing since October 2014. RD, at 8; Tr. 56. Respondent was employed at Nulton Diagnostic & Treatment Center (Nulton) between May 2019 and August 14, 2022. RD, at 8; Tr. 57. Beginning in October 2020 and lasting through August 2022, Respondent was also employed at PA Treatment Center. RD, at 8; Tr. 57-58. Dr. F. is a psychiatrist licensed to practice in Pennsylvania who began working for Nulton in 2019. RD, at 5; Tr. 40. Dr. F. did not work at PA Treatment Center. Tr. 37-38.
Dr. F. met Respondent in approximately the spring of 2019 while she was considering a job at Nulton. RD, at 6; Tr. 40-41. Respondent testified that this initial meeting was the only time he ever spoke to Dr. F. RD, at 10, Tr. 9. Dr. F. testified that after the initial meeting, she entered into a written agreement with Respondent wherein Dr. F. served as Respondent's supervising physician. RD, at 6; Tr. 41. However, shortly after Dr. F. began work at Nulton, her supervisory capacities were allocated elsewhere, so she and Respondent never actually engaged in a supervisory relationship even during the pendency of the agreement. RD, at 7; Tr. 46. Dr. F. testified that the written agreement lasted from August 22, 2019, to October 7, 2019. RD, at 6; Tr. 41, 46. Respondent testified that while working at Nulton, he had supervising agreements with various physicians, including Dr. F. RD, at 8; Tr. 58.
Dr. F. testified that generally, a written agreement is made between a board-certified physician and a physician assistant and that these agreements have two major components: the first, “to delegate the medical services that the [physician assistant] should perform,” and the second, “that
Respondent testified that “under Pennsylvania law, [his] duties as a physician assistant are to evaluate, treat, and provide care to patients under the supervision of a doctor.” RD, at 8; Tr. 56-57.
Respondent asserted that “the supervising physician's role is to provide oversight of [his] treatment . . . [but] what that degree of oversight is[,] is dictated by the written agreement itself.” RD, at 9; Tr. 83. Respondent testified that “in almost all the written agreements [he has] participated in, the physicians were very hands off and only communicated with [him] if there was a particular issue.” RD, at 9; Tr. 83-84.
Respondent testified that even when his written agreement with Dr. F. was active (according to the Government's documentary evidence), he “never consulted with her.” RD, at 10; Tr. 94. Dr. F. also testified that she did not talk or consult with Respondent regarding patient care or any other matters in 2022. RD, at 7; Tr. 45. Not only did Respondent not consult with Dr. F., he testified that he had no conversations with Dr. F. at all during the course of their agreement. RD, at 10 n.27; Tr. 95. Even so, Respondent claimed that his non-existent relationship with Dr. F. was “not that unusual,” and that he has had “supervising physicians [he has] never met or spoken to.” Tr. 96. Respondent did not testify regarding whether or not he had written controlled substance prescriptions under the authority of those supervising physicians he had never spoken to.
It is undisputed that the agreement between Respondent and Dr. F. ended in October 2019. RD, at 10; Tr. 85-86. However, Respondent testified that he was never notified that the agreement was terminated, so he believed that from August 2022 through November 2022, he was still covered under the agreement with Dr. F. RD, at 8, 10; Tr. 58, 86. Respondent testified that he believed the agreement remained in place even after he left Nulton in August 2022, because he believed that “[a]ccording to the law, the agreement does not end when your employment ends.” Tr. 98.
Dr. F. testified that she did not contact Respondent regarding inactivation of their agreement and did not discuss her receipt of the termination letter from the Board with Respondent. RD, at 7; Tr. 46-48.
The Agency notes that the October 8, 2019 termination letter indicates that Respondent was provided a copy of the letter.
It is undisputed that between August 24, 2022, and September 20, 2022, and between October 6, 2022, and November 8, 2022, Respondent issued approximately seventeen (17) prescriptions for controlled substances to patients
Federal law requires that “[a] prescription for a controlled substance to be effective must be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” 21 CFR 1306.04(a). Moreover, Pennsylvania regulations provide that a physician assistant may only perform medical services as approved within a written agreement with a supervising physician; “shall not independently prescribe or dispense drugs”; and may not “[p]rescribe or dispense drugs except as described in the written agreement.” 49 Pa. Code section 18.152(a)(2); 63 Pa. Cons. Stat. section 422.13(a), (e), (f).
Here, the Agency finds that Respondent and Dr. F. had a valid supervisory agreement in place from August 22, 2019, to October 7, 2019, while both were employed at Nulton. The Agency further finds that Dr. F. never supervised Respondent during that time period. Further, as noted by the ALJ, there was no regular review of patient records, no reports of Respondent's activities, and no channels of communication at all between Respondent and Dr. F. RD, at 25.
The Agency further finds that Respondent left Nulton in August of 2022. Thereafter, he issued 17 prescriptions to patients at a different practice, PA Treatment Center, where Dr. F. did not work and would not have access to the patient's records. It is undisputed that Respondent was not covered by any supervisory agreement at the time those prescriptions were issued. Even assuming Respondent truly believed that his agreement with Dr. F. remained valid,
Under the Controlled Substances Act (CSA), “[a] registration . . . to . . . dispense a controlled substance . . . may be suspended or revoked by the Attorney General upon a finding that the registrant . . . has committed such acts as would render his registration under section 823 of this title inconsistent with the public interest as determined under such section.” 21 U.S.C. 824(a). In making the public interest determination, the CSA requires consideration of the following factors:
(A) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(B) The [registrant's] experience in dispensing, or conducting research with respect to controlled substances.
(C) The [registrant's] conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(D) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(E) Such other conduct which may threaten the public health and safety.
The Agency considers these public interest factors in the disjunctive.
The Government has the burden of proof in this proceeding. 21 CFR 1301.44. While the Agency has considered all of the public interest factors in 21 U.S.C. 823(g)(1), the Government's evidence in support of its
Having reviewed the record and the RD, the Agency agrees with the ALJ, adopts the ALJ's analysis, and finds that the Government's evidence satisfies its
Evidence is considered under Public Interest Factors B and D when it reflects compliance (or non-compliance) with laws related to controlled substances and experience dispensing controlled substances.
In the current matter, the Agency agrees with the ALJ's analysis that Respondent repeatedly issued controlled substance prescriptions outside the usual course of professional practice by issuing such prescriptions while lacking an active agreement with a supervisory physician as required by state law. RD, at 17-18. Indeed, as noted by the ALJ, Respondent failed to maintain any supervisee/supervisor relationship, and with Dr. F. in particular, “Respondent's failure to communicate at all with [Dr. F.]—even when Respondent changed employers—makes it hard to accept that Respondent truly believed he still had an active supervisory agreement with [Dr. F.].”
As Respondent's conduct displays clear violations of the federal and state regulations described above, the Agency agrees with the ALJ and hereby finds that Respondent repeatedly violated federal and state law relating to controlled substances.
Where, as here, the Government has established sufficient grounds to revoke Respondent's registration, the burden shifts to the registrant to show why he can be entrusted with the responsibility carried by a registration.
Here, and as noted by the ALJ, Respondent did admit some fault regarding his use of auto-populated settings identifying Dr. M. as the supervising physician during the relevant time despite the fact that his written agreement with Dr. M. had been inactivated in December 2021. RD, at 27-28; Tr. 92-93. Respondent also acknowledged that his agreement with Dr. F. was indeed inactivated in October 2019 based on the termination letter introduced into evidence by the Government. RD, at 28; Tr. 85-86;
Notably, in his Exceptions, Respondent asserted that “Pennsylvania law regarding the supervision of physician assistants places the responsibility of supervision on the supervising physician, not the physician assistant.” Exceptions, at 3 (citing 49 Pa. Code section 18.142; 63 Pa. Cons. Stat. section 422.13). Respondent also claimed that “[i]f the supervising physician fails to fulfill these responsibilities, the fault does not lie with the PA, especially if the PA was acting under the assumption of being properly supervised.”
Ultimately, the ALJ concluded, and the Agency agrees, that Respondent has not demonstrated unequivocal acceptance of responsibility for his actions.
In addition to acceptance of responsibility, the Agency considers both specific and general deterrence when determining an appropriate sanction.
In sum, Respondent has not offered any credible evidence on the record to rebut the Government's case for revocation of his registration and Respondent has not demonstrated that he can be entrusted with the responsibility of registration.
Pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 824(a), I hereby revoke DEA Certificate of Registration No. MM3329578 issued to Stephen McCarthy, P.A. Further, pursuant to 28 CFR 0.100(b) and the authority vested in me by 21 U.S.C. 823(g)(1), I hereby deny any pending applications of Stephen McCarthy, P.A., to renew or modify this registration, as well as any other pending application of Stephen McCarthy, P.A., for additional registration in Pennsylvania. This Order is effective October 3, 2024.
This document of the Drug Enforcement Administration was signed on August 19, 2024, by Administrator Anne Milgram. That document with the original signature and date is maintained by DEA. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DEA Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of DEA. This administrative process in no way alters the legal effect of this document upon publication in the
The National Science Board's Committee on Strategy hereby gives notice of the scheduling of a teleconference for the transaction of National Science Board business pursuant to the NSF Act and the Government in the Sunshine Act.
Tuesday, September 3, 2024, from 2-3 p.m. eastern.
This meeting will be via videoconference through the National Science Foundation, 2415 Eisenhower Avenue, Alexandria, VA 22314.
Closed.
The agenda is: Chair's Opening Remarks; Presentation and discussion of NSF's FY 2026 Budget Submission to the Office of Management and Budget; Committee recommendation to NSB related to NSF's FY 2026 Budget Submission to the Office of Management and Budget.
Point of contact for this meeting is: Chris Blair,
The National Science Board (NSB) hereby gives notice of the scheduling of a teleconference of the NSB for the transaction of NSB business pursuant to the NSF Act and the Government in the Sunshine Act. This meeting is being held on short notice. The Executive Committee determined that the interests of the National Science Foundation require the short notice.
Tuesday, September 3, 2024, from 3-3:30 p.m. eastern.
This meeting will be in person and via videoconference through the National Science Foundation, 2415 Eisenhower Avenue, Alexandria, VA 22314.
Closed.
The agenda is: NSB Chair's Remarks about the Agenda; NSB FY26 Budget Presentation; Committee on Oversight Report on the Office of the Inspector General FY26 Budget Submission; and NSB vote to transmit NSF Budget Submission to the Office of Management and Budget.
Point of contact for this meeting is: Chris Blair,
Nuclear Regulatory Commission.
10 CFR 2.206 request; receipt.
The U.S. Nuclear Regulatory Commission (NRC) is giving notice that by petition dated March 4, 2024, as supplemented on June 7, 2024, San Luis Obispo Mothers for Peace, Friends of the Earth, and Environmental Working Group (the petitioners) requested that the NRC exercise its supervisory authority to order the immediate closure of Diablo Canyon Nuclear Power Plant, Unit Nos. 1 and 2 (Diablo Canyon) due to “the unacceptable risk of a seismically induced severe accident.” The Commission referred the request to the enforcement petition process under NRC regulations. The petitioners' request is included in the
September 3, 2024.
Please refer to Docket ID NRC-2024-0148 when contacting the NRC about the availability of information regarding this document. You may obtain publicly available information related to this document using any of the following methods:
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Perry Buckberg, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-1383; email:
On March 4, 2024, the petitioners filed a petition requesting that the NRC exercise its supervisory authority to order the immediate closure of Diablo Canyon due to “the unacceptable risk of a seismically induced severe accident.” An order was issued on March 12, 2024, referring the request to the enforcement petition process under section 2.206 of title 10 of the
The specific concerns expressed in the March 4, 2024, petition, as supplemented on June 7, 2024, now include:
1. Thrust faulting is neglected by Pacific Gas & Electric Company's (PG&E's) 2012 Seismic Source Characterization (SSC) model, because the model assumes that a majority of large earthquakes affecting Diablo Canyon are strike-slip and disregards the significant contribution of thrust faulting earthquake sources under the Diablo Canyon site and the adjacent Irish Hills. In addition, PG&E did not use a hanging-wall term for the modeling of potential ground motions from the Los Osos and San Luis Bay thrust faults.
2. The January 2024 magnitude 7.5 (moment magnitude) earthquake centered in the Noto Peninsula (Japan), with an average slip of 2 meters on the fault, is analogous to future potential thrust mechanism earthquakes beneath Diablo Canyon. Based on the slip rate of the Irish Hills adjacent to Diablo Canyon and the slip of the Noto earthquake, large thrust fault earthquakes will occur, on average, every 715 years near the Diablo Canyon site.
3. PG&E's 2012 SSC model does not account for an inferred offshore thrust fault that has a slip rate of 2.8 millimeters per year (mm/yr) and the potential for producing a magnitude 7.5 earthquake.
4. Seismic core damage frequency estimated by PG&E in 2018 to be 3 × 10
The NRC staff assembled a Petition Review Board (PRB) in accordance with NRC Management Directive (MD) 8.11, “Review Process for 10 CFR 2.206 Petitions,” and its associated Directive Handbook 8.11, Section III. In an email dated May 15, 2024, the petition manager informed the petitioners that the PRB's initial assessment was to not accept the petition for review. The PRB's position was that the petition did not meet the criteria in MD 8.11 for accepting petitions under 10 CFR 2.206 because “the issues raised have previously been the subject of a facility specific or generic NRC staff review . . .” and the petition does not provide significant new information that the staff did not consider in a prior review.
On May 15, 2024, along with the initial assessment, the petition manager offered the petitioners an opportunity to address the PRB in a public meeting, which was accepted by the petitioners.
The June 7, 2024, supplement to the petition responded to the PRB's initial assessment.
The NRC then held the public meeting on July 17, 2024. During the meeting, the petitioner's presentation discussed and expounded on information from the supplement dated June 7, 2024, and included graphics to represent their position. The transcript of that meeting is considered a supplement to the petition.
Following the public meeting, the PRB met to consider what had been presented during the meeting. The PRB determined that the concerns as previously described in this notice, which were raised in the original petition and supplements, meet the criteria in MD 8.11, Sections III.C.1(a) and (b) and will be accepted into the 10 CFR 2.206 process for further review by the PRB in accordance with MD 8.11. The PRB also determined that there is no imminent safety concern that warrants immediate shutdown of Diablo Canyon. On August 22, 2024, the petition manager informed the petitioners of this outcome.
The documents identified in the following table are available to interested persons through ADAMS.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Monthly notice.
Pursuant to section 189a.(2) of the Atomic Energy Act of 1954, as amended (the Act), the U.S. Nuclear Regulatory Commission (NRC) is publishing this regular monthly notice. The Act requires the Commission to publish notice of any amendments issued, or proposed to be issued, and grants the Commission the authority to issue and make immediately effective any amendment to an operating license or combined license, as applicable, upon a determination by the Commission that such amendment involves no significant hazards consideration (NSHC), notwithstanding the pendency before the Commission of a request for a hearing from any person.
Comments must be filed by October 3, 2024. A request for a hearing or petitions for leave to intervene must be filed by November 4, 2024. This monthly notice includes all amendments issued, or proposed to be issued, from July 19, 2024, to August 15, 2024. The last monthly notice was published on August 6, 2024.
You may submit comments by any of the following methods; however, the NRC encourages electronic comment submission through the Federal rulemaking website.
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Karen Zeleznock, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-1118; email:
Please refer to Docket ID NRC-2024-0150, facility name, unit number(s), docket number(s), application date, and subject when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
For the facility-specific amendment requests shown in this notice, the Commission finds that the licensees' analyses provided, consistent with section 50.91 of title 10 of
The Commission is seeking public comments on these proposed determinations. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determinations.
Normally, the Commission will not issue the amendments until the expiration of 60 days after the date of publication of this notice. The Commission may issue any of these license amendments before expiration of the 60-day period provided that its final determination is that the amendment involves NSHC. In addition, the Commission may issue any of these amendments prior to the expiration of the 30-day comment period if circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example in derating or shutdown of the facility. If the Commission takes action on any of these amendments prior to the expiration of either the comment period or the notice period, it will publish in the
Within 60 days after the date of publication of this notice, any person (petitioner) whose interest may be affected by any of these actions may file a request for a hearing and petition for leave to intervene (petition) with respect to that action. Petitions shall be filed in accordance with the Commission's “Agency Rules of Practice and Procedure” in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309. If a petition is filed, the Commission or a presiding officer will rule on the petition and, if appropriate, a notice of a hearing will be issued.
Petitions must be filed no later than 60 days from the date of publication of this notice in accordance with the filing instructions in the “Electronic Submissions (E-Filing)” section of this document. Petitions and motions for leave to file new or amended contentions that are filed after the deadline will not be entertained absent a determination by the presiding officer that the filing demonstrates good cause by satisfying the three factors in 10 CFR 2.309(c)(1)(i) through (iii).
If a hearing is requested, and the Commission has not made a final determination on the issue of no significant hazards consideration, the Commission will make a final determination on the issue of no significant hazards consideration, which will serve to establish when the hearing is held. If the final determination is that the amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing would take place after issuance of the amendment. If the final determination is that the amendment request involves a significant hazards consideration, then any hearing held would take place before the issuance of the amendment unless the Commission finds an imminent danger to the health or safety of the public, in which case it will issue an appropriate order or rule under 10 CFR part 2.
A State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof, may submit a petition to the Commission to participate as a party under 10 CFR 2.309(h) no later than 60 days from the date of publication of this notice. Alternatively, a State, local governmental body, Federally recognized Indian Tribe, or agency thereof may participate as a non-party under 10 CFR 2.315(c).
For information about filing a petition and about participation by a person not a party under 10 CFR 2.315, see ADAMS Accession No. ML20340A053 (
All documents filed in NRC adjudicatory proceedings, including documents filed by an interested State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof that requests to participate under 10 CFR 2.315(c), must be filed in accordance with 10 CFR 2.302. The E-Filing process requires participants to submit and serve all adjudicatory documents over the internet, or in some cases, to mail copies on electronic storage media, unless an exemption permitting an alternative filing method, as further discussed, is granted. Detailed guidance on electronic submissions is located in the “Guidance for Electronic Submissions to the NRC” (ADAMS Accession No. ML13031A056) and on the NRC's public website at
To comply with the procedural requirements of E-Filing, at least 10 days prior to the filing deadline, the
Information about applying for a digital ID certificate is available on the NRC's public website at
A person filing electronically using the NRC's adjudicatory E-Filing system may seek assistance by contacting the NRC's Electronic Filing Help Desk through the “Contact Us” link located on the NRC's public website at
Participants who believe that they have good cause for not submitting documents electronically must file an exemption request, in accordance with 10 CFR 2.302(g), with their initial paper filing stating why there is good cause for not filing electronically and requesting authorization to continue to submit documents in paper format. Such filings must be submitted in accordance with 10 CFR 2.302(b)-(d). Participants filing adjudicatory documents in this manner are responsible for serving their documents on all other participants. Participants granted an exemption under 10 CFR 2.302(g)(2) must still meet the electronic formatting requirement in 10 CFR 2.302(g)(1), unless the participant also seeks and is granted an exemption from 10 CFR 2.302(g)(1).
Documents submitted in adjudicatory proceedings will appear in the NRC's electronic hearing docket, which is publicly available at
The following table provides the plant name, docket number, date of application, ADAMS accession number, and location in the application of the licensees' proposed NSHC determinations. For further details with respect to these license amendment applications, see the applications for amendment, which are available for public inspection in ADAMS. For additional direction on accessing information related to this document, see the “Obtaining Information and Submitting Comments” section of this document.
During the period since publication of the last monthly notice, the Commission has issued the following amendments. The Commission has determined for each of these amendments that the application complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR chapter I, which are set forth in the license amendment.
A notice of consideration of issuance of amendment to facility operating license or combined license, as applicable, proposed NSHC determination, and opportunity for a hearing in connection with these actions, were published in the
Unless otherwise indicated, the Commission has determined that these amendments satisfy the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for these amendments. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.22(b) and has made a determination based on that assessment, it is so indicated in the safety evaluation for the amendment.
For further details with respect to each action, see the amendment and associated documents such as the Commission's letter and safety evaluation, which may be obtained using the ADAMS accession numbers indicated in the following table. The safety evaluation will provide the ADAMS accession numbers for the application for amendment and the
Since publication of the last monthly notice, the Commission has issued the following amendment. The Commission has determined for this amendment that the application for the amendment complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR chapter I, which are set forth in the license amendment.
Because of exigent circumstances or emergency situation associated with the date the amendment was needed, there was not time for the Commission to publish, for public comment before issuance, its usual notice of consideration of issuance of amendment, proposed NSHC determination, and opportunity for a hearing.
In circumstances where failure to act in a timely way would have resulted, for example, in derating or shutdown of a nuclear power plant or in prevention of either resumption of operation or of increase in power output up to the plant's licensed power level (an emergency situation), the Commission may not have had an opportunity to provide for public comment on its NSHC determination. In such case, the license amendment has been issued without opportunity for comment prior to issuance. Nonetheless, the State has been consulted by telephone whenever possible.
Under its regulations, the Commission may issue and make an amendment immediately effective, notwithstanding the pendency before it of a request for a hearing from any person, in advance of the holding and completion of any required hearing, where it has determined that NSHC is involved. The Commission has applied the standards of 10 CFR 50.92 and has made a final determination that the amendments involve NSHC. The basis for this determination is contained in the NRC staff safety evaluation related to each action. Accordingly, the amendment has been issued and made effective as indicated.
For those amendments that involve an emergency situation, the Commission is now providing an opportunity to comment on the final NSHC determination for each action; comments should be submitted in accordance with Section I of this notice within 30 days of the date of this notice. Any comments received within 30 days of the date of publication this notice will be considered.
For those amendments that have not been previously noticed in the
Unless otherwise indicated, the Commission has determined that the amendment satisfies the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for this amendment. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.12(b) and has made a determination based on that assessment, it is so indicated in the safety evaluation for the amendment.
For further details with respect to these actions, see the amendment and associated documents such as the Commission's letter and safety evaluation, which may be obtained using the ADAMS accession numbers indicated in the following table. The safety evaluation will provide the ADAMS accession number(s) for the application for amendment and the
The following notice was previously published as separate individual notice. It was published as an individual notice either because time did not allow the Commission to wait for this monthly notice or because the action involved exigent circumstances. It is repeated here because the monthly notice lists all amendments issued or proposed to be issued involving NSHC.
For details, including the applicable notice period, see the individual notice in the
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
License amendment request; notice of opportunity to comment, request a hearing, and petition for leave to intervene; order imposing procedures.
The U.S. Nuclear Regulatory Commission (NRC) received and is considering approval of one amendment request. The amendment request is for Hope Creek Generating Station, Unit 1. For the amendment request, the NRC proposes to determine that it involves no significant hazards consideration (NSHC). Because the amendment request contains sensitive unclassified non-safeguards information (SUNSI), an order imposes procedures to obtain access to SUNSI for contention preparation by persons who file a hearing request or petition for leave to intervene.
Comments must be received by October 3, 2024. A request for a hearing or petitions for leave to intervene must be filed by November 4, 2024. Any potential party as defined in section 2.4 of title 10 of the
You may submit comments by any of the following methods however, the NRC encourages electronic comment submission through the Federal rulemaking website.
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Kay Goldstein, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-1506; email:
Please refer to Docket ID NRC-2024-0144, facility name, unit number(s), docket number(s), application date, and subject when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
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•
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The NRC encourages electronic comment submission through the Federal rulemaking website (
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
Pursuant to section 189a.(1)-(2) of the Atomic Energy Act of 1954, as amended (the Act), the NRC is publishing this notice. The Act requires the Commission to publish notice of any amendments issued or proposed to be issued and grants the Commission the authority to issue and make immediately effective any amendment to an operating license or combined license, as applicable, upon a determination by the Commission that such amendment involves NSHC, notwithstanding the pendency before the Commission of a request for a hearing from any person.
This notice includes a notice of amendment containing SUNSI.
The Commission has made a proposed determination that the following amendment request involves NSHC. Under the Commission's regulations in 10 CFR 50.92, this means that operation of the facility in accordance with the proposed amendment would not (1) involve a significant increase in the probability or
The Commission is seeking public comments on this (these) proposed determination. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determination.
Normally, the Commission will not issue the amendment until the expiration of 60 days after the date of publication of this notice. The Commission may issue the license amendment before expiration of the 60-day period provided that its final determination is that the amendment involves no significant hazards consideration. In addition, the Commission may issue the amendment prior to the expiration of the 30-day comment period if circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example, in derating or shutdown of the facility. If the Commission takes action on the amendment prior to the expiration of either the comment period or the notice period, it will publish a notice of issuance in the
Within 60 days after the date of publication of this notice, any person (petitioner) whose interest may be affected by any of these actions may file a request for a hearing and petition for leave to intervene (petition) with respect to that action. Petitions shall be filed in accordance with the Commission's “Agency Rules of Practice and Procedure” in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309. If a petition is filed, the Commission or a presiding officer will rule on the petition and, if appropriate, a notice of a hearing will be issued.
Petitions must be filed no later than 60 days from the date of publication of this notice in accordance with the filing instructions in the “Electronic Submissions (E-Filing)” section of this document. Petitions and motions for leave to file new or amended contentions that are filed after the deadline will not be entertained absent a determination by the presiding officer that the filing demonstrates good cause by satisfying the three factors in 10 CFR 2.309(c)(1)(i) through (iii).
If a hearing is requested, and the Commission has not made a final determination on the issue of no significant hazards consideration, the Commission will make a final determination on the issue of no significant hazards consideration, which will serve to establish when the hearing is held. If the final determination is that the amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing would take place after issuance of the amendment. If the final determination is that the amendment request involves a significant hazards consideration, then any hearing held would take place before the issuance of the amendment unless the Commission finds an imminent danger to the health or safety of the public, in which case it will issue an appropriate order or rule under 10 CFR part 2.
A State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof, may submit a petition to the Commission to participate as a party under 10 CFR 2.309(h) no later than 60 days from the date of publication of this notice. Alternatively, a State, local governmental body, Federally recognized Indian Tribe, or agency thereof may participate as a non-party under 10 CFR 2.315(c).
For information about filing a petition and about participation by a person not a party under 10 CFR 2.315, see ADAMS Accession No. ML20340A053 (
All documents filed in NRC adjudicatory proceedings, including documents filed by an interested State, local governmental body, Federally recognized Indian Tribe, or designated agency thereof that requests to participate under 10 CFR 2.315(c), must be filed in accordance with 10 CFR 2.302. The E-Filing process requires participants to submit and serve all adjudicatory documents over the internet, or in some cases, to mail copies on electronic storage media, unless an exemption permitting an alternative filing method, as further discussed, is granted. Detailed guidance on electronic submissions is located in the “Guidance for Electronic Submissions to the NRC” (ADAMS Accession No. ML13031A056) and on the NRC's public website at
To comply with the procedural requirements of E-Filing, at least 10 days prior to the filing deadline, the participant should contact the Office of the Secretary by email at
Information about applying for a digital ID certificate is available on the NRC's public website at
A person filing electronically using the NRC's adjudicatory E-Filing system may seek assistance by contacting the NRC's Electronic Filing Help Desk through the “Contact Us” link located on the NRC's public website at
Participants who believe that they have good cause for not submitting documents electronically must file an exemption request, in accordance with 10 CFR 2.302(g), with their initial paper filing stating why there is good cause for not filing electronically and requesting authorization to continue to submit documents in paper format. Such filings must be submitted in accordance with 10 CFR 2.302(b)-(d). Participants filing adjudicatory documents in this manner are responsible for serving their documents on all other participants. Participants granted an exemption under 10 CFR 2.302(g)(2) must still meet the electronic formatting requirement in 10 CFR 2.302(g)(1), unless the participant also seeks and is granted an exemption from 10 CFR 2.302(g)(1).
Documents submitted in adjudicatory proceedings will appear in the NRC's electronic hearing docket, which is publicly available at
The following table provides the plant name, docket number, date of application, ADAMS accession number, and location in the application of the licensee's proposed NSHC determination. For further details with respect to this license amendment application, see the application for amendment, publicly available portions of which is available for public inspection in ADAMS. For additional direction on accessing information related to this document, see the “Obtaining Information and Submitting Comments” section of this document.
A. This Order contains instructions regarding how potential parties to this proceeding may request access to documents containing Sensitive Unclassified Non-Safeguards Information (SUNSI).
B. Within 10 days after publication of this notice of hearing or opportunity for hearing, any potential party who believes access to SUNSI is necessary to respond to this notice may request access to SUNSI. A “potential party” is any person who intends to participate as a party by demonstrating standing and filing an admissible contention under 10 CFR 2.309. Requests for access to SUNSI submitted later than 10 days after publication of this notice will not be considered absent a showing of good cause for the late filing, addressing why the request could not have been filed earlier.
C. The requestor shall submit a letter requesting permission to access SUNSI to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemakings and Adjudications Staff, and provide a copy to the Deputy General Counsel for Licensing, Hearings, and Enforcement, Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. The expedited delivery or courier mail address for both offices is: U.S. Nuclear Regulatory Commission, 11555 Rockville Pike, Rockville, Maryland 20852. The email addresses for the Office of the Secretary and the Office of the General Counsel are
(1) A description of the licensing action with a citation to this
(2) The name and address of the potential party and a description of the potential party's particularized interest that could be harmed by the action identified in C.(1); and
(3) The identity of the individual or entity requesting access to SUNSI and the requestor's basis for the need for the information in order to meaningfully participate in this adjudicatory proceeding. In particular, the request must explain why publicly available
D. Based on an evaluation of the information submitted under paragraph C, the NRC staff will determine within 10 days of receipt of the request whether:
(1) There is a reasonable basis to believe the petitioner is likely to establish standing to participate in this NRC proceeding; and
(2) The requestor has established a legitimate need for access to SUNSI.
E. If the NRC staff determines that the requestor satisfies both D.(1) and D.(2), the NRC staff will notify the requestor in writing that access to SUNSI has been granted. The written notification will contain instructions on how the requestor may obtain copies of the requested documents, and any other conditions that may apply to access to those documents. These conditions may include, but are not limited to, the signing of a Non-Disclosure Agreement or Affidavit, or Protective Order
F. Filing of Contentions. Any contentions in these proceedings that are based upon the information received as a result of the request made for SUNSI must be filed by the requestor no later than 25 days after receipt of (or access to) that information. However, if more than 25 days remain between the petitioner's receipt of (or access to) the information and the deadline for filing all other contentions (as established in the notice of hearing or opportunity for hearing), the petitioner may file its SUNSI contentions by that later deadline.
G. Review of Denials of Access.
(1) If the request for access to SUNSI is denied by the NRC staff after a determination on standing and requisite need, the NRC staff shall immediately notify the requestor in writing, briefly stating the reason or reasons for the denial.
(2) The requestor may challenge the NRC staff's adverse determination by filing a challenge within 5 days of receipt of that determination with: (a) the presiding officer designated in this proceeding; (b) if no presiding officer has been appointed, the Chief Administrative Judge, or if this individual is unavailable, another administrative judge, or an Administrative Law Judge with jurisdiction pursuant to 10 CFR 2.318(a); or (c) if another officer has been designated to rule on information access issues, with that officer.
(3) Further appeals of decisions under this paragraph must be made pursuant to 10 CFR 2.311.
H. Review of Grants of Access. A party other than the requestor may challenge an NRC staff determination granting access to SUNSI whose release would harm that party's interest independent of the proceeding. Such a challenge must be filed within 5 days of the notification by the NRC staff of its grant of access and must be filed with: (a) the presiding officer designated in this proceeding; (b) if no presiding officer has been appointed, the Chief Administrative Judge, or if this individual is unavailable, another administrative judge, or an Administrative Law Judge with jurisdiction pursuant to 10 CFR 2.318(a); or (c) if another officer has been designated to rule on information access issues, with that officer.
If challenges to the NRC staff determinations are filed, these procedures give way to the normal process for litigating disputes concerning access to information. The availability of interlocutory review by the Commission of orders ruling on such NRC staff determinations (whether granting or denying access) is governed by 10 CFR 2.311.
I. The Commission expects that the NRC staff and presiding officers (and any other reviewing officers) will consider and resolve requests for access to SUNSI, and motions for protective orders, in a timely fashion in order to minimize any unnecessary delays in identifying those petitioners who have standing and who have propounded contentions meeting the specificity and basis requirements in 10 CFR part 2. The attachment to this Order summarizes the general target schedule for processing and resolving requests under these procedures.
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the Market Dominant or the Competitive product list, or the modification of an existing product currently appearing on the Market Dominant or the Competitive product list.
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern Market Dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern Competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II.
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This Notice will be published in the
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
The Exchange is filing with the Securities and Exchange Commission (“Commission”) a proposed rule change to amend the Fee Schedule to establish fees for Industry Members
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontrator [
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calcuated [
Market Data Provider: Exegy. It is anticipated that the operating fees costs for the CAT Fee 2024-1 Period will include costs related to the receipt of certain market data for the CAT pursuant to an agreement between FCAT and Exegy Incorporated (“Exegy”). CAT LLC determined that Exegy would provide market data that included all data elements required by the CAT NMS Plan,
Operating Fee Estimates. CAT LLC estimates that the budget for operating fees during the CAT Fee 2024-1 Period will be approximately $14,008,947.50. The budget for operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual operating fees incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
Law Firm: WilmerHale. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by WilmerHale. CAT LLC anticipates that it will continue to employ WilmerHale during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project and recognition that the hourly fee rates for this law firm are anticipated to be in line with market rates for specialized legal expertise. WilmerHale's billing rates are negotiated on an annual basis and are determined with reference to the rates charged by other leading law firms for similar work. The Participants assess WilmerHale's performance and review prospective budgets and staffing plans submitted by WilmerHale on an annual basis. The legal fees will be paid by CAT LLC to WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
Law Firm: Jenner. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by Jenner. CAT LLC anticipates that it will continue to employ Jenner during the CAT Fee 2024-1 Period based on among other things, their expertise, history with the project and recognition that their hourly fee rates are in line with market rates for specialized legal expertise. The legal fees will be paid by CAT LLC to Jenner.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
Legal Cost Estimates. CAT LLC estimates that the budget for legal services during the CAT Fee 2024-1 Period will be approximately $4,484,554.50. The budget for legal services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the legal services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual legal costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budet [
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
Financial Advisory Firm: Anchin. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to financial advisory services performed by Anchin. CAT LLC anticipates that it will continue to employ Anchin during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. The fees for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Faciliate [
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Accounting Firm: Grant Thornton. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to accounting services performed by Grant Thornton. CAT LLC anticipates that it will continue to employ Grant Thornton during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. It is anticipated that Grant Thornton will continue to be engaged as an independent accounting firm to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. The fees for these services will be paid by CAT LLC to Grant Thornton. CAT LLC estimated the budget for the accounting costs for Grant Thornton for the CAT Fee 2024-1 Period based on the anticipated hourly rates and the anticipated services plus an administrative fee.
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
a. Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
b. Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
c. Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3.a., CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
d. Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph B.
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph A.3.a. of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph B.2. of the fee schedule.
Proposed paragraph A.3.a. of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph A.3.b. of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph A.3.b. of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph A.3.b. of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph A.3.c. of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3.a., CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph A.3.d. of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph B.”
The Exchange proposes to add paragraph B.1. to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph A. within thirty days after receipt of an invoice or other notice indicating payment is due
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange Participants to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On February 6, 2024, 24X National Exchange LLC (“24X”) filed with the Securities and Exchange Commission (“Commission”) a Form 1 application under the Securities Exchange Act of 1934 (“Act”) seeking registration as a national securities exchange under Section 6 of the Act.
As described in the Notice, 24X proposes to significantly expand trading outside of regular trading hours
In Amendment No. 1, 24X proposes to revise Exhibit B-1 to: (1) revise proposed 24X Rule 1.5(c) (the definition of “24X Market Session”) to expressly condition the operation of the 24X Market Session;
In Amendment No. 1, 24X also proposes to revise proposed Exhibits C, C-2, D (including Exhibits D-1 through D-4), E, and E-1. More specifically, in Amendment No. 1, 24X proposes to (1) revise proposed Exhibit C to reflect 24X's intention to enter into a technology services agreement with MEMX Technologies, LLC (“MEMX Technologies”) to license the technology underlying 24X from MEMX Technologies; (2) revise proposed Exhibit C-2 to update the number of authorized ownership units for 24X Bermuda Holdings LLC, the ultimate holding company for 24X; (3) revise proposed Exhibit D, including proposed Exhibits D-1 through D-4, to provide updated financial information on 24X's affiliates; and (4) revise proposed Exhibit E and E-1 to describe 24X's proposed compliance with Regulation Systems Compliance and Integrity, its arrangement with MEMX Technologies, and make other conforming changes to reflect Amendment No. 1.
The Commission requests that interested persons provide written views and data with respect to 24X's Form 1, as amended by Amendment No. 1. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• 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 10-242 and should be submitted on or before September 24, 2024.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
The Exchange proposes to amend the MIAX Options Exchange Fee Schedule (the “Fee Schedule”) to establish fees for Industry Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontrator [
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calcuated [
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budet [
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Faciliate [
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's fee schedule. Proposed paragraph (b)(2) of the fee schedule would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend the MIAX Sapphire Fee Schedule (the “Fee Schedule”) to establish an Options Regulatory Fee (“ORF”) that would automatically sunset on October 31, 2024.
While changes to the Fee Schedule pursuant to this proposal are effective upon filing, the Exchange has designated these changes to be operative on September 1, 2024.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to adopt Section b), Options Regulatory Fee, to Chapter 2 of the Fee Schedule. The Exchange proposes to establish an ORF in the amount of $0.0013 per contract side. The amount of the proposed fee is based on historical industry volume, projected volumes on the Exchange, projected Exchange regulatory costs, and an assessment practice which is identical to the assessment practices currently utilized by the Exchange's affiliates, Miami International Securities Exchange, LLC (“MIAX Options”) MIAX PEARL, LLC (“MIAX Pearl”), and MIAX Emerald, LLC (“MIAX Emerald”). The Exchange's proposed ORF should balance the Exchange's regulatory revenue against the anticipated regulatory costs. The Exchange acknowledges that alternative ORF models are being pursued, however a consensus has not yet been reached among the industry. Therefore the Exchange proposes that it will start collecting ORF beginning on September 1, 2024, and that the ORF will automatically sunset on October 31, 2024.
The per-contract ORF will be assessed by MIAX Sapphire to each MIAX Sapphire Member
To illustrate how the ORF will be assessed and collected, the Exchange provides the following set of examples. If the transaction is executed on the Exchange and the ORF is assessed, if there is no change to the clearing account of the original transaction, then the ORF is collected from the Member that is the executing clearing firm for the transaction. (The Exchange notes that, for purposes of the Fee Schedule, when there is no change to the clearing account of the original transaction, the executing clearing firm is deemed to be the ultimate clearing firm.) If there is a change to the clearing account of the original transaction (
As a practical matter, when a transaction that is subject to the ORF is not executed on the Exchange, the Exchange lacks the information necessary to identify the order entering member for that transaction. There are countless order entering market participants, and each day such participants can drop their connection to one market center and establish themselves as participants on another. For these reasons, it is not possible for the Exchange to identify, and thus assess fees such as an ORF, on order entering participants on away markets on a given trading day.
Clearing members, however, are distinguished from order entering participants because they remain identified to the Exchange on information the Exchange receives from the OCC regardless of the identity of the order entering participant, their location, and the market center on which they execute transactions. Therefore, the Exchange believes it is more efficient for the operation of the Exchange and for the marketplace as a whole to collect the ORF from clearing members. Additionally, this collection method was originally instituted for the benefit of clearing firms that desired to have the ORF be collected from the clearing firm that ultimately clears the transaction. The clearing firms may then choose to pass through all, a portion, or none of the cost of the ORF to its customers,
As discussed below, the Exchange believes it is appropriate to charge the ORF only to transactions that clear as customer at the OCC. The Exchange believes that its broad regulatory responsibilities with respect to a Member's activities support applying the ORF to transactions cleared but not executed by a Member. The Exchange's regulatory responsibilities are the same regardless of whether a Member enters an order that executes or clears a transaction executed on behalf of another party. The Exchange will regularly review all such activities, including performing surveillance for position limit violations, end of day and intra-day manipulation, front-running, contrary exercise advice violations and insider trading. These activities span across multiple exchanges.
The ORF is designed to recover a material portion of the costs of supervising and regulating Members' customer options business including performing routine surveillances and investigations, as well as policy, rulemaking, interpretive and enforcement activities. The Exchange believes that revenue generated from the ORF, when combined with all of the Exchange's other regulatory fees and fines, will cover a material portion, but not all, of the Exchange's regulatory costs. The Exchange has designed the ORF to generate revenues that, when combined with all of the Exchange's other regulatory fees, will be less than or equal to the Exchange's regulatory costs.
Regulatory costs include direct regulatory expenses and certain indirect expenses for work allocated in support of the regulatory function. The direct expenses include in-house and third-party service provider costs to support the day-to-day regulatory work such as surveillance, investigations and examinations. The indirect expenses include support from personnel in such areas as human resources, legal, information technology, facilities and accounting as well as shared costs necessary to operate the Exchange and to carry on its regulatory function, such as hardware, data center costs and connectivity. The Exchange acknowledges that these indirect expenses are also allocated towards other business operations, such as providing connectivity and market data services, for which the Exchange has also conducted a cost-based analysis. As such, when analyzing the indirect expenses associated with its regulatory program, the Exchange did not double-count any expenses, but instead allocated a portion of the costs not already allocated to other fees imposed by the Exchange. Indirect expenses are estimated to be approximately 52% of the total regulatory costs for 2024. Thus, direct expenses are estimated to be approximately 48% of the total regulatory costs for 2024. The Exchange notes that its regulatory responsibilities with respect to Member compliance with options sales practice rules have been allocated to the Financial Industry Regulatory Authority (“FINRA”) under a 17d-2 Agreement. The ORF is not designed to cover the cost of options sales practice regulation. Finally, the Exchange notes that it takes into account all regulatory sources of funding, including fines collected by the Exchange in connection with disciplinary matters, when determining the appropriate ORF rate.
The Exchange will monitor the amount of revenue collected from the ORF to ensure that it, in combination with its other regulatory fees and fines, does not exceed the Exchange's total regulatory costs. The Exchange will monitor MIAX Sapphire regulatory costs and revenues at a minimum on a semi-annual basis. If the Exchange determines regulatory revenues exceed or are insufficient to cover a material portion of its regulatory costs, the Exchange will adjust the ORF by submitting a fee change filing to the Commission. Going forward, the Exchange will notify Members of adjustments to the ORF via regulatory circular at least 30 days prior to the effective date of the change.
The Exchange believes it is reasonable and appropriate for the Exchange to charge the ORF for customer options transactions regardless of the exchange on which the transactions occur. The Exchange has a statutory obligation to enforce compliance by Members and their associated persons under the Act and the rules of the Exchange and to surveil for other manipulative conduct by market participants (including non-Members) trading on the Exchange. The Exchange cannot effectively surveil for such conduct without looking at and evaluating activity across all options markets. Many of the Exchange's market surveillance programs require the Exchange to look at and evaluate activity across all options markets, such as surveillance for position limit violations, manipulation, front-running and contrary exercise advice violations/expiring exercise declarations. While much of this activity relates to the execution of orders, the ORF is assessed on and collected from clearing firms. The Exchange, because it lacks access to information on the identity of the entering firm for executions that occur on away markets, believes it is appropriate to assess the ORF on its Members' clearing activity, based on information the Exchange receives from OCC, including for away market activity. Among other reasons, doing so better and more accurately captures activity that occurs away from the Exchange over which the Exchange has a degree of regulatory responsibility. In so doing, the Exchange believes that
In addition to its own surveillance programs, the Exchange will work with other SROs and exchanges on intermarket surveillance related issues. Through its participation in the Intermarket Surveillance Group (“ISG”),
The Exchange believes that charging the ORF across markets will avoid having Members direct their trades to other markets in order to avoid the fee and to thereby avoid paying for their fair share for regulation. If the ORF did not apply to activity across markets then a Member would send their orders to the least cost, least regulated exchange (to the extent permissible under the Options Linkage plan, which, among other requirements, prohibits trading through of better priced quotations). Other exchanges do impose a similar fee on their members' activity, and their fees will extend to include the activities of their own members on the Exchange. In fact, all registered options exchanges currently impose ORF on their members, and, similar to the Exchange, the majority of the options exchanges, including MIAX Sapphire's affiliates, launched over the last decade have implemented an ORF on the day of launch or shortly thereafter in order to properly fund their regulatory programs.
The Exchange notes that there is established precedent for an SRO charging a fee across markets, namely, FINRA's Trading Activity Fee
Lastly, the Exchange recognizes that in 2019, the Commission issued suspensions of and orders instituting proceedings to determine whether to approve or disapprove a proposed rule change to modify the Options Regulatory Fee of NYSE American, NYSE Arca, MIAX Options, MIAX PEARL, MIAX Emerald, Cboe, Cboe EDGX Options, and C2.
The Exchange recognizes that an alternative model is being pursued among industry participants but that a consensus has not yet been reached. Therefore, the Exchange proposes to establish an ORF in the amount of $0.0013 per contract side to be operative on September 1, 2024, until October 31, 2024, at which time its ORF will automatically sunset. The Exchange believes that this will allow it time to gather the necessary data, including its actual regulatory costs and revenues, as well as the cost of regulating executions that clear in a customer capacity and executions that occur on away markets, while also allowing it to adequately cover a portion of the projected costs associated with the regulation of its Members and avoid the unfair competitive disadvantage it would be placed at it if it were not allowed to collect ORF during the time period needed to assess and collect data it does not have as a new options exchange. Such a process will inform the Exchange's approach to the ORF after the sunset date. To reiterate, as a new exchange, not having the opportunity to fund its regulatory program through the same regulatory fee charged by every other options exchange would place an undue competitive disadvantage upon the Exchange's regulatory program and options business as a whole. Further, the Exchange emphasizes that other exchanges will be charging ORF for transactions occurring on MIAX Sapphire, and as such, it follows that the Exchange that is primarily responsible for monitoring those transactions should also be able to charge ORF for activity occurring on its own market, as well as transactions it surveils on away markets.
The Exchange notes that if, during the proposed ORF collection period of September 1, 2024, until the sunset date of October 31, 2024, a viable alternative ORF methodology presents itself, the Exchange would endeavor to implement said alternative prior to the proposed sunset date of October 31, 2024.
As a new exchange, not having the opportunity to fund its regulatory program through the same regulatory fee charged by every other options exchange would place an undue competitive disadvantage upon the Exchange's regulatory program and options business as a whole. Further, the Exchange emphasizes that other exchanges will be charging ORF for transactions occurring on MIAX Sapphire, and as such, it follows that the exchange that is primarily responsible for monitoring those transactions should also be able to charge the ORF for activity occurring on its own market, as well as transactions it surveils on away markets.
The Exchange will notify current and future Members via a Regulatory Circular of the proposed ORF prior to the operative date of September 1, 2024. The Exchange believes that the prior notification to future market participants will ensure that the future market participants are prepared to configure their systems to properly account for the proposed ORF.
The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act
The Exchange believes that establishing an ORF in the amount of $0.0013 is reasonable because the Exchange's collection of ORF needs to be balanced against the amount of regulatory costs incurred by the Exchange. The Exchange believes that the amount proposed herein will serve to balance the Exchange's regulatory revenue against the anticipated regulatory costs. Moreover, the proposed amount is lower than the amount of ORF assessed on other exchanges.
The Exchange also believes the proposed fee change is equitable and not unfairly discriminatory in that it is charged to all Members on all their transactions that clear in the customer range at the OCC, with an exception.
The Exchange believes that the proposal to collect the ORF from non-Members when such non-Members ultimately clear the transaction (that is, when the non-Member is the “ultimate clearing firm” for a transaction in which a Member was assessed the ORF), is an equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. The Exchange notes that there is a material distinction between “assessing” the ORF and “collecting” the ORF. The Exchange does not assess the ORF to non-Members in any instance. For all executions, regardless of where they occur, the ORF is collected from the ultimate clearing firm, regardless of whether that clearing firm is a Member, but only if the original executing clearing firm is a Member. If the original executing clearing firm is not a Member, no ORF is assessed or collected. If the original executing clearing firm is a Member, while the ORF may be collected from the ultimate non-Member clearing firm, the ORF is assessed to the Member executing clearing firm. The Exchange believes that this collection practice is reasonable and appropriate, given its broad regulatory responsibilities with respect to its Members activity, as well as the fact that this collection method was originally instituted for the benefit of clearing firms that
The ORF is designed to recover a material portion of the costs of supervising and regulating Members' customer options business including performing routine surveillances and investigations, as well as policy, rulemaking, interpretive, and enforcement activities. Allowing the Exchange to collect an ORF beginning on September 1, 2024 until the sunset date of October 31, 2024, is reasonable as it allows the Exchange to recoup its regulatory expenses in the exact manner as other options exchanges. MEMX, a competing options exchange, which began operations on September 27, 2023,
MIAX Sapphire does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. This proposal will not create an unnecessary or inappropriate intra-market burden on competition because the ORF will apply to all customer activity, and is designed to enable the Exchange to recover a material portion of the Exchange's cost related to its regulatory activities. This proposal will not create an unnecessary or inappropriate inter-market burden on competition because it will be a regulatory fee that supports regulation in furtherance of the purposes of the Act. The Exchange is obligated to ensure that the amount of regulatory revenue collected from the ORF, in combination with its other regulatory fees and fines, does not exceed regulatory costs. MIAX Sapphire's proposed ORF, as described herein, is lower than, or comparable to, fees charged by other options exchanges for the same or similar services.
The Exchange notes that while it does not believe that its proposed ORF will impose any burden on inter-market competition, the Exchange not charging an ORF or being precluded from charging an ORF would, in-fact, represent a significant burden on competition. As noted above, the Exchange is a new entrant in the highly competitive environment for equity options trading. Also, as noted above, all registered options exchanges currently impose the ORF on their members, and such ORF fees imposed by other options exchanges currently do and will continue to extend to executions occurring on the Exchange. The Exchange believes that it is likely that a viable ORF alternative may be presented prior to the Exchange's sunset period, and the Exchange is not precluded from adopting said alternative prior to the sunset date. The Exchange believes that in order to compete with these existing options exchanges, it must, in fact, impose an ORF on its Members, and that the inability to do so would result in an unfair competitive disadvantage to the Exchange.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,
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.
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
Cboe C2 Exchange, Inc. (the “Exchange” or “C2 Options”) proposes to adopt a fee schedule entitled “Consolidated Audit Trail Funding Fees”
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition,
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development,
Operating Committee to approve an operating budget for CAT LLC on an annual basis. It requires the budget to “include the projected costs of the Company, including the costs of developing and operating the CAT for the upcoming year, and the sources of all revenues to cover such costs, as well as the funding of any reserve that the Operating Committee reasonably deems appropriate for the prudent operation of the Company.” Section 11.1(a)(i) of the CAT NMS Plan further states that:
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B)
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period from July 16, 2024 through December 31, 2024, CAT LLC will use the proceeds from the CAT Fee 2024-1 and the related Participant CAT fees to repay such notes.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. It is anticipated that AWS will provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools during the CAT Fee 2024-1 Period. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools), as well as various environments for CAT, such as development, performance testing, test, and production environments. AWS will perform cloud hosting services for both the CAT transaction database as well as the CAT Customer and Account Information System (“CAIS”) during the CAT Fee 2024-1 Period.
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2024-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
Market Data Provider: Exegy. It is anticipated that the operating fees costs for the CAT Fee 2024-1 Period will include costs related to the receipt of certain market data for the CAT pursuant to an agreement between FCAT and Exegy Incorporated (“Exegy”). CAT LLC determined that Exegy would provide market data that included all data elements required by the CAT NMS Plan,
Operating Fee Estimates. CAT LLC estimates that the budget for operating fees during the CAT Fee 2024-1 Period will be approximately $14,008,947.50. The budget for operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual operating fees incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
Legal Cost Estimates. CAT LLC estimates that the budget for legal services during the CAT Fee 2024-1 Period will be approximately $4,484,554.50. The budget for legal services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the legal services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual legal costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2024-1 Period will be approximately $652,623. The budget for consulting costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for consulting services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual consulting costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
Financial Advisory Firm: Anchin. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to financial advisory services performed by Anchin. CAT LLC anticipates that it will continue to employ Anchin during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. The fees for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Facilitate bill payments;
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(3) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(3) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's fee schedule. Proposed paragraph (b)(2) of the fee schedule would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300
The requirements of paragraph (b)(2) would apply to CAT Fee 2024-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the second and third quarter of 2024,
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The term “Customer Identifying Information” is defined in Section 1.1 of the CAT NMS Plan to mean
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2024-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
The Exchange neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
The Exchange proposes to amend the MIAX Emerald Options Exchange Fee Schedule (the “Fee Schedule”) to establish fees for Industry Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year,
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
[w]ithout limiting the foregoing, the reasonably budgeted CAT costs shall include technology (including cloud hosting services, operating fees, CAIS operating fees, change request fees and capitalized developed technology costs), legal, consulting, insurance, professional and administration, and public relations costs, a reserve and such other cost categories as reasonably determined by the Operating Committee to be included in the budget.
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period from July 16, 2024 through December 31, 2024, CAT LLC will use the proceeds from the CAT Fee 2024-1 and the related Participant CAT fees to repay such notes.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontrator [
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calcuated [
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budet [
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Faciliate [
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(3) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(3) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's fee schedule. Proposed paragraph (b)(2) of the fee schedule would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The requirements of paragraph (b)(2) would apply to CAT Fee 2024-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the second and third quarter of 2024,
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2024-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”),
The Exchange is filing with the Commission a proposed rule change to establish fees for Industry Members
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontrator [
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2024-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification,
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budet [
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%),
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Faciliate [
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(3) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(3) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's fee schedule. Proposed paragraph (b)(2) of the fee schedule would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The requirements of paragraph (b)(2) would apply to CAT Fee 2024-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the second and third quarter of 2024,
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The term “Customer Identifying Information” is defined in Section 1.1 of the CAT NMS Plan to mean
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2024-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
Not applicable.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) proposes to adopt a fee schedule entitled “Consolidated Audit Trail Funding Fees”
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (‘CAT Fees’) to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (‘Prospective CAT Costs’).”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as ‘Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period from July 16, 2024 through December 31, 2024, CAT LLC will use the proceeds from the CAT Fee 2024-1 and the related Participant CAT fees to repay such notes.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. It is anticipated that AWS will provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools during the CAT Fee 2024-1 Period. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools), as well as various environments for CAT, such as development, performance testing, test, and production environments. AWS will perform cloud hosting services for both the CAT transaction database as well as the CAT Customer and Account Information System (“CAIS”) during the CAT Fee 2024-1 Period.
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
Plan Processor: FCAT. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT a negotiated monthly fixed price for the operation of the CAT. This fixed price contract was negotiated on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the breadth of services provided and market rates for similar types of activity. It is anticipated that FCAT will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2024-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
Market Data Provider: Exegy. It is anticipated that the operating fees costs for the CAT Fee 2024-1 Period will include costs related to the receipt of certain market data for the CAT pursuant to an agreement between FCAT and Exegy Incorporated (“Exegy”). CAT LLC determined that Exegy would provide market data that included all data elements required by the CAT NMS Plan,
Operating Fee Estimates. CAT LLC estimates that the budget for operating fees during the CAT Fee 2024-1 Period will be approximately $14,008,947.50. The budget for operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual operating fees incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
Law Firm: WilmerHale. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by WilmerHale. CAT LLC anticipates that it will continue to employ WilmerHale during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project and recognition that the hourly fee rates for this law firm are anticipated to be in line with market rates for specialized legal expertise. WilmerHale's billing rates are negotiated on an annual basis and are determined with reference to the rates charged by other leading law firms for similar work. The Participants assess WilmerHale's performance and review prospective budgets and staffing plans submitted by WilmerHale on an annual basis. The legal fees will be paid by CAT LLC to WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
Law Firm: Jenner. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by Jenner. CAT LLC anticipates that it will continue to employ Jenner during the CAT Fee 2024-1 Period based on among other things, their expertise, history with the project and recognition that their hourly fee rates are in line with market rates for specialized legal expertise. The legal fees will be paid by CAT LLC to Jenner.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
Legal Cost Estimates. CAT LLC estimates that the budget for legal services during the CAT Fee 2024-1 Period will be approximately $4,484,554.50. The budget for legal services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the legal services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual legal costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2024-1 Period will be approximately $652,623. The budget for consulting costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for consulting services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual consulting costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
Financial Advisory Firm: Anchin. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to financial advisory services performed by Anchin. CAT LLC anticipates that it will continue to employ Anchin during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. The fees for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Facilitate bill payments;
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Accounting Firm: Grant Thornton. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to accounting services performed by Grant Thornton. CAT LLC anticipates that it will continue to employ Grant Thornton during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. It is anticipated that Grant Thornton will continue to be engaged as an independent accounting firm to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. The fees for these services will be paid by CAT LLC to Grant Thornton. CAT LLC estimated the budget for the accounting costs for Grant Thornton for the CAT Fee 2024-1 Period based on the
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public
(a) Description of Reserve
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(3) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(3) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's fee schedule. Proposed paragraph (b)(2) of the fee schedule would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The requirements of paragraph (b)(2) would apply to CAT Fee 2024-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The term “Customer Identifying Information” is defined in Section 1.1 of the CAT NMS Plan to mean
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2024-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
The Exchange neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
SR-CBOE-2024-037 on the subject line.
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The proposed rule change would adopt a new framework entitled the “Clearing Agency Framework for Certain Requirements on Governance and Conflicts of Interest” (“Framework”) of FICC and its affiliates, The Depository Trust Company (“DTC”) and National Securities Clearing Corporation (“NSCC,” and together with
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Recently, the Commission adopted a new rule on governance and conflicts of interest for registered clearing agencies, Rule 17ad-25.
Proposed Section 1 of the Framework would constitute the executive summary of the Framework. Section 1 notes, among other things, that the Framework provides an outline for the way in which the Clearing Agencies and their Boards comply with the requirements of Rule 17ad-25(g), (h), (i) and (j)
Section 1 also notes that references in the Framework to the Clearing Agencies and governance bodies should be read in the singular or the plural as the context requires, and references to individual officers or employees, management, or functional areas generally refer to employees or functions of DTCC,
Proposed Section 2 of the Framework would cover Framework ownership and change management. The Framework would be owned and managed by an officer, within the General Counsel's Office of DTCC, on behalf of each Clearing Agency. Regarding change management, Section 2 would state that changes to the Framework would be approved by either (1) the Boards, (2) such Board committees as may be delegated authority by the Boards from time to time pursuant to their charters, or (3) with respect to certain changes, the General Counsel or Deputy General Counsels of the Clearing Agencies, pursuant to authority delegated by the Boards and with the advice and direction of the Framework owner. Section 2 also states that the Framework would be reviewed and approved annually by the Boards, or duly authorized committees of the Boards.
Proposed Section 3 of the Framework would describe how the Clearing Agencies comply with sections (g) and (h) of Rule 17ad-25.
Regarding the directors, the Framework would describe that directors are required to exercise their powers in good faith and in the best interests of the Clearing Agencies, rather than their own interests or the interests of another entity or person. Directors have a duty to each Clearing Agency that applies separately. A conflict of interest is present whenever the interests of the Clearing Agencies compete with the interests of a director, the director's employer, or any other party with which a director is associated, or otherwise whenever a director's corporate or personal interests could be viewed as affecting his or her objectivity or independent judgment in fulfilling the director's duties to the Clearing Agencies.
The Framework would state that directors are required to document and inform the Corporate Secretary of the Clearing Agencies promptly of the existence of any relationship or interest that reasonably could affect the independent judgment or decision-making of the director. The Framework would provide that the Corporate Secretary would escalate any disclosure to the General Counsel for evaluation. If such disclosure is deemed to be an actual conflict of interest, the General Counsel would notify the Non-Executive Chairman of the Board and discuss how such conflict can be mitigated or eliminated. In certain cases, it may be advisable for the involved director to recuse himself/herself from any discussion or vote related to the matter. In other cases, where the conflict is limited or indirect, the Non-Executive Chairman in consultation with the General Counsel may determine that the conflict should be disclosed to the full Board of Directors, but in light of such disclosure to the Board, recusal of the director is unnecessary. Further, there may be cases where a conflict is so significant or pervasive that the director would be unable to continue to serve on the Boards. In such instances, the Non-Executive Chairman and General Counsel would discuss with the Governance Committee. Any measures taken to address a conflict of interest would be documented by the Corporate Secretary's Office.
Regarding senior management, the Framework would state that all staff, including senior managers, must avoid activities or relationships that might affect objectivity in business decisions throughout employment with the Clearing Agencies. Staff, including senior managers, are required to disclose a relationship or interest that reasonably could affect objectivity in business decisions for review and determination on the appropriate course of action. A course of action for a conflict of interest could include actions such as recusal of the staff member from the particular matter, such as a vendor selection process or disallowing a staff member from being on the board of directors of a Clearing Agency vendor or client. The course of action will be documented.
Proposed Section 4 of the Framework would describe how the Clearing Agencies comply with section (i) of Rule 17ad-25.
Further, the Boards of the Clearing Agencies would: (1) review and approve the procedures described in the previous paragraph; (2) review and approve any agreement that would establish a relationship with a service provider for core services along with the required risk evaluation prepared by senior management; and (3) evaluate any action taken by senior management to remedy significant deterioration in performance or address changing risks or material issues identified through senior management's monitoring of service providers for core services.
Importantly, consistent with the definition from Rule 17ad-25(a), service providers for core services to the Clearing Agencies can be external service providers or intercompany affiliates (
Proposed Section 5 of the Framework would state that in support of their compliance with Rule 17ad-25(j),
The Framework would state further that the Advisory Councils and the ad hoc mechanisms assist the Boards of the Clearing Agencies in their obligation to solicit, consider, and document their consideration of the views of participants and other relevant stakeholders of the Clearing Agencies regarding material developments in their respective risk management and operations on a recurring basis. Specifically, senior management of the Clearing Agencies would bring material developments in the Clearing Agencies' risk management and operations to the Advisory Councils (or ad hoc mechanisms) for their consideration. Senior management would document the views of the stakeholders participating in these Advisory Councils and mechanisms on such developments. Senior management would then escalate the views on material developments in the Clearing Agencies risk management and operations to the Boards for their consideration.
The proposed rule changes also define “material developments” in the Clearing Agencies' risk management and operations as including developments that would significantly affect the risk and/or operational profile of a Clearing Agency and/or would significantly affect the rights and obligations of relevant stakeholders. Providing information on such material developments would enable stakeholders to identify and evaluate the risk, fees and other significant costs they incur by participating or otherwise interacting with a Clearing Agency. “Material developments” in the Clearing Agencies' risk management and operations would cover areas such as financial risk management, margin methodologies, cyber and operational resiliency, default management, fee structures, the introduction of new cleared products and services, access models, and the design and functioning of the processes and technology systems that support the infrastructure of the Clearing Agencies and the way that
Subject to approval by the Commission, the Clearing Agencies would implement the proposed rule changes on December 5, 2024.
The Clearing Agencies believe that the proposed changes are consistent with Section 17A(b)(3)(F) of the Act
The proposed rule changes would address potential conflicts of interest, as described more fully in Item II(A)1(ii) above. The proposed rule changes would help ensure that the Clearing Agencies are able to identify potential conflicts of interest at the senior management and Board level and subject such conflicts to a uniform process of review, mitigation or elimination, and documentation. In addition, the proposed changes would address the situation where the Clearing Agencies may not have access to information necessary to identify a potential conflict of interest by requiring that a director be required to document and inform the Clearing Agencies promptly of the existence of any relationship or interest that reasonably could affect the independent judgment or decision-making of the director. The Clearing Agencies believe that including the foregoing requirements in the Framework would help ensure the integrity of the governance processes of the Clearing Agencies and thereby promote the prompt and accurate clearance and settlement of securities transactions and safeguard the securities and funds which are in the custody or control of the Clearing Agencies or for which they are responsible, consistent with Section 17A(b)(3)(F) of the Act.
The proposed rule changes would also address risks presented by service providers for core services, as described more fully in Item II(A)1(iii) above. The proposed rule changes in this regard would require senior management of the Clearing Agencies to manage the risks presented by evaluating and documenting such risks, including under changes to circumstances and potential disruptions, among other things. The proposed rule changes would also provide for Board oversight of senior management regarding the management of risks presented by service providers for core services. These requirements for both senior management and the Boards would help prevent situations where a service provider for core services does not perform its obligations and therefore help prevent undermining the Clearing Agencies' sound risk management and operational resiliency. The Clearing Agencies believe that by helping to maintain their sound risk management and operational resiliency, the proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions and safeguard the securities and funds which are in the custody or control of the Clearing Agencies or for which they are responsible, consistent with Section 17A(b)(3)(F) of the Act.
The proposed changes would also address the obligation of the Boards to solicit and consider viewpoints of participants and other relevant stakeholders, as described more fully in Item II(A)1(iv) above. The proposed rule changes in this regard would require the Boards to solicit, consider and document their consideration of participant and relevant stakeholder viewpoints regarding material developments in their risk management and operations on a recurring basis. Obtaining viewpoints from participants and relevant stakeholders on material developments in the Clearing Agencies' risk management and operations would help optimize the Clearing Agencies' decisions, rules and procedures because it could provide the Clearing Agencies with a wider breadth of useful information as they make developments in these key areas. The Clearing Agencies believe that because the proposed rule changes could lead to better decisions, rules and procedures in these key areas, the proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions and foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.
The Clearing Agencies believe that the proposed rule changes could promote competition. Specifically, the Clearing Agencies believe, as the Commission noted in its adopting release regarding the adoption of Rule 17ad-25(g) and Rule 17ad-25(h),
The Clearing Agencies also believe that the proposed rule changes on the management of risks presented by service providers for core services described in Item II(A)1(iii) above could also promote competition. The proposed rule changes in this regard would require senior management of the Clearing Agencies to manage the risks presented by evaluating and documenting such risks, including under changes to circumstances and potential disruptions, among other things. The proposed rule changes would also provide for Board oversight of senior management regarding the management of risks presented by service providers for core services. These requirements for both senior management and the Boards would help prevent situations where a service provider for core services does not perform its obligations, and therefore help prevent undermining the Clearing Agencies' sound risk management and operational resiliency, which could also be costly for members of the Clearing Agencies. The Clearing Agencies believe that by implementing the proposed
The Clearing Agencies also believe that the proposed changes on the obligation of the Boards to solicit and consider viewpoints of participants and other relevant stakeholders described in Item II(A)1(iv) above could also promote competition. The proposed rule changes in this regard would require the Boards to solicit, consider and document their consideration of participant and relevant stakeholder viewpoints regarding material developments in their risk management and operations on a recurring basis. The Clearing Agencies believe that the proposed rule changes could promote competition because they would formalize a process by which multiple interested parties (that is, participants and relevant stakeholders) would have their viewpoints on material developments in risk management and operations considered by the Boards, and the Boards could have useful information on how emerging topics in these areas might impact participants and stakeholders.
The Clearing Agencies have not received or solicited any written comments relating to this proposal. If any written comments are received, they will be publicly filed as an Exhibit 2 to this filing, as required by Form 19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to Section IV (Solicitation of Comments) of the Exhibit 1A in the General Instructions to Form 19b-4, the Commission does not edit personal identifying information from comment submissions. Commenters should submit only information that they wish to make available publicly, including their name, email address, and any other identifying information.
All prospective commenters should follow the Commission's instructions on how to submit comments,
The Clearing Agencies reserve the right not to respond to any comments received.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The proposed rule change would adopt a new framework entitled the “Clearing Agency Framework for Certain Requirements on Governance and Conflicts of Interest”
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Recently, the Commission adopted a new rule on governance and conflicts of interest for registered clearing agencies, Rule 17ad-25.
Proposed Section 1 of the Framework would constitute the executive summary of the Framework. Section 1 notes, among other things, that the Framework provides an outline for the way in which the Clearing Agencies and their Boards comply with the requirements of Rule 17ad-25(g), (h), (i) and (j)
Section 1 also notes that references in the Framework to the Clearing Agencies and governance bodies should be read in the singular or the plural as the context requires, and references to individual officers or employees, management, or functional areas generally refer to employees or functions of DTCC,
Proposed Section 2 of the Framework would cover Framework ownership and change management. The Framework would be owned and managed by an officer, within the General Counsel's Office of DTCC, on behalf of each Clearing Agency. Regarding change management, Section 2 would state that changes to the Framework would be approved by either (1) the Boards, (2) such Board committees as may be delegated authority by the Boards from time to time pursuant to their charters, or (3) with respect to certain changes, the General Counsel or Deputy General Counsels of the Clearing Agencies, pursuant to authority delegated by the Boards and with the advice and direction of the Framework owner. Section 2 also states that the Framework would be reviewed and approved annually by the Boards, or duly authorized committees of the Boards.
Proposed Section 3 of the Framework would describe how the Clearing Agencies comply with sections (g) and (h) of Rule 17ad-25.
Regarding the directors, the Framework would describe that directors are required to exercise their powers in good faith and in the best interests of the Clearing Agencies, rather than their own interests or the interests of another entity or person. Directors have a duty to each Clearing Agency that applies separately. A conflict of interest is present whenever the interests of the Clearing Agencies compete with the interests of a director, the director's employer, or any other party with which a director is associated, or otherwise whenever a director's corporate or personal interests could be viewed as affecting his or her objectivity or independent judgment in fulfilling the director's duties to the Clearing Agencies.
The Framework would state that directors are required to document and inform the Corporate Secretary of the Clearing Agencies promptly of the existence of any relationship or interest that reasonably could affect the independent judgment or decision-making of the director. The Framework would provide that the Corporate Secretary would escalate any disclosure to the General Counsel for evaluation. If such disclosure is deemed to be an actual conflict of interest, the General Counsel would notify the Non-Executive Chairman of the Board and discuss how such conflict can be mitigated or eliminated. In certain cases, it may be advisable for the involved director to recuse himself/herself from any discussion or vote related to the matter. In other cases, where the conflict is limited or indirect, the Non-Executive Chairman in consultation with the General Counsel may determine that the conflict should be disclosed to the full Board of Directors, but in light of such disclosure to the Board, recusal of the director is unnecessary. Further, there may be cases where a conflict is so significant or pervasive that the director would be unable to continue to serve on the Boards. In such instances, the Non-Executive Chairman and General Counsel would discuss with the Governance Committee. Any measures taken to address a conflict of interest would be documented by the Corporate Secretary's Office.
Regarding senior management, the Framework would state that all staff, including senior managers, must avoid activities or relationships that might affect objectivity in business decisions throughout employment with the Clearing Agencies. Staff, including senior managers, are required to disclose a relationship or interest that reasonably could affect objectivity in business decisions for review and determination on the appropriate course of action. A course of action for a conflict of interest could include actions such as recusal of the staff member from the particular matter, such as a vendor selection process or disallowing a staff member from being on the board of directors of a Clearing Agency vendor or
Proposed Section 4 of the Framework would describe how the Clearing Agencies comply with section (i) of Rule 17ad-25.
Further, the Boards of the Clearing Agencies would: (1) review and approve the procedures described in the previous paragraph; (2) review and approve any agreement that would establish a relationship with a service provider for core services along with the required risk evaluation prepared by senior management; and (3) evaluate any action taken by senior management to remedy significant deterioration in performance or address changing risks or material issues identified through senior management's monitoring of service providers for core services.
Importantly, consistent with the definition from Rule 17ad-25(a), service providers for core services to the Clearing Agencies can be external service providers or intercompany affiliates (
Proposed Section 5 of the Framework would state that in support of their compliance with Rule 17ad-25(j),
The Framework would state further that the Advisory Councils and the ad hoc mechanisms assist the Boards of the Clearing Agencies in their obligation to solicit, consider, and document their consideration of the views of participants and other relevant stakeholders of the Clearing Agencies regarding material developments in their respective risk management and operations on a recurring basis. Specifically, senior management of the Clearing Agencies would bring material developments in the Clearing Agencies' risk management and operations to the Advisory Councils (or ad hoc mechanisms) for their consideration. Senior management would document the views of the stakeholders participating in these Advisory Councils and mechanisms on such developments. Senior management would then escalate the views on material developments in the Clearing Agencies risk management and operations to the Boards for their consideration.
The proposed rule changes also define “material developments” in the Clearing Agencies' risk management and operations as including developments that would significantly affect the risk and/or operational profile of a Clearing Agency and/or would significantly affect the rights and obligations of relevant stakeholders. Providing information on such material developments would enable stakeholders to identify and evaluate the risk, fees and other significant costs they incur by participating or otherwise interacting with a Clearing Agency. “Material developments” in the Clearing Agencies' risk management and operations would cover areas such as financial risk management, margin methodologies, cyber and operational resiliency, default management, fee structures, the introduction of new cleared products and services, access models, and the design and functioning of the processes and technology systems
Subject to approval by the Commission, the Clearing Agencies would implement the proposed rule changes on December 5, 2024.
The Clearing Agencies believe that the proposed changes are consistent with Section 17A(b)(3)(F) of the Act
The proposed rule changes would address potential conflicts of interest, as described more fully in Item II(A)1(ii) above. The proposed rule changes would help ensure that the Clearing Agencies are able to identify potential conflicts of interest at the senior management and Board level and subject such conflicts to a uniform process of review, mitigation or elimination, and documentation. In addition, the proposed changes would address the situation where the Clearing Agencies may not have access to information necessary to identify a potential conflict of interest by requiring that a director be required to document and inform the Clearing Agencies promptly of the existence of any relationship or interest that reasonably could affect the independent judgment or decision-making of the director. The Clearing Agencies believe that including the foregoing requirements in the Framework would help ensure the integrity of the governance processes of the Clearing Agencies and thereby promote the prompt and accurate clearance and settlement of securities transactions and safeguard the securities and funds which are in the custody or control of the Clearing Agencies or for which they are responsible, consistent with Section 17A(b)(3)(F) of the Act.
The proposed rule changes would also address risks presented by service providers for core services, as described more fully in Item II(A)1(iii) above. The proposed rule changes in this regard would require senior management of the Clearing Agencies to manage the risks presented by evaluating and documenting such risks, including under changes to circumstances and potential disruptions, among other things. The proposed rule changes would also provide for Board oversight of senior management regarding the management of risks presented by service providers for core services. These requirements for both senior management and the Boards would help prevent situations where a service provider for core services does not perform its obligations and therefore help prevent undermining the Clearing Agencies' sound risk management and operational resiliency. The Clearing Agencies believe that by helping to maintain their sound risk management and operational resiliency, the proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions and safeguard the securities and funds which are in the custody or control of the Clearing Agencies or for which they are responsible, consistent with Section 17A(b)(3)(F) of the Act.
The proposed changes would also address the obligation of the Boards to solicit and consider viewpoints of participants and other relevant stakeholders, as described more fully in Item II(A)1(iv) above. The proposed rule changes in this regard would require the Boards to solicit, consider and document their consideration of participant and relevant stakeholder viewpoints regarding material developments in their risk management and operations on a recurring basis. Obtaining viewpoints from participants and relevant stakeholders on material developments in the Clearing Agencies' risk management and operations would help optimize the Clearing Agencies' decisions, rules and procedures because it could provide the Clearing Agencies with a wider breadth of useful information as they make developments in these key areas. The Clearing Agencies believe that because the proposed rule changes could lead to better decisions, rules and procedures in these key areas, the proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions and foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.
The Clearing Agencies believe that the proposed rule changes could promote competition. Specifically, the Clearing Agencies believe, as the Commission noted in its adopting release regarding the adoption of Rule 17ad-25(g) and Rule 17ad-25(h),
The Clearing Agencies also believe that the proposed rule changes on the management of risks presented by service providers for core services described in Item II(A)1(iii) above could also promote competition. The proposed rule changes in this regard would require senior management of the Clearing Agencies to manage the risks presented by evaluating and documenting such risks, including under changes to circumstances and potential disruptions, among other things. The proposed rule changes would also provide for Board oversight of senior management regarding the management of risks presented by service providers for core services. These requirements for both senior management and the Boards would help prevent situations where a service provider for core services does not perform its obligations, and therefore help prevent undermining the Clearing Agencies' sound risk management and
The Clearing Agencies also believe that the proposed changes on the obligation of the Boards to solicit and consider viewpoints of participants and other relevant stakeholders described in Item II(A)1(iv) above could also promote competition. The proposed rule changes in this regard would require the Boards to solicit, consider and document their consideration of participant and relevant stakeholder viewpoints regarding material developments in their risk management and operations on a recurring basis. The Clearing Agencies believe that the proposed rule changes could promote competition because they would formalize a process by which multiple interested parties (that is, participants and relevant stakeholders) would have their viewpoints on material developments in risk management and operations considered by the Boards, and the Boards could have useful information on how emerging topics in these areas might impact participants and stakeholders.
The Clearing Agencies have not received or solicited any written comments relating to this proposal. If any written comments are received, they will be publicly filed as an Exhibit 2 to this filing, as required by Form 19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to Section IV (Solicitation of Comments) of the Exhibit 1A in the General Instructions to Form 19b-4, the Commission does not edit personal identifying information from comment submissions. Commenters should submit only information that they wish to make available publicly, including their name, email address, and any other identifying information.
All prospective commenters should follow the Commission's instructions on how to submit comments,
The Clearing Agencies reserve the right not to respond to any comments received.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
Cboe EDGX Exchange, Inc. (the “Exchange” or “Cboe EDGX”) proposes to adopt a fee schedule entitled “Consolidated Audit Trail Funding Fees”
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
Operating Committee to approve an operating budget for CAT LLC on an annual basis. It requires the budget to “include the projected costs of the Company, including the costs of developing and operating the CAT for the upcoming year, and the sources of all revenues to cover such costs, as well as the funding of any reserve that the Operating Committee reasonably deems appropriate for the prudent operation of the Company.” Section 11.1(a)(i) of the CAT NMS Plan further states that:
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. It is anticipated that AWS will provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools during the CAT Fee 2024-1 Period. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools), as well as various environments for CAT, such as development, performance testing, test, and production environments. AWS will perform cloud hosting services for both the CAT transaction database as well as the CAT Customer and Account Information System (“CAIS”) during the CAT Fee 2024-1 Period.
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
Plan Processor: FCAT. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT a negotiated monthly fixed price for the operation of the CAT. This fixed price contract was negotiated on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the breadth of services provided and market rates for similar types of activity. It is anticipated that FCAT will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2024-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2024-1 Period will be approximately $652,623. The budget for consulting costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for consulting services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual consulting costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Facilitate bill payments;
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Accounting Firm: Grant Thornton. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to accounting services performed by Grant Thornton. CAT LLC anticipates that it will continue to employ Grant Thornton during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. It is anticipated that Grant Thornton will continue to be engaged as an independent accounting firm to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. The fees for these services will be paid by CAT LLC to Grant Thornton. CAT LLC estimated the budget for the accounting costs for Grant Thornton for the CAT Fee 2024-1 Period based on the anticipated hourly rates and the
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(3) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(3) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (‘CEBB’) and/or the CAT Executing Broker for the Seller (‘CEBS’) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's fee schedule. Proposed paragraph (b)(2) of the fee schedule would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The requirements of paragraph (b)(2) would apply to CAT Fee 2024-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the second and third quarter of 2024,
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The term “Customer Identifying Information” is defined in Section 1.1 of the CAT NMS Plan to mean
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2024-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
The Exchange neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange is filing a proposal to amend the MIAX Sapphire Options Exchange Fee Schedule (the “Fee Schedule”) to adopt certain non-transaction fees. The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 15, 2024, the U.S. Securities and Exchange Commission (“Commission”) approved the Exchange's Form 1 application to register as a national securities exchange under Section 6 of the Exchange Act.
The Exchange proposes to establish Section 5), System Connectivity Fees, which will describe network connectivity fees. The Exchange proposes to offer to both Members and non-Members the choice of a 1 Gigabit (“Gb”) fiber connection or the 10Gb ultra-low latency (“ULL”) fiber connection to the Exchange's primary and secondary facilities, as well as its disaster recovery facility. The 1Gb and 10Gb ULL fees will be charged to both Members and non-Members for connectivity to the Exchange's primary/secondary facility and to its disaster recovery facility.
The Exchange proposes to establish monthly fees of $1,400 per 1Gb connection and $13,500 per 10Gb ULL connection that will be assessed to Members and non-Members for connecting to the primary/secondary facility. The Exchange proposes to establish monthly fees of $550 per 1Gb connection and $2,750 per 10Gb ULL connection that will be assessed to Members and non-Members for connecting to the disaster recovery facility.
Monthly network connectivity fees for Members and non-Members for connectivity with the primary/secondary facility will be assessed in any month the Member or non-Member is credentialed to use any of the MIAX Sapphire Application Programming Interfaces (“APIs”) or market data feeds in the production environment. Further, the Exchange proposes to pro-rate the monthly fees when a Member or non-Member makes a change to the connectivity (by adding or deleting connections) with such pro-rated fees based on the number of trading days that the Member or non-Member has been credentialed to utilize any of the MIAX Sapphire APIs or market data feeds in the production environment through such connection, divided by the total number of trading days in such month multiplied by the applicable monthly rate. Monthly network connectivity fees for Members and non-Members for connectivity to the disaster recovery facility will be assessed in each month during which the Member or non-Member has established connectivity to the disaster recovery facility.
The Exchange proposes that Members and non-Members utilizing the MENI
The Exchange proposes to waive the monthly Member and non-Member network connectivity fees for the first two 10Gb ULL connections on each switch
For clarity, the Exchange provides the below examples regarding connectivity fees, utilizing the launch date of August 12, 2024:
• Members and non-Members that subscribe to the 1Gb connection to the primary/secondary facility and/or disaster recovery facility, and/or subscribe to the 10Gb ULL connection to the disaster recovery facility, will not be charged the proposed rates (
• Members and non-Members that subscribe to the 10Gb ULL connection to the primary/secondary facility will not be charged the proposed rate ($13,500) for the first two 10Gb ULL connections on each switch to the primary/secondary facility for the remaining days in August, as well as the entire period cover the months of September through November 2024. Thereafter, Members and non-Members will receive a 50% discount for the first two 10Gb ULL connections on each switch to the primary/secondary facility for entire period covering December 2024 through February 2025. For each 10Gb ULL connection on each switch greater than two (
The Exchange previously communicated to market participants that the Exchange intends to waive the monthly Member and non-Member network connectivity fees in the manner described above.
The Exchange proposes to establish Section 5)d), Port Fees, which will provide the fee structure and amounts for the different types of ports offered by the Exchange, which are described below.
The Exchange proposes to establish Section 5)d)i), FIX Port Fees, pursuant to which the Exchange will assess FIX Port fees to Members in each month the Member is credentialed to use a FIX Port in the production environment and based upon the number of credentialed FIX Ports. In particular, the Exchange proposes to assess Members the following monthly FIX Port fees: (i) $275 for the 1st FIX Port; (ii) $175 per port for the 2nd through 5th FIX Ports; and (iii) $75 per port for the 6th FIX Port and each additional FIX Port. FIX Port fees will be waived during the Initial Waiver Period.
The Exchange proposes to establish Section 5)d)ii), MEO Port Fees, pursuant to which the Exchange will assess MEO Port fees based upon the different types of MEO Ports offered by the Exchange. MIAX Sapphire offers different types of MEO Ports depending on the services required by Members.
The Exchange proposes to assess monthly Full Service MEO Port
Specifically, the Exchange proposes to establish the following monthly Full Service MEO Port fees: (i) $2,500 for Market Maker registrations in up to 10 option classes or up to 20% of option classes by volume; (ii) $3,750 for Market Maker registrations in up to 40 option classes or up to 35% of option classes by volume; (iii) $5,000 for Market Maker registrations in up to 100 option classes or up to 50% of option classes by volume; and (iv) $6,000 for Market Maker registrations in over 100 option classes or over 50% of option classes by volume up to all option classes listed on MIAX Sapphire.
The Exchange also proposes to adopt footnote “b.” for its Full Service MEO Port fees that will apply to the Market Makers who fall within the following Full Service MEO Port fee levels, which represent the 3rd and 4th levels of the fee table: Market Makers who have (i) registrations in up to 100 option classes or up to 50% of option classes by volume, and (ii) registrations in over 100 option classes or over 50% of option classes by volume up to all option classes listed on MIAX Sapphire. The Exchange proposes that for these monthly Full Service MEO Port tier levels, if the Market Maker's total monthly executed volume during the relevant month is less than 0.015% of the total monthly executed volume reported by OCC in the Market Maker account type for MIAX Sapphire-listed option classes for that month, then the fee will be $4,000 instead of the fee otherwise applicable to such level (
The purpose of this proposed lower monthly Full Service MEO Port fee is to provide a lower fixed cost to those Market Makers who quote the entire Exchange market (or substantial amount of the Exchange market), as objectively measured by either number of classes assigned or national average daily volume (“ADV”), but who do not otherwise execute a significant amount of volume on the Exchange. The Exchange believes that, by offering lower fixed costs to Market Makers that execute less volume, the Exchange will retain and attract smaller-scale Market Makers, which are an integral component of the option industry marketplace, but have been decreasing in number in recent years, due to industry consolidation and lower market maker profitability. Since these smaller-scale Market Makers utilize less Exchange capacity due to lower overall volume executed, the Exchange believes it is reasonable and appropriate to offer such Market Makers a lower fixed cost. The Exchange notes that its affiliated markets, MIAX, MIAX Pearl, and MIAX Emerald, offer a similar reduced fee for their full service MEO/MEI ports for smaller-scale Market Makers.
For the calculation of the monthly Full Service MEO Port fees, the applicable fee rate is the lesser of either the per class basis or percentage of total national ADV measurement. The amount of the monthly Full Service MEO Port fee will be based upon the number of classes in which the Market Maker was registered to quote on any given day within the calendar month, or upon the class volume percentages set forth in the table in Section 5)d)ii) of the Fee Schedule. A Market Maker is determined to be registered in a class if that Market Maker has been registered in one or more series in that class.
MEO Port users will be allocated two (2) Full Service MEO Ports and four (4) Limited Service MEO Ports per Matching Engine
Full Service MEO Port fees and Limited Service MEO Port fees will be waived during the Initial Waiver Period.
The Exchange proposes to establish Section 5)d)iv), Clearing Trade Drop Port Fees. The Exchange proposes to assess a CTD Port fee of $450 per month. This fixed fee structure and amount is the same as the CTD Port fee in place at the Exchange's affiliate, MIAX Emerald.
The Exchange proposes to establish Section 5)d)v), Fix Drop Copy Port Fees. The Exchange proposes to assess an FXD Port fee of $250 per month. This fixed fee structure is the same as the FXD Port fee structure in place at the Exchange's affiliate, MIAX Emerald, and is half the price of the FXD Port fee for MIAX Emerald.
As described more fully below, the Exchange provides a cost analysis to supports its proposed connectivity and port fees that includes, among other things, descriptions of how the Exchange allocated costs among it and its affiliated markets (MIAX, MIAX Pearl, and MIAX Emerald) to ensure no cost was allocated more than once, as well as additional detail supporting its cost allocation processes. The Exchange proposes connectivity and port fees that are intended to cover the Exchange's cost of providing connectivity and ports, with a reasonable mark-up over those costs.
The Exchange believes that the proposed fees are consistent with Section 6(b) of the Act
In general, the Exchange believes that exchanges, in setting fees of all types, should meet very high standards of transparency to demonstrate why each new fee or fee increase meets the Exchange Act requirements that fees be reasonable, equitably allocated, not unfairly discriminatory, and not create an undue burden on competition among members and markets. In particular, the Exchange believes that each exchange should take extra care to be able to demonstrate that these fees are based on its costs and reasonable business needs.
In proposing to charge fees for connectivity and port services, the Exchange is especially diligent in assessing those fees in a transparent way against its own aggregate costs of providing the related service, and in carefully and transparently assessing the impact on Members—both generally and in relation to other Members,
As detailed below, the Exchange recently calculated its aggregate annual costs (and approximations for monthly costs) for providing 1Gb and 10Gb ULL connectivity, Full Service MEO Ports, Limited Service MEO Ports, FIX Ports, CTD Ports, and FXD Ports. For physical 1Gb and 10Gb ULL connectivity combined, the Exchange calculated its aggregate annual cost to equal $6,620,300 (or approximately $551,692 per month, when rounded to the nearest dollar when dividing the combined annual cost by 12 months). For the various port services, the Exchange calculated the following annual costs: $605,907 for Full Service MEO Ports (or approximately $50,491 per month, when rounded to the nearest dollar when dividing the combined annual cost by 12 months); $600,608 for Limited Service MEO Ports (or approximately $50,050 per month, when rounded to the nearest dollar when dividing the combined annual cost by 12 months); $158,148 for FIX Ports (or approximately $13,178 per month, when rounded to the nearest dollar when dividing the combined annual cost by 12 months); $109,908 for CTD Ports (or approximately $9,158 per month, when rounded to the nearest dollar when dividing the combined annual cost by 12 months); and $36,637 for FXD Ports (or approximately $3,054 per month, when rounded to the nearest dollar when dividing the combined annual cost by 12 months). In order to cover the aggregate costs of providing connectivity and ports to its users (both Members and non-Members
The Exchange's affiliates previously completed a study of their aggregate costs to provide connectivity and port services and produce market data, defined above as its Cost Analysis.
As an initial step, the Exchange determined the total cost for the Exchange and the affiliated markets for each cost driver as part of its 2024 budget review process. The 2024 budget review is a company-wide process that occurs over the course of many months, includes meetings among senior management, department heads, and the Finance Team. Each department head is required to send a “bottom up” budget to the Finance Team allocating costs at the profit and loss account and vendor levels for the Exchange and its affiliated markets based on a number of factors, including server counts, additional hardware and software utilization, current or anticipated functional or non-functional development projects, capacity needs, end-of-life or end-of-service intervals, number of members, market model (
All of these factors result in different allocation percentages among the Exchange and its affiliated markets,
The next step involves determining what portion of the cost allocated to the Exchange pursuant to the above methodology is to be allocated to each core service,
By allocating segmented costs to each core service, the Exchange was able to estimate by core service the potential margin it might earn based on different fee models. The Exchange notes that as a non-listing venue it has five primary sources of revenue that it can potentially use to fund its operations: transaction fees, fees for connectivity and port services, membership fees, regulatory fees, and market data fees. Accordingly, the Exchange must cover its expenses from these five primary sources of revenue. The Exchange also notes that as a general matter each of these sources of revenue is based on services that are interdependent. For instance, the Exchange's system for executing transactions is dependent on physical hardware and connectivity; only Members and parties that they sponsor to participate directly on the Exchange may submit orders to the Exchange; many Members (but not all) consume market data from the Exchange in order to trade on the Exchange; and the Exchange consumes market data from external sources in order to comply with regulatory obligations. Accordingly, given this interdependence, the allocation of costs to each service or revenue source required judgment of the Exchange and was weighted based on estimates of the Exchange that the Exchange believes are reasonable, as set forth below. While there is no standardized and generally accepted methodology for the allocation of an exchange's costs, the Exchange's methodology is the result of an extensive review and analysis and will be consistently applied going forward for any other potential fee proposals. In the absence of the Commission attempting to specify a methodology for the allocation of exchanges' interdependent costs, the Exchange will continue to be left with its best efforts to attempt to conduct such an allocation in a thoughtful and reasonable manner.
Through the Exchange's extensive updated Cost Analysis, which was again recently further refined, the Exchange analyzed every expense item in the Exchange's general expense ledger to determine whether each such expense relates to the provision of connectivity and port services, and, if such expense did so relate, what portion (or percentage) of such expense actually supports the provision of connectivity and port services, and thus bears a relationship that is, “in nature and closeness,” directly related to network connectivity and port services. In turn, the Exchange allocated certain costs more to physical connectivity and
The following charts detail the individual line-item costs considered by the Exchange to be related to offering physical dedicated 1Gb and 10Gb ULL connectivity as well as the percentage of the Exchange's overall costs that such costs represent for each cost driver (
Below are additional details regarding each of the line-item costs considered by the Exchange to be related to offering physical 1Gb and 10Gb ULL connectivity.
The Exchange notes that it and its affiliated markets anticipate that by year-end 2024, there will be 289 employees (excluding employees at non-options/equities exchange subsidiaries of Miami International Holdings, Inc. (“MIH”), the holding company of the Exchange and its affiliated markets), and each department leader has direct knowledge of the time spent by each employee with respect to the various tasks necessary to operate the Exchange. Specifically, twice a year, and as needed with additional new hires and new project initiatives, in consultation with employees as needed, managers and department heads assign a percentage of time to every employee and then allocate that time amongst the Exchange and its affiliated markets to determine each market's individual Human Resources expense. Then, managers and department heads assign a percentage of each employee's time allocated to the Exchange into buckets including network connectivity, ports, market data, and other exchange services. This process ensures that every employee is 100% allocated, ensuring there is no double counting between the Exchange and its affiliated markets.
For personnel costs (Human Resources), the Exchange calculated an allocation of employee time for employees whose functions include providing and maintaining physical connectivity and performance thereof (primarily the Exchange's network infrastructure team, which spends most of their time performing functions necessary to provide physical connectivity). As described more fully above, the Exchange's parent company allocates costs to the Exchange and its affiliated markets and then a portion of the Human Resources costs allocated to the Exchange is then allocated to connectivity. From that portion allocated to the Exchange that applied to connectivity, the Exchange then allocated weighted averages of 49.1% for 10Gb ULL connectivity and 1.7% for 1Gb connectivity of each employee's time from the above group.
The Exchange also allocated Human Resources costs to provide physical
The estimates of Human Resources cost were therefore determined by consulting with such department leaders, determining which employees are involved in tasks related to providing physical connectivity, and confirming that the proposed allocations were reasonable based on an understanding of the percentage of time such employees devote to those tasks. This includes personnel from the Exchange departments that are predominately involved in providing 1Gb and 10Gb ULL connectivity: Business Systems Development, Trading Systems Development, Systems Operations and Network Monitoring, Network and Data Center Operations, Listings, Trading Operations, and Project Management. Again, the Exchange allocated 49.1% for 10Gb ULL connectivity and 1.7% for 1Gb connectivity of each of their employee's time assigned to the Exchange for 10Gb ULL and 1Gb connectivity, as stated above. Employees from these departments perform numerous functions to support 10Gb ULL connectivity, such as the installation, re-location, configuration, and maintenance of 10Gb ULL connections and the hardware they access. This hardware includes servers, routers, switches, firewalls, and monitoring devices. These employees also perform software upgrades, vulnerability assessments, remediation and patch installs, equipment configuration and hardening, as well as performance and capacity management. These employees also engage in research and development analysis for equipment and software supporting 10Gb ULL connectivity and design, and support the development and on-going maintenance of internally-developed applications as well as data capture and analysis, and Member and internal Exchange reports related to network and system performance. The above list of employee functions is not exhaustive of all the functions performed by Exchange employees to support 10Gb ULL and 1Gb connectivity, but illustrates the breath of functions those employees perform in support of the above cost and time allocations.
Lastly, the Exchange notes that senior level executives' time was only allocated to the 10Gb ULL and 1Gb connectivity related Human Resources costs to the extent that they are involved in overseeing tasks related to providing physical connectivity. The Human Resources cost was calculated using a blended rate of compensation reflecting salary, equity and bonus compensation, benefits, payroll taxes, and 401(k) matching contributions.
The Connectivity cost driver includes external fees paid to connect to other exchanges and third parties, cabling and switches required to operate the Exchange. The Connectivity cost driver is more narrowly focused on technology used to complete connections to the Exchange and to connect to external markets. The Exchange notes that its connectivity to external markets is required in order to receive market data to run the Exchange's matching engine and basic operations compliant with existing regulations, primarily Regulation NMS.
The Exchange relies on various connectivity providers for connectivity to the entire U.S. options industry, and infrastructure services for critical components of the network that are necessary to provide and maintain its System Networks and access to its System Networks via 1Gb and 10Gb ULL connectivity. Specifically, the Exchange utilizes connectivity providers to connect to other national securities exchanges and the Options Price Reporting Authority (“OPRA”). The Exchange understands that these service providers provide services to most, if not all, of the other U.S. exchanges and other market participants. Connectivity provided by these service providers is critical to the Exchanges daily operations and performance of its System Networks to which market participants connect to via 1Gb and 10Gb ULL connectivity. Without these services providers, the Exchange would not be able to connect to other national securities exchanges, market data providers or OPRA and, therefore, would not be able to operate and support its System Networks. The Exchange does not employ a separate fee to cover its connectivity provider expense and recoups that expense, in part, by charging for 1Gb and 10Gb ULL connectivity.
The next cost driver consists of internet Services and external market data. Internet services includes third-party service providers that provide the internet, fiber and bandwidth connections between the Exchange's networks, primary and secondary data centers, and office locations in Princeton, New Jersey and Miami, Florida.
External market data includes fees paid to third parties, including other exchanges, to receive market data. The Exchange includes external market data fee costs towards the provisions of physical connectivity because such market data is necessary for certain services related to connectivity, including pre-trade risk checks and checks for other conditions (
The Exchange relies on various content service providers for data feeds for the entire U.S. options industry, as well as content for critical components of the network that are necessary to provide and maintain its System Networks and access to its System Networks via 1Gb and 10Gb ULL connectivity. Specifically, the Exchange utilizes content service providers to receive market data from OPRA, other exchanges and market data providers. The Exchange understands that these service providers provide services to most, if not all, of the other U.S. exchanges and other market participants. Market data provided these service providers is critical to the Exchanges daily operations and performance of its System Networks to which market participants connect to via 1Gb and 10Gb ULL connectivity. Without these services providers, the Exchange would not be able to receive market data and, therefore, would not be able to operate and support its System Networks. The Exchange does not employ a separate fee to cover its
Data Center costs includes an allocation of the costs the Exchange incurs to provide physical connectivity in the third-party data centers where it maintains its equipment (such as dedicated space, security services, cooling and power). The Exchange notes that it does not own the primary data center or the secondary data center, but instead, leases space in data centers operated by third parties. The Exchange has allocated a high percentage of the total Data Center cost to physical 1Gb and 10Gb ULL connectivity (59.7% combined) because the third-party data centers and the Exchange's physical equipment contained therein is the most direct cost in providing physical access to the Exchange. In other words, for the Exchange to operate in a dedicated space with connectivity by market participants to a physical trading platform, the data centers are a very tangible cost, and in turn, if the Exchange did not maintain such a presence then physical connectivity would be of no value to market participants.
Hardware and Software Licenses includes hardware and software licenses used to operate and monitor physical assets necessary to offer physical connectivity to the Exchange. This software is necessary for the Exchange to operate its options trading platform in order to maintain premium network performance. This hardware includes servers, network switches, cables, optics, protocol data units, and cabinets, to maintain a state-of-the-art technology platform. Accordingly, the Exchange allocated a high percentage of the total Hardware and Software Maintenance and License cost to physical 1Gb and 10Gb ULL connectivity (57.9% combined) because the hardware and software licenses are the most direct cost in providing physical access to the Exchange's platform.
All physical assets, software, and hardware used to provide 1Gb and 10Gb ULL connectivity, which also includes assets used for testing and monitoring of Exchange infrastructure, were valued at cost, and depreciated or leased over periods ranging from three to five years. Thus, the depreciation cost primarily relates to servers necessary to operate the Exchange, some of which are owned by the Exchange and some of which are leased by the Exchange in order to allow efficient periodic technology refreshes. The Exchange also included in the Depreciation cost driver certain budgeted improvements that the Exchange intends to capitalize and depreciate with respect to 1Gb and 10Gb ULL connectivity in the near-term. As with the other allocated costs in the Exchange's updated Cost Analysis, the Depreciation cost was therefore narrowly tailored to depreciation related to 1Gb and 10Gb ULL connectivity. As noted above, the Exchange allocated 63.6% of its allocated depreciation costs to providing physical 10Gb ULL connectivity and 2.3% of all depreciation costs to providing 1Gb connectivity.
Finally, as with other exchange products and services, a portion of general shared expenses was allocated to overall physical connectivity costs. These general shared costs are integral to exchange operations, including its ability to provide physical connectivity. Costs included in general shared expenses include office space and office expenses (
The Exchange employed a process to determine a reasonable percentage to allocate general shared expenses to 1Gb and 10Gb ULL connectivity pursuant to its multi-layered allocation process. First, general expenses were allocated among the Exchange and affiliated markets as described above. Then, the general shared expense assigned to the Exchange was allocated across core services of the Exchange, including connectivity. Then, these costs were further allocated to sub-categories within the final categories,
Again, a portion of all shared expenses were allocated to the Exchange (and its affiliated markets) which, in turn, allocated a portion of that overall allocation to all physical connectivity on the Exchange. The Exchange then allocated 47% of the portion allocated to physical connectivity to 10Gb ULL connectivity and 1.7% of the portion allocated to physical connectivity to 1Gb connectivity. The Exchange believes these allocation percentages are reasonable because, while the overall dollar amounts may be higher than other cost drivers, the percentages are based on and in line with the percentage allocations of each of the Exchange's other cost drivers for each provision of connectivity. The percentage allocated to 10Gb ULL connectivity also reflects its importance to the Exchange's strategy and necessity towards the nature of the Exchange's overall operations, which is to provide a resilient, highly deterministic trading system that relies on faster 10Gb ULL connectivity than the Exchange's competitors to maintain premium performance. This allocation reflects the Exchange's focus on providing and maintaining high performance network connectivity, of which 10Gb ULL connectivity is a main contributor. The Exchange intends to differentiate itself by offering a “premium-product” network experience, as an operator of a high performance, ultra-low latency network with unparalleled system
The Exchange notes that the 47% allocation of general shared expenses for physical 10Gb ULL connectivity is higher than that allocated to general shared expenses for all other types of connectivity and ports. This is based on its allocation methodology that weighted costs attributable to each core service. While physical connectivity has several areas where certain tangible costs are heavily weighted towards providing such service (
The Exchange divided the total monthly cost for 10Gb ULL connectivity of $532,820 by the number of physical 10Gb ULL connections the Exchange anticipates maintaining upon expiration of the full length of the waiver period for 10Gb ULL connections at the time the proposed pricing was determined (40), to arrive at a cost of approximately $13,321 per month (rounded to the nearest dollar), per physical 10Gb ULL connection.
Similarly, the Exchange divided the total monthly cost for 1Gb connectivity of $18,872 by the number of physical 1Gb connections the Exchange anticipates maintaining upon expiration of the waiver period at the time the proposed pricing was determined (12), to arrive at a cost of approximately $1,573 per month (rounded to the nearest dollar), per physical 1Gb connection.
The following chart details the individual line-item costs considered by the Exchange to be related to offering Full Service MEO Ports as well as the percentage of the Exchange's overall costs such costs represent for such area (
Below are additional details regarding each of the line-item costs considered by the Exchange to be related to offering Full Service MEO Ports.
With respect to Full Service MEO Ports, the Exchange calculated Human Resources cost by taking an allocation of employee time for employees whose functions include providing Full Service MEO Ports and maintaining performance thereof (including a broader range of employees such as technical operations personnel, market operations personnel, and software engineering personnel) as well as a limited subset of personnel with ancillary functions related to maintaining such connectivity (such as sales, membership, and finance personnel). Just as described above for connectivity, the estimates of Human Resources cost were again determined by consulting with department leaders, determining which employees are involved in tasks related to providing Full Service MEO Ports and maintaining performance thereof, and confirming that the proposed allocations were reasonable based on an understanding of the percentage of their time such employees devote to tasks related to providing Full Service MEO Ports and maintaining performance thereof. This includes personnel from the following Exchange departments that are predominately involved in providing Full Service MEO Ports: Business Systems Development, Trading Systems Development, Systems Operations and Network Monitoring, Network and Data Center Operations, Listings, Trading Operations, and Project Management. The Exchange notes that senior level executives were allocated Human Resources costs to the extent they are involved in overseeing tasks specifically related to providing Full Service MEO Ports. Senior level executives were only allocated Human Resources costs to the extent that they are involved in managing personnel responsible for tasks integral to providing Full Service MEO Ports. The Human Resources cost was again calculated using a blended rate of compensation reflecting salary, equity and bonus compensation, benefits, payroll taxes, and 401(k) matching contributions.
The Connectivity cost driver includes external fees paid to connect to other exchanges and cabling and switches, as described above.
The next cost driver consists of internet services and external market data. Internet services includes third-party service providers that provide the internet, fiber and bandwidth
Data Center costs includes an allocation of the costs the Exchange incurs to provide Full Service MEO Ports in the third-party data centers where it maintains its equipment as well as related costs for market data to then enter the Exchange's system via Full Service MEO Ports (the Exchange does not own the primary data center or secondary date center, but instead leases space in data centers operated by third parties).
Hardware and Software Licenses includes hardware and software licenses used to monitor the health of the order entry services provided by the Exchange, as described above.
The vast majority of the software the Exchange uses to provide Full Service MEO Ports has been developed in-house and the cost of such development, which takes place over an extended period of time and includes not just development work, but also quality assurance and testing to ensure the software works as intended, is depreciated over time once the software is activated in the production environment. Hardware used to provide Full Service MEO Ports includes equipment used for testing and monitoring of order entry infrastructure and other physical equipment the Exchange purchased and is also depreciated over time.
All hardware and software, which also includes assets used for testing and monitoring of order entry infrastructure, were valued at cost, depreciated or leased over periods ranging from three to five years. Thus, the depreciation cost primarily relates to servers necessary to operate the Exchange, some of which is owned by the Exchange and some of which is leased by the Exchange in order to allow efficient periodic technology refreshes. The Exchange allocated 2.3% of all depreciation costs to providing Full Service MEO Ports. The Exchange allocated depreciation costs for depreciated software necessary to operate the Exchange to Full Service MEO Ports because such software is related to the provision of Full Service MEO Ports. As with the other allocated costs in the Exchange's updated Cost Analysis, the Depreciation cost driver was therefore narrowly tailored to depreciation related to Full Service MEO Ports.
Finally, a portion of general shared expenses was allocated to overall Full Service MEO Port costs as without these general shared costs the Exchange would not be able to operate in the manner that it does and provide application sessions. The costs included in general shared expenses include general expenses of the Exchange, including office space and office expenses (
The Exchange divided the total monthly cost for Full Service MEO Ports of $50,491 by the number of Full Service MEO Ports the Exchange anticipates maintaining upon expiration of the Initial Waiver Period at the time the proposed pricing was determined (112), to arrive at a cost of approximately $451 per month (rounded to the nearest dollar), per Full Service MEO Port.
The following chart details the individual line-item costs considered by the Exchange to be related to offering Limited Service MEO Ports as well as the percentage of the Exchange's overall costs such costs represent for such area (
Below are additional details regarding each of the line-item costs considered by the Exchange to be related to offering Limited Service MEO Ports.
With respect to Limited Service MEO Ports, the Exchange calculated Human Resources cost by taking an allocation of employee time for employees whose functions include providing Limited Service MEO Ports and maintaining performance thereof (including a broader range of employees such as technical operations personnel, market operations personnel, and software engineering personnel) as well as a limited subset of personnel with ancillary functions related to maintaining such connectivity (such as sales, membership, and finance personnel). Just as described above for connectivity, the estimates of Human Resources cost were again determined by consulting with department leaders, determining which employees are involved in tasks related to providing Limited Service MEO Ports and maintaining performance thereof, and confirming that the proposed allocations were reasonable based on an understanding of the percentage of their time such employees devote to tasks related to providing Limited Service MEO Ports and maintaining performance thereof. This includes personnel from the following Exchange departments that are predominately involved in providing Limited Service MEO Ports: Business Systems Development, Trading Systems Development, Systems Operations and Network Monitoring, Network and Data Center Operations, Listings, Trading Operations, and Project Management. The Exchange notes that senior level executives were allocated Human Resources costs to the extent they are involved in overseeing tasks specifically related to providing Limited Service MEO Ports. Senior level executives were only allocated Human Resources costs to the extent that they are involved in managing personnel responsible for tasks integral to providing and maintaining Limited Service MEO Ports. The Human Resources cost was again calculated using a blended rate of compensation reflecting salary, equity and bonus compensation, benefits, payroll taxes, and 401(k) matching contributions.
The Connectivity cost includes external fees paid to connect to other exchanges and cabling and switches, as described above.
The next cost driver consists of internet services and external market data. Internet services includes third-party service providers that provide the internet, fiber and bandwidth connections between the Exchange's networks, primary and secondary data centers, and office locations in Princeton and Miami. For purposes of Limited Service MEO Ports, the Exchange also includes a portion of its costs related to external market data. External market data includes fees paid to third parties, including other exchanges, to receive and consume market data from other markets. The Exchange includes external market data costs towards the provision of Limited Service MEO Ports because such market data is necessary (in addition to physical connectivity) to offer certain services related to such ports, such as validating orders on entry against the NBBO and checking for other conditions (
Data Center costs includes an allocation of the costs the Exchange incurs to provide Limited Service MEO Ports in the third-party data centers where it maintains its equipment as well as related costs for market data to then enter the Exchange's System via Limited Service MEO Ports (the Exchange does not own the primary data center or the secondary data center, but instead leases space in data centers operated by third parties).
Hardware and Software Licenses includes hardware and software licenses used to monitor the health of the order entry services provided by the Exchange, as described above.
The vast majority of the software the Exchange uses to provide Limited Service MEO Ports has been developed in-house and the cost of such development, which takes place over an extended period of time and includes not just development work, but also quality assurance and testing to ensure the software works as intended, is depreciated over time once the software is activated in the production environment. Hardware used to provide Limited Service MEO Ports includes equipment used for testing and monitoring of order entry infrastructure and other physical equipment the Exchange purchased and is also depreciated over time.
All hardware and software, which also includes assets used for testing and monitoring of order entry infrastructure, were valued at cost, depreciated or leased over periods ranging from three to five years. Thus, the depreciation cost primarily relates to servers necessary to operate the Exchange, some of which is owned by the Exchange and some of which is leased by the Exchange in order to allow efficient periodic
Finally, a portion of general shared expenses was allocated to overall Limited Service MEO Port costs as without these general shared costs the Exchange would not be able to operate in the manner that it does and provide Limited Service MEO Ports. The costs included in general shared expenses include general expenses of the Exchange, including office space and office expenses (
The Exchange divided the total monthly cost for Limited Service MEO Ports of $50,050 by the number of Limited Service MEO Ports the Exchange anticipates maintaining upon expiration of the Initial Waiver Period at the time the proposed pricing was determined (208, for charged ports, without the cap on the number of Limited Service MEO Ports), to arrive at a cost of approximately $241 per month (rounded to the nearest dollar), per Limited Service MEO Port.
The following charts detail the individual line-item costs considered by the Exchange to be related to offering FIX, CTD and FXD Ports as well as the percentage of the Exchange's overall costs such costs represent for such area (
Below are additional details regarding each of the line-item costs considered by the Exchange to be related to offering FIX, CTD and FXD Ports.
With respect to FIX, CTD and FXD Ports, the Exchange calculated Human Resources cost by taking an allocation of employee time for employees whose functions include providing FIX, CTD and FXD Ports and maintaining performance thereof (including a broader range of employees such as technical operations personnel, market operations personnel, and software engineering personnel) as well as a limited subset of personnel with ancillary functions related to maintaining such connectivity (such as sales, membership, and finance personnel). Just as described above for connectivity, the estimates of Human Resources cost were again determined by consulting with department leaders, determining which employees are involved in tasks related to providing FIX, CTD and FXD Ports and maintaining performance thereof, and confirming that the proposed allocations were reasonable based on an understanding of the percentage of their time such employees devote to tasks related to providing FIX, CTD and FXD Ports and maintaining performance thereof. This includes personnel from the following Exchange departments that are predominately involved in providing FIX, CTD and FXD Ports: Business Systems Development, Trading Systems Development, Systems Operations and Network Monitoring, Network and Data Center Operations, Listings, Trading Operations, and Project Management. The Exchange notes that senior level executives were allocated Human Resources costs to the extent they are involved in overseeing tasks specifically related to providing FIX, CTD and FXD Ports. Senior level executives were only allocated Human Resources costs to the extent that they are involved in managing personnel responsible for tasks integral to providing and maintaining FIX, CTD and FXD Ports. The Human Resources cost was again calculated using a blended rate of compensation reflecting salary, equity and bonus compensation, benefits, payroll taxes, and 401(k) matching contributions.
Lastly, the Exchange notes that the Human Resource allocations for Full Service MEO Ports and Limited Service MEO Ports are greater than the Human Resource allocations for FIX, CTD and FXD Ports. For its Human Resource cost driver, the Exchange allocated 5.1% to Full Service MEO Ports, 5% to Limited Service MEO Ports, 1.3% to FIX Ports, 0.9% to CTD Ports, and 0.3% to FXD Ports. This is because the MEO interface is a customized binary interface that the Exchange developed in-house and maintains on its own. The FIX interface is the industry standard for simple order entry which requires less development, maintenance, and support than the MEO interface. Likewise, the CTD and FXD interfaces only provide information concerning clearing trade updates and trade execution, respectively, which also require less development, maintenance and support than the MEO interface. The MEO interface is performance oriented and designed to meet the needs of more latency sensitive Members. Due to the in-house development of the MEO interface, the Exchange was required to expend more internal personnel to support the MEO interface than the FIX, CTD or FXD interfaces. Because of the materially higher cost associated with maintaining and supporting MEO Ports (Full Service and Limited Service) versus FIX, CTD and FXD Ports, the Exchange allocates a materially higher percentage of Human Resource expense to MEO Ports versus FIX, CTD and FXD Ports.
The Connectivity cost includes external fees paid to connect to other exchanges and cabling and switches, as described above.
The next cost driver consists of internet services and external market data. Internet services includes third-party service providers that provide the internet, fiber and bandwidth connections between the Exchange's networks, primary and secondary data centers, and office locations in Princeton and Miami. For purposes of FIX, CTD and FXD Ports, the Exchange also includes a portion of its costs related to external market data. External market data includes fees paid to third parties, including other exchanges, to receive and consume market data from other markets. The Exchange includes external market data costs towards the provision of FIX, CTD and FXD Ports because such market data is necessary (in addition to physical connectivity) to offer certain services related to such ports, such as validating orders on entry against the NBBO and checking for other conditions (
Data Center costs includes an allocation of the costs the Exchange
Hardware and Software Licenses includes hardware and software licenses used to monitor the health of the order entry services provided by the Exchange, as described above.
The vast majority of the software the Exchange uses to provide FIX, CTD and FXD Ports has been developed in-house and the cost of such development, which takes place over an extended period of time and includes not just development work, but also quality assurance and testing to ensure the software works as intended, is depreciated over time once the software is activated in the production environment. Hardware used to provide FIX, CTD and FXD Ports includes equipment used for testing and monitoring of order entry infrastructure and other physical equipment the Exchange purchased and is also depreciated over time.
All hardware and software, which also includes assets used for testing and monitoring of order entry infrastructure, were valued at cost, depreciated or leased over periods ranging from three to five years. Thus, the depreciation cost primarily relates to servers necessary to operate the Exchange, some of which is owned by the Exchange and some of which is leased by the Exchange in order to allow efficient periodic technology refreshes. The Exchange allocated 0.6%, 0.4% and 0.1% of all depreciation costs to providing FIX, CTD and FXD Ports, respectively. The Exchange allocated depreciation costs for depreciated software necessary to operate the Exchange because such software is related to the provision of FIX, CTD and FXD Ports. As with the other allocated costs in the Exchange's updated Cost Analysis, the Depreciation cost driver was therefore narrowly tailored to depreciation related to FIX, CTD and FXD Ports.
Lastly, the Exchange notes that the Depreciation allocations for MEO Ports (Full Service and Limited Service) are greater than the Depreciation allocations for FIX, CTD and FXD Ports. For its Depreciation cost driver, the Exchange allocated 2.3% to Full Service MEO Ports, 2.2% to Limited Service MEO Ports, 0.6% to FIX Ports, 0.4% to CTD Ports, and 0.1% to FXD Ports. As discussed above, this is because the MEO interface is a customized binary interface that the Exchange developed in-house and maintains on its own. The FIX interface is the industry standard for simple order entry which requires less development, maintenance, and support than the MEO interface. Likewise, the CTD and FXD interfaces only provide information concerning clearing trade updates and trade execution, respectively, which also require less development, maintenance and support than the MEO interface. The Exchange maintains more dedicated hardware per port for the MEO interface compared to the FIX, CTD and FXD interfaces. As a result, the MEO interface is supported by more dedicated in-house hardware and software than the FIX, CTD and FXD interfaces that is subject to depreciation. Thus, there is a greater amount of equipment supporting the MEO interface than the FIX, CTD and FXD interfaces, resulting in higher depreciation costs.
Finally, a portion of general shared expenses was allocated to overall FIX, CTD and FXD Port costs as without these general shared costs the Exchange would not be able to operate in the manner that it does and provide FIX, CTD and FXD Ports. The costs included in general shared expenses include general expenses of the Exchange, including office space and office expenses (
Lastly, the Exchange notes that the Allocated Shared Expense allocations for MEO Ports (Full Service and Limited Service) are greater than the same allocations for FIX, CTD and FXD Ports. For its Allocated Shared Expense cost driver, the Exchange allocated 1.7% to Full Service MEO Ports, 1.7% to Limited Service MEO Ports, 0.4% to FIX Ports, 0.3% to CTD Ports, and 0.1% to FXD Ports. As discussed above, this is because the MEO interface is a customized binary interface that the Exchange developed in-house and maintains on its own. The FIX interface is the industry standard for simple order entry which requires less development, maintenance, and support than the MEO interface. Likewise, the CTD and FXD interfaces only provide information concerning clearing trade updates and trade execution, respectively, which also require less development, maintenance and support than the MEO interface. The FIX interface is the industry standard for simple order entry which requires less development, maintenance, and support than the MEO interface. The MEO interface is performance oriented and designed to meet the needs of more latency sensitive Members. This required more internal personnel and resources to support than the FIX, CTD and FXD interfaces. Because of the materially higher cost associated with maintaining and supporting MEO Ports versus FIX, CTD and FXD Ports, the Exchange allocates a materially higher percentage of Allocated Shared expense to MEO Ports versus FIX, CTD and FXD Ports, which are less complex, standardized solutions.
The Exchange divided the total monthly cost for FIX Ports of $13,178 by the number of FIX Ports the Exchange anticipates maintaining upon expiration of the Initial Waiver Period at the time the proposed pricing was determined (25), to arrive at a cost of approximately $527 per month (rounded to the nearest dollar), per FIX Port.
Similarly, the Exchange divided the total monthly cost for CTD Ports of $9,158 by the number of CTD Ports the Exchange anticipates maintaining upon expiration of the Initial Waiver Period at the time the proposed pricing was
Finally, the Exchange divided the total monthly cost for FXD Ports of $3,054 by the number of FXD Ports the Exchange anticipates maintaining upon expiration of the Initial Waiver Period at the time the proposed pricing was determined (6), to arrive at a cost of approximately $509 per month (rounded to the nearest dollar), per FXD Port.
In conducting its Cost Analysis, the Exchange did not allocate any of its expenses in full to any core services (including physical connectivity or ports) and did not double-count any expenses. Instead, as described above, the Exchange allocated applicable cost drivers across its core services and used the same Cost Analysis to form the basis of this proposal and the separate filings the Exchange submitted (or plans to submit) proposing fees for proprietary market data feeds offered by the Exchange, as well as for Purge Ports. For instance, in calculating the Human Resources expenses to be allocated to physical connections based upon the above described methodology, the Exchange has a team of employees dedicated to network infrastructure and with respect to such employees the Exchange allocated network infrastructure personnel with a high percentage of the cost of such personnel (49.1%) given their focus on functions necessary to provide 10Gb ULL physical connections. The salaries of those same personnel were allocated only 6.8% to Full Service MEO Ports and 6.7% to Limited Service MEO Ports and the remaining 37.4% was allocated to 1Gb connectivity, other port services, transaction services, membership services and market data. The Exchange did not allocate any other Human Resources expense for providing physical connections to any other employee group, outside of a smaller allocation of 18.4% for 10Gb ULL connectivity or 19.7% for the entire network, of the cost associated with certain specified personnel who work closely with and support network infrastructure personnel. In contrast, the Exchange allocated much smaller percentages of costs (3.1% for Full Service MEO Ports and 0.6% for Limited Service MEO Ports) across a wider range of personnel groups in order to allocate Human Resources costs to providing Full Service MEO Ports and Limited Service MEO Ports. This is because a much wider range of personnel are involved in functions necessary to offer, monitor and maintain Full Service MEO Ports and Limited Service MEO Ports but the tasks necessary to do so are not a primary or full-time function.
In total, the Exchange allocated 35.7% of its personnel costs to providing 10Gb ULL and 1Gb ULL connectivity, 5.1% of its personnel costs to providing Full Service MEO Ports, 5% of its personnel costs to providing Limited Service MEO Ports, 1.3% of its personnel costs to providing FIX Ports, 0.9% of its personnel costs to providing CTD Ports, and 0.3% of its personnel costs to providing FXD Ports, for a total allocation of 48.3% Human Resources expense to provide these specific connectivity and port services. In turn, the Exchange allocated the remaining 51.7% of its Human Resources expense to membership services, transaction services, other port services and market data. Thus, again, the Exchange's allocations of cost across core services were based on real costs of operating the Exchange and were not double-counted across the core services or their associated revenue streams.
As another example, the Exchange allocated depreciation expense to all core services, including physical connections and ports, but in different amounts. The Exchange believes it is reasonable to allocate the identified portion of such expense because such expense includes the actual cost of the computer equipment, such as dedicated servers, computers, laptops, monitors, information security appliances and storage, and network switching infrastructure equipment, including switches and taps that were purchased to operate and support the network. Without this equipment, the Exchange would not be able to operate the network and provide connectivity and port services to its Members and non-Members and their customers. However, the Exchange did not allocate all of the depreciation and amortization expense toward the cost of providing connectivity services, but instead allocated approximately 65.9% of the Exchange's overall depreciation and amortization expense to connectivity services (63.6% attributed to 10Gb ULL physical connections, 2.3% to 1Gb physical connections, and 5.6% attributed to Full Service MEO Ports, Limited Service MEO Ports, FIX Ports, CTD Ports, and FXD Ports, combined). The Exchange allocated the remaining depreciation and amortization expense (approximately 28.5%) toward the cost of providing transaction services, membership services, other port services, and market data.
The Exchange notes that its revenue estimates are based on projections across all potential revenue streams and will only be realized to the extent such revenue streams actually produce the revenue estimated once the waiver periods expire for each applicable proposed fee. The Exchange does not yet know whether such expectations will be realized. For instance, in order to generate the revenue expected from connectivity, the Exchange will have to be successful in retaining existing clients that wish to maintain physical connectivity and/or ports or in obtaining new clients that will purchase such services. Similarly, the Exchange will have to be successful in retaining a positive net capture on transaction fees in order to realize the anticipated revenue from transaction pricing.
The Exchange notes that personnel began to plan for and develop the Exchange beginning in early 2023, and costs included in this Cost Analysis are related to the development and buildout of the Exchange since that time. During the Exchange's development and buildout that occurred throughout 2023 and continues to today, the Exchange routinely studied its aggregate costs to provide connectivity and port services, which were used to determine the proposed pricing for the provisions of connectivity and port services that are part of the Exchange's Cost Analysis, including projections. It is possible, however, that actual costs may be higher or lower. To the extent the Exchange sees growth in use of connectivity or port services it will receive additional revenue to offset future cost increases. However, if use of connectivity or port services is static or decreases, the Exchange might not realize the revenue that it anticipates or needs in order to cover applicable costs. Accordingly, the Exchange is committing to conduct a one-year review after implementation of these fees. The Exchange expects that it may propose to adjust fees at that time, to increase fees in the event that revenues fail to cover costs and a reasonable mark-up of such costs. Similarly, the Exchange may propose to decrease fees in the event that revenue materially exceeds our current projections. In addition, the Exchange will periodically conduct a review to inform its decision making on whether a fee change is appropriate (
The proposed fees will allow the Exchange to cover certain costs incurred by the Exchange associated with providing and maintaining necessary hardware and other network infrastructure as well as network monitoring and support services; without such hardware, infrastructure, monitoring and support the Exchange would be unable to provide the connectivity and port services. Much of the cost relates to monitoring and analysis of data and performance of the network via the subscriber's connection(s). The above costs, namely those associated with hardware, software, and human capital, enable the Exchange to measure network performance with nanosecond granularity. These same costs are also associated with time and money spent seeking to continuously improve the network performance, improving the subscriber's experience, based on monitoring and analysis activity. The Exchange routinely works to improve the performance of the network's hardware and software. The costs associated with maintaining and enhancing a state-of-the-art exchange network is a significant expense for the Exchange, and thus the Exchange believes that it is reasonable and appropriate to help offset those costs by amending fees for connectivity services. Subscribers, particularly those of 10Gb ULL connectivity, expect the Exchange to provide this level of support to connectivity so they continue to receive the performance they expect. This differentiates the Exchange from its competitors. As detailed above, the Exchange has five primary sources of revenue that it can potentially use to fund its operations: transaction fees, fees for connectivity services, membership and regulatory fees, and market data fees. Accordingly, the Exchange must cover its expenses from these five primary sources of revenue.
All revenue projections are based upon an annual return for each of the proposed fees once the relevant waiver periods expire.
The Exchange's Cost Analysis estimates the annual cost to provide 1Gb connectivity services will equal $226,461. Based on projected 1Gb connectivity services usage, the Exchange would generate annual revenue of approximately $241,200. The Exchange believes this represents a modest profit of 6.1% when compared to the cost of providing 1Gb connectivity services.
The Exchange's Cost Analysis estimates the annual cost to provide 10Gb ULL connectivity services will equal $6,393,839. Based on projected 10Gb ULL connectivity services usage, the Exchange would generate annual revenue of approximately $6,810,000. The Exchange believes this represents a modest profit of 6.1% when compared to the cost of providing 1Gb connectivity services.
The Exchange's Cost Analysis estimates the annual cost to provide Full Service MEO Port services will equal $605,907. Based on projected Full Service MEO Port service usage, the Exchange would generate annual revenue of approximately $399,000. The Exchange believes this represents a loss of 51.9% when compared to the cost of providing Full Service MEO Port services.
The Exchange's Cost Analysis estimates the annual cost to provide Limited Service MEO Port services will equal $600,608. Since launch, taking into account the proposal to remove the cap on the number of Limited Service MEO Ports available and based on projected Limited Service MEO Port service usage, the Exchange would generate annual revenue of approximately $624,000. The Exchange believes this represents a modest profit of 3.7% for providing Limited Service MEO Port services.
The Exchange's Cost Analysis estimates the annual cost to provide FIX Port services will equal $158,148. Based on projected FIX Port service usage, the Exchange would generate annual revenue of approximately $77,700. The Exchange believes this represents a loss of 103.5% when compared to the cost of providing FIX Port services.
The Exchange's Cost Analysis estimates the annual cost to provide CTD Port services will equal $109,908. Based on projected CTD Port service usage, the Exchange would generate annual revenue of approximately $54,000. The Exchange believes this represents a loss of 103.5% when compared to the cost of providing CTD Port services.
The Exchange's Cost Analysis estimates the annual cost to provide FXD Port services will equal $36,637. Based on projected FXD Port service usage, the Exchange would generate annual revenue of approximately $18,000. The Exchange believes this represents a loss of 103.5% when compared to the cost of providing FXD Port services.
Based on the above discussion, the Exchange believes that even if the Exchange earns the above revenue or incrementally more or less, the proposed fees are fair and reasonable because they will not result in pricing that deviates from that of other exchanges or a supra-competitive profit, when comparing the total expense of the Exchange associated with providing each of the proposed connectivity and port services versus the total projected revenue of the Exchange associated with connectivity and port services. The Exchange's affiliated options markets recently filed to raise certain connectivity and port fees to the same, or similar, rates as proposed herein and those filings were not suspended by the Commission.
The Exchange notes that its revenue estimate is based on projections and will only be realized to the extent customer activity produces the revenue estimated. As a competitor in the hyper-competitive exchange environment, and an exchange focused on driving competition, the Exchange does not yet know whether such projections will be realized. For instance, in order to generate the revenue expected from 10Gb ULL connectivity and Ports, the Exchange will have to be successful in retaining existing clients that wish to utilize 10Gb ULL connectivity and Ports and/or obtaining new clients that will purchase such access. To the extent the Exchange is successful in encouraging new clients to utilize 10Gb ULL connectivity and Ports, the Exchange does not believe it should be penalized for such success. To the extent the
The Exchange is owned by a holding company that is the parent company of five exchange markets and, therefore, the Exchange and its affiliated markets must allocate shared costs across all of those markets accordingly, pursuant to the above-described allocation methodology. In contrast, the IEX, which currently operates only one exchange, and MEMX, which just started operating two exchanges, in their recent non-transaction fee filings allocate the entire amount of that same cost to a single exchange. This can result in lower profit margins for the non-transaction fees established by IEX and MEMX because the single allocated cost does not experience the efficiencies and synergies that result from sharing costs across multiple exchanges. The Exchange and its affiliated markets often share a single cost, which results in cost efficiencies that can cause a broader gap between the allocated cost amount and projected revenue, even though the fee levels being proposed are lower or competitive with competing markets (as described above). To the extent that the application of a cost-based standard results in Commission Staff making determinations as to the appropriateness of certain profit margins, the Exchange believes that Commission Staff should also consider whether the proposed fee level is comparable to, or competitive with, the same fee charged by competing exchanges and how different cost allocation methodologies (such as across multiple markets) may result in different profit margins for comparable fee levels. Further, if Commission Staff is making determinations as to appropriate profit margins in their approval of exchange fees, the Exchange believes that the Commission should be clear to all market participants as to what they have determined is an appropriate profit margin and should apply such determinations consistently and, in the case of certain legacy exchanges, retroactively, if such standards are to avoid having a discriminatory effect.
Further, as is reflected in the proposal, the Exchange continuously and aggressively works to control its costs as a matter of good business practice. A potential profit margin should not be evaluated solely on its size; that assessment should also consider cost management and whether the ultimate fee reflects the value of the services provided. For example, a profit margin on one exchange should not be deemed excessive where that exchange has been successful in controlling its costs, but not excessive on another exchange where that exchange is charging comparable fees but has a lower profit margin due to higher costs. Doing so could have the perverse effect of not incentivizing cost control where higher costs alone could be used to justify fees increases.
The Exchange believes that the proposed fees for connectivity and ports are reasonable, fair, equitable, and not unfairly discriminatory because they are designed to align fees with services provided and will apply equally to all subscribers.
The Exchange believes that the proposed fees are equitably allocated among anticipated users of the network connectivity and port alternatives, as the Exchange expects that users of 10Gb ULL connections will consume substantially more bandwidth and network resources than users of 1Gb ULL connection. It is the experience of the Exchange's affiliates that this is the case as 10Gb ULL connection users account for more than 99% of message traffic over the network on those markets, which drives other costs that are linked to capacity utilization, as described above, while the users of the 1Gb ULL connections account for less than 1% of message traffic over the network. In the experience of the Exchange's affiliates, users of the 1Gb connections do not have the same business needs for the high-performance network as 10Gb ULL users.
The Exchange's high-performance network and supporting infrastructure (including employee support), will provide unparalleled system throughput with the network ability to support access to several distinct options markets. To achieve a consistent, premium network performance, the Exchange must build out and maintain a network that has the capacity to handle the message rate requirements of its most heavy network consumers. These billions of messages per day will consume the Exchange's resources and significantly contribute to the overall network connectivity expense for storage and network transport capabilities, just as they do for the Exchange's affiliate markets. The Exchange must then purchase additional storage capacity on an ongoing basis to ensure it has sufficient capacity to store these messages to satisfy its record keeping requirements under the Exchange Act.
The proposed fees for Full Service MEO Ports are not unfairly discriminatory because they would apply to all Market Makers equally. The Exchange proposes a pricing structure for Full Service MEO Ports that is the same as that used by the Exchange's affiliates, MIAX, MIAX Pearl, and MIAX Emerald, except with lower pricing for each tier.
To achieve a consistent, premium network performance, the Exchange must build out and maintain a network that has the capacity to handle the message rate requirements of its most heavy network consumers during anticipated peak market conditions. The need to support billions of messages per day will consume the Exchange's resources and significantly contribute to the overall network connectivity expense for storage and network transport capabilities. The Exchange may have to purchase additional storage capacity on an ongoing basis to ensure it has sufficient capacity to store these messages as part of it surveillance program and to satisfy its record keeping requirements under the Exchange Act.
The Exchange further believes that the proposed fees are reasonable, equitably allocated and not unfairly discriminatory because, for the flat fee in each tier, the Exchange provides each Member two (2) Full Service MEO Ports for each matching engine to which that Member is connected. Unlike other options exchanges that provide similar port functionality and charge fees on a per port basis,
The Exchange believes its proposal to provide a reduced Full Service MEO Port fee to Market Makers that fall within the 3rd and 4th levels of the proposed fee table is not unfairly discriminatory because this proposed lower monthly fee is designed to provide a lower fixed cost to those Market Makers who are willing to quote the entire Exchange market (or substantial amount of the Exchange market), as objectively measured by either number of classes assigned or national ADV, but who do not otherwise execute a significant amount of volume on the Exchange. The Exchange believes that, by offering lower fixed costs to Market Makers that execute less volume, the Exchange will retain and attract smaller-scale Market Makers, which are an integral component of the option industry marketplace, but have been decreasing in number in recent years, due to industry consolidation and lower market maker profitability. The Exchange believes it is beneficial to incentivize these additional Market Makers to register to make markets on the Exchange to increase liquidity as the Exchange begins operations. Increased liquidity from a diverse set of market participants helps facilitate price discovery and the interaction of orders, which benefits all market participants of the Exchange. Since these smaller-scale Market Makers may utilize less Exchange capacity due to lower overall volume executed, the Exchange believes it is reasonable, equitably allocated and not unfairly discriminatory to offer such Market Makers a lower fixed cost. The Exchange notes that its affiliated markets, MIAX, MIAX Pearl, and MIAX Emerald, offer a similar reduced fee for their Full Service MEO/MEI Ports for smaller-scale Market Makers.
The proposed fees for Limited Service MEO Ports are not unfairly discriminatory because they would apply to all Market Makers equally. All Market Makers will be eligible to receive four (4) free Limited Service MEO Ports per matching engine and those that elect to purchase more would be subject to the same monthly rate upon the expiration of the Initial Waiver Period, regardless of the number of additional Limited Service MEO Ports they purchase. In the experience of the Exchange's affiliated markets, certain market participants choose to purchase additional Limited Service MEO Ports based on their own particular trading/quoting strategies and feel they need a certain number of connections to the Exchange to execute on those strategies. Other market participants may continue to choose to only utilize the free Limited Service MEO Ports to accommodate their own trading or quoting strategies, or other business models. All market participants elect to receive or purchase the amount of Limited Service MEO Ports they require based on their own business decisions and all market participants would be subject to the same fee structure and flat fee. Every market participant may receive up to four (4) free Limited Service MEO Ports and those that choose to purchase additional Limited Service MEO Ports may elect to do so based on their own business decisions and would continue to be subject to the same monthly fee.
The Exchange believes that its proposed fee for Limited Service MEO Ports is reasonable, equitable, and not unfairly discriminatory because it is designed to align fees with services provided, will apply equally to all Members that are assigned Limited Service MEO Ports (either directly or through a Service Bureau), and will minimize barriers to entry by providing all Members with four free Limited Service MEO Ports from the time the Exchange launches operations.
The Exchange believes that providing four free Limited Service MEO Ports is reasonable, equitable, and not unfairly discriminatory because it will enable Members to access the Exchange on this basis without having to pay for Limited Service MEO Ports, thereby encouraging order flow and liquidity from a diverse set of market participants, facilitating price discovery and the interaction of orders. The Exchange believes that four Limited Service MEO Ports is an appropriate number to provide for free because it aligns with the maximum number of free Limited Service MEO/MEI Ports offered by each of the Exchange's affiliated options markets, and the Exchange believes will align with the amount of such ports that will be maintained by a substantial majority of Members once the Exchange launches operations.
Based on an initial survey of market participants that the Exchange anticipates will utilize Limited Service MEO Ports, the Exchange projects that only a few Members will be subject to any Limited Service MEO Port fees following the expiration of the Initial Waiver Period. In determining the appropriate number of Limited Service MEO Ports to provide for free, the Exchange considered several factors. First, the Exchange believes that, with respect to Limited Service MEO Port usage, Members will prefer at least two Limited Service MEO Ports, for redundancy purposes. Second, from a review of the number of Limited Service MEI Ports currently requested, the median number of ports per Member that will utilize Limited Service MEO Ports upon the launch of the Exchange is approximately eight. Thus, the Exchange believes that having four ports appears to be reasonably sufficient for the majority of Members to access the Exchange. On that basis, the Exchange chose four Limited Service MEO Ports as the maximum number of ports for which it will not charge to access the Exchange. The Exchange notes that some Members may use more Limited Service MEO Ports than other Members (and the four provided for free), which will be driven by the nature and volume of the business they conduct on the Exchange, and the choices they make in segmenting that business across different Limited Service MEO Ports. Allowing for this expansive use of Exchange capacity represents an aggregate cost that the Exchange seeks to recover through charging for ports five and higher.
The proposed fee structure is also designed to encourage Members to be efficient with their Limited Service MEO Port usage, thereby resulting in a corresponding increase in the efficiency that the Exchange would be able to realize in managing its aggregate costs for providing Limited Service MEO Ports. There is no requirement that any Member maintain a specific number of Limited Service MEO Ports and a Member may choose to maintain as many or as few of such ports as each Member deems appropriate.
The Exchange assessed the impact of the structure and amount of the proposed fee on all Members that the Exchange anticipates will utilize Limited Service MEO Ports. The Exchange believes that the proposed fee is fair and equitably allocated across all Members. As a threshold matter, the fee will not by design apply differently to different types or sizes of Members. Nonetheless, upon launch, the Exchange will be able to assess whether there may be any differences in the amount of the projected fee that correlates to the type and/or size of different Members. This assessment will help determine whether the number of assigned Limited Service MEO Ports, and thus projected fees, correlates closely to a Member's inbound message volume to the Exchange. This is a similar assessment as that performed by the Exchange's affiliates, MIAX and MIAX Emerald, prior to changing their respective Limited Service MEI Port fees recently. Based on the experience of the Exchange's affiliates, as inbound message volume increases per Member, the number of requested and assigned Limited Service MEO Ports increases. As the Exchange has not launched operations at the time of this filing, the Exchange does not have data to show any correlation between a Member's inbound message volume and the number of Limited Service MEO Port assigned to the Member. However, based on the experience of the Exchange's affiliates, MIAX and MIAX Emerald, Members with relatively higher inbound message volume were projected to pay higher fees because they requested more Limited Service MEI Ports for those exchanges.
To achieve consistent, premium network performance, the Exchange must build and maintain a network that has the capacity to handle the message rate requirements of its heaviest network consumers during anticipated peak market conditions. The resultant need to support the anticipated amount of billions of messages per day will consume the Exchange's resources and significantly contribute to the overall network connectivity expense for storage and network transport capabilities. This need will also require the Exchange to purchase additional storage capacity on an ongoing basis to ensure it has sufficient capacity to store these messages as part of it surveillance program and to satisfy its record keeping requirements under the Exchange Act.
The Exchange further believes that the proposed fees are reasonable, fair and equitable, and non-discriminatory because they will apply to all Members in the same manner and are not targeted at a specific type or category of market
Notwithstanding that Members with the highest number of Limited Service MEO Ports will pay a greater percentage of the total projected fees than is represented by their Limited Service MEO Port usage, the Exchange does not believe that the proposed fee is unfairly discriminatory. It is not possible to fully synchronize the Exchange's objective to provide four free Limited Service MEO Ports to all Members, thereby minimizing barriers to entry and incentivizing liquidity on the Exchange, with an approach that exactly aligns the projected per Member fee with each Member's number of requested Limited Service MEO Ports. As proposed, the Exchange is providing a reasonable number of Limited Service MEO Ports to each Member without charge. Any variance between projected fees and Limited Service MEO Port usage is attributable to objective differences among Members in terms of the number of Limited Service MEO Ports they determine are appropriate based on their trading on the Exchange. Further, the Exchange believes that the low amount of the proposed fee (which in the aggregate is projected to only partially recover the Exchange's directly-related costs as described herein) mitigates any disparate impact.
Further, the fee will help to encourage Limited Service MEO Port usage in a way that aligns with the Exchange's regulatory obligations. As a national securities exchange, the Exchange is subject to Regulation Systems Compliance and Integrity (“Reg SCI”).
Finally, the Exchange believes that the proposed fee is consistent with Section 11A of the Exchange Act in that it is designed to facilitate the economically efficient execution of securities transactions, fair competition among brokers and dealers, exchange markets and markets other than exchange markets, and the practicability of brokers executing investors' orders in the best market. Specifically, the proposed low, cost-based fee will enable a broad range of the Exchange Members to continue to connect to the Exchange, thereby facilitating the economically efficient execution of securities transactions on the Exchange, fair competition between and among such Members, and the practicability of Members that are brokers executing investors' orders on the Exchange when it is the best market.
To achieve consistent, premium network performance, the Exchange must build and maintain a network that has the capacity to handle the message rate requirements of its heaviest network consumers during anticipated peak market conditions. The resultant need to support the anticipated amount of billions of messages per day will consume the Exchange's resources and significantly contribute to the overall network connectivity expense for storage and network transport capabilities. This need will also require the Exchange to purchase additional storage capacity on an ongoing basis to ensure it has sufficient capacity to store these messages as part of it surveillance program and to satisfy its record keeping requirements under the Exchange Act.
The Exchange further believes that the proposed fees for FIX, CTD and FXD Ports are reasonable, fair and equitable, and non-discriminatory because they will apply to all Members in the same manner and are not targeted at a specific type or category of market participant engaged in any particular trading strategy. The fee for each type of port does not depend on any distinctions between Members, customers, broker-dealers, or any other entity. The fee will be assessed solely based on the number of FIX, CTD or FXD Ports an entity selects and not on any other distinction applied by the Exchange.
The Exchange does not believe that the proposed rule change will impose
The Exchange believes the proposed fees will not result in any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed fees will allow the Exchange to recoup its costs with a small profit for providing 1Gb and 10Gb ULL connectivity, while recouping some of its costs for a negative margin for providing Full Service MEO Ports, Limited Service MEO Ports, FIX Ports, CTD Ports and FXD Ports, following expiration of the respective waiver periods for each fee. As described above, the Exchange anticipates operating at a loss for the majority of the above services in order to provide a low-cost alternative to attract order flow and encourage market participants to experience the high determinism and resiliency of the Exchange's trading Systems. To do so, the Exchange chooses to waive the fees for all of the connectivity and port services for a specified time period. This will likely result in the Exchange forgoing revenue it could generate from assessing any fees without a waiver period or higher fees upon expiration of the waiver periods. The Exchange could seek to charge higher fees upon launch, but that could serve to discourage participation on the Exchange. Instead, the Exchange chooses to provide a low-cost exchange alternative to the options industry, which may result in lower initial revenues.
Further, the Exchange does not believe that the proposed fees would place certain market participants at the Exchange at a relative disadvantage compared to other market participants or affect the ability of such market participants to compete. The proposed fees will apply uniformly to all market participants regardless of the number of 1Gb or 10Gb ULL connections they choose to purchase. The proposed fees do not favor certain categories of market participants in a manner that would impose an undue burden on competition.
The Exchange does not believe that the proposed rule change would place certain market participants at the Exchange at a relative disadvantage compared to other market participants or affect the ability of such market participants to compete. In particular, Exchange personnel has been informally discussing potential fees for connectivity services with a diverse group of market participants that are likely to connect to the Exchange for launch (including large and small firms, firms with large connectivity service footprints and small connectivity service footprints, as well as extranets and service bureaus) for several months leading up to that time. The Exchange does not believe the proposed fees for connectivity services would negatively impact the ability of Members, non-Members (extranets or service bureaus), third-parties that purchase the Exchange's connectivity and resell it, and customers of those resellers to compete with other market participants or that they are placed at a disadvantage.
The Exchange does anticipate, however, that some market participants may reduce or discontinue use of connectivity services provided directly by the Exchange once the relevant waiver periods expire. The Exchange's affiliates have experienced similar reductions in use by their members for similar non-transaction fee increases. For example, one MIAX Pearl Options Market Maker terminated their MIAX Pearl Options membership on January 1, 2023 as a direct result of the similar proposed fee changes by MIAX Pearl Options.
The Exchange does not believe that the proposed fees for connectivity services place certain market participants at a relative disadvantage to other market participants because the proposed connectivity pricing is associated with relative usage of the Exchange by each market participant and does not impose a barrier to entry to smaller participants. The Exchange believes its proposed pricing is reasonable and, when coupled with the availability of third-party providers that also offer connectivity solutions, that participation on the Exchange is affordable for all market participants, including smaller trading firms. As described above, the connectivity services purchased by market participants typically increase based on their additional message traffic and/or the complexity of their operations. The market participants that utilize more connectivity services typically utilize the most bandwidth, and those are the participants that consume the most resources from the network. Accordingly, the proposed fees for connectivity services do not favor certain categories of market participants in a manner that would impose a burden on competition; rather, the allocation of the proposed connectivity fees reflects the network resources consumed by the various size of market participants and the costs to the Exchange of providing such connectivity services.
The Exchange does not believe its proposed fees for Limited Service MEO Ports will place certain market participants at a relative disadvantage to other market participants. All market participants would be eligible to receive four (4) free Limited Service MEO Ports and those that elect to purchase more would be subject to the same flat fee regardless of the number of additional Limited Service MEO Ports they purchase. All firms purchase the amount of Limited Service MEO Ports they require based on their own business decisions and similarly situated firms are subject to the same fees.
The Exchange also does not believe that the proposed rule change and price increase will result in any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act. As this is a fee increase, arguably if set too high, this fee would make it easier for other exchanges to compete with the Exchange. Only if this were a substantial fee decrease could this be considered a form of predatory pricing. In contrast, the Exchange believes that, without this fee increase, we are potentially at a competitive disadvantage to certain other exchanges that have in place higher fees for similar services. As we have noted, the Exchange believes that connectivity fees can be used to foster more competitive transaction pricing and additional infrastructure investment and there are other options markets of which market participants may connect to trade options at higher rates than the Exchange's. Accordingly, the Exchange does not believe its proposed fee changes impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The proposed rule change would adopt a new framework entitled the “Clearing Agency Framework for Certain Requirements on Governance and Conflicts of Interest” (“Framework”) of NSCC and its affiliates, Fixed Income Clearing Corporation (“FICC”) and The Depository Trust Company (“DTC,” and together with NSCC and FICC, the “Clearing Agencies”). The Framework would outline the way in which the Clearing Agencies and their Boards of Directors (“Boards”), as applicable, comply with certain sections of Rule 17ad-25,
In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Recently, the Commission adopted a new rule on governance and conflicts of interest for registered clearing agencies, Rule 17ad-25.
Proposed Section 1 of the Framework would constitute the executive summary of the Framework. Section 1 notes, among other things, that the Framework provides an outline for the way in which the Clearing Agencies and their Boards comply with the requirements of Rule 17ad-25(g), (h), (i) and (j)
Section 1 also notes that references in the Framework to the Clearing Agencies and governance bodies should be read in the singular or the plural as the context requires, and references to individual officers or employees, management, or functional areas generally refer to employees or functions of DTCC,
Proposed Section 2 of the Framework would cover Framework ownership and change management. The Framework would be owned and managed by an officer, within the General Counsel's Office of DTCC, on behalf of each Clearing Agency. Regarding change management, Section 2 would state that changes to the Framework would be approved by either (1) the Boards, (2) such Board committees as may be delegated authority by the Boards from time to time pursuant to their charters, or (3) with respect to certain changes, the General Counsel or Deputy General Counsels of the Clearing Agencies, pursuant to authority delegated by the Boards and with the advice and direction of the Framework owner. Section 2 also states that the Framework would be reviewed and approved annually by the Boards, or duly authorized committees of the Boards.
Proposed Section 3 of the Framework would describe how the Clearing Agencies comply with sections (g) and (h) of Rule 17ad-25.
Regarding the directors, the Framework would describe that directors are required to exercise their powers in good faith and in the best interests of the Clearing Agencies, rather than their own interests or the interests of another entity or person. Directors have a duty to each Clearing Agency that applies separately. A conflict of interest is present whenever the interests of the Clearing Agencies compete with the interests of a director, the director's employer, or any other party with which a director is associated, or otherwise whenever a director's corporate or personal interests could be viewed as affecting his or her objectivity or independent judgment in fulfilling the director's duties to the Clearing Agencies.
The Framework would state that directors are required to document and inform the Corporate Secretary of the Clearing Agencies promptly of the existence of any relationship or interest that reasonably could affect the independent judgment or decision-making of the director. The Framework would provide that the Corporate Secretary would escalate any disclosure to the General Counsel for evaluation. If such disclosure is deemed to be an actual conflict of interest, the General Counsel would notify the Non-Executive Chairman of the Board and discuss how such conflict can be mitigated or eliminated. In certain cases, it may be advisable for the involved director to recuse himself/herself from any discussion or vote related to the matter. In other cases, where the conflict is limited or indirect, the Non-Executive Chairman in consultation with the General Counsel may determine that the conflict should be disclosed to the full Board of Directors, but in light of such disclosure to the Board, recusal of the director is unnecessary. Further, there may be cases where a conflict is so significant or pervasive that the director would be unable to continue to serve on the Boards. In such instances, the Non-Executive Chairman and General Counsel would discuss with the Governance Committee. Any measures taken to address a conflict of interest would be documented by the Corporate Secretary's Office.
Regarding senior management, the Framework would state that all staff, including senior managers, must avoid activities or relationships that might affect objectivity in business decisions throughout employment with the Clearing Agencies. Staff, including senior managers, are required to disclose a relationship or interest that reasonably could affect objectivity in business decisions for review and determination on the appropriate course of action. A course of action for a conflict of interest could include actions such as recusal of the staff member from the particular matter, such as a vendor selection process or disallowing a staff member from being on the board of directors of a Clearing Agency vendor or client. The course of action will be documented.
Proposed Section 4 of the Framework would describe how the Clearing Agencies comply with section (i) of Rule 17ad-25.
Further, the Boards of the Clearing Agencies would: (1) review and approve the procedures described in the previous paragraph; (2) review and approve any agreement that would establish a relationship with a service provider for core services along with the required risk evaluation prepared by senior management; and (3) evaluate any action taken by senior management
Importantly, consistent with the definition from Rule 17ad-25(a), service providers for core services to the Clearing Agencies can be external service providers or intercompany affiliates (
Proposed Section 5 of the Framework would state that in support of their compliance with Rule 17ad-25(j),
The Framework would state further that the Advisory Councils and the ad hoc mechanisms assist the Boards of the Clearing Agencies in their obligation to solicit, consider, and document their consideration of the views of participants and other relevant stakeholders of the Clearing Agencies regarding material developments in their respective risk management and operations on a recurring basis. Specifically, senior management of the Clearing Agencies would bring material developments in the Clearing Agencies' risk management and operations to the Advisory Councils (or ad hoc mechanisms) for their consideration. Senior management would document the views of the stakeholders participating in these Advisory Councils and mechanisms on such developments. Senior management would then escalate the views on material developments in the Clearing Agencies risk management and operations to the Boards for their consideration.
The proposed rule changes also define “material developments” in the Clearing Agencies' risk management and operations as including developments that would significantly affect the risk and/or operational profile of a Clearing Agency and/or would significantly affect the rights and obligations of relevant stakeholders. Providing information on such material developments would enable stakeholders to identify and evaluate the risk, fees and other significant costs they incur by participating or otherwise interacting with a Clearing Agency. “Material developments” in the Clearing Agencies' risk management and operations would cover areas such as financial risk management, margin methodologies, cyber and operational resiliency, default management, fee structures, the introduction of new cleared products and services, access models, and the design and functioning of the processes and technology systems that support the infrastructure of the Clearing Agencies and the way that participants and other relevant stakeholders connect to such systems.
Subject to approval by the Commission, the Clearing Agencies would implement the proposed rule changes on December 5, 2024.
The Clearing Agencies believe that the proposed changes are consistent with Section 17A(b)(3)(F) of the Act
The proposed rule changes would address potential conflicts of interest, as described more fully in Item II(A)1(ii) above. The proposed rule changes would help ensure that the Clearing Agencies are able to identify potential conflicts of interest at the senior management and Board level and subject such conflicts to a uniform process of review, mitigation or elimination, and documentation. In addition, the proposed changes would address the situation where the Clearing Agencies may not have access to information necessary to identify a potential conflict of interest by requiring that a director be required to document and inform the Clearing Agencies promptly of the existence of any relationship or interest that reasonably could affect the independent judgment or decision-making of the director. The Clearing Agencies believe that including the foregoing requirements in the Framework would help ensure the integrity of the governance processes of
The proposed rule changes would also address risks presented by service providers for core services, as described more fully in Item II(A)1(iii) above. The proposed rule changes in this regard would require senior management of the Clearing Agencies to manage the risks presented by evaluating and documenting such risks, including under changes to circumstances and potential disruptions, among other things. The proposed rule changes would also provide for Board oversight of senior management regarding the management of risks presented by service providers for core services. These requirements for both senior management and the Boards would help prevent situations where a service provider for core services does not perform its obligations and therefore help prevent undermining the Clearing Agencies' sound risk management and operational resiliency. The Clearing Agencies believe that by helping to maintain their sound risk management and operational resiliency, the proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions and safeguard the securities and funds which are in the custody or control of the Clearing Agencies or for which they are responsible, consistent with Section 17A(b)(3)(F) of the Act.
The proposed changes would also address the obligation of the Boards to solicit and consider viewpoints of participants and other relevant stakeholders, as described more fully in Item II(A)1(iv) above. The proposed rule changes in this regard would require the Boards to solicit, consider and document their consideration of participant and relevant stakeholder viewpoints regarding material developments in their risk management and operations on a recurring basis. Obtaining viewpoints from participants and relevant stakeholders on material developments in the Clearing Agencies' risk management and operations would help optimize the Clearing Agencies' decisions, rules and procedures because it could provide the Clearing Agencies with a wider breadth of useful information as they make developments in these key areas. The Clearing Agencies believe that because the proposed rule changes could lead to better decisions, rules and procedures in these key areas, the proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions and foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.
The Clearing Agencies believe that the proposed rule changes could promote competition. Specifically, the Clearing Agencies believe, as the Commission noted in its adopting release regarding the adoption of Rule 17ad-25(g) and Rule 17ad-25(h),
The Clearing Agencies also believe that the proposed rule changes on the management of risks presented by service providers for core services described in Item II(A)1(iii) above could also promote competition. The proposed rule changes in this regard would require senior management of the Clearing Agencies to manage the risks presented by evaluating and documenting such risks, including under changes to circumstances and potential disruptions, among other things. The proposed rule changes would also provide for Board oversight of senior management regarding the management of risks presented by service providers for core services. These requirements for both senior management and the Boards would help prevent situations where a service provider for core services does not perform its obligations, and therefore help prevent undermining the Clearing Agencies' sound risk management and operational resiliency, which could also be costly for members of the Clearing Agencies. The Clearing Agencies believe that by implementing the proposed changes described in Item II(A)1(iii) above and thereby helping to avoid costs that members may incur if a service provider for core services does not meet its obligations, the proposed rule changes could promote competition.
The Clearing Agencies also believe that the proposed changes on the obligation of the Boards to solicit and consider viewpoints of participants and other relevant stakeholders described in Item II(A)1(iv) above could also promote competition. The proposed rule changes in this regard would require the Boards to solicit, consider and document their consideration of participant and relevant stakeholder viewpoints regarding material developments in their risk management and operations on a recurring basis. The Clearing Agencies believe that the proposed rule changes could promote competition because they would formalize a process by which multiple interested parties (that is, participants and relevant stakeholders) would have their viewpoints on material developments in risk management and operations considered by the Boards, and the Boards could have useful information on how emerging topics in these areas might impact participants and stakeholders.
The Clearing Agencies have not received or solicited any written comments relating to this proposal. If any written comments are received, they will be publicly filed as an Exhibit 2 to this filing, as required by Form 19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to Section IV (Solicitation of Comments) of the Exhibit 1A in the General Instructions to Form 19b-4, the Commission does not edit personal identifying information from comment submissions. Commenters should submit only information that they wish to make
All prospective commenters should follow the Commission's instructions on how to submit comments,
The Clearing Agencies reserve the right not to respond to any comments received.
Within 45 days of the date of publication of this notice in the
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
Cboe BYX Exchange, Inc. (the “Exchange” or “Cboe BYX”) proposes to adopt a fee schedule entitled “Consolidated Audit Trail Funding Fees”
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
the budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B)
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period from July 16, 2024 through December 31, 2024, CAT LLC will use the proceeds from the CAT Fee 2024-1 and the related Participant CAT fees to repay such notes.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. It is anticipated that AWS will provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools during the CAT Fee 2024-1 Period. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools), as well as various environments for CAT, such as development, performance testing, test, and production environments. AWS will perform cloud hosting services for both the CAT transaction database as well as the CAT Customer and Account Information System (“CAIS”) during the CAT Fee 2024-1 Period.
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
Plan Processor: FCAT. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT a negotiated monthly fixed price for the operation of the CAT. This fixed price contract was negotiated on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the breadth of services provided and market rates for similar types of activity. It is anticipated that FCAT will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2024-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
Law Firm: WilmerHale. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by WilmerHale. CAT LLC anticipates that it will continue to employ WilmerHale during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project and recognition that the hourly fee rates for this law firm are anticipated to be in line with market rates for specialized legal expertise. WilmerHale's billing rates are negotiated on an annual basis and are determined with reference to the rates charged by other leading law firms for similar work. The Participants assess WilmerHale's performance and review prospective budgets and staffing plans submitted by WilmerHale on an annual basis. The legal fees will be paid by CAT LLC to WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
Law Firm: Jenner. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by Jenner. CAT LLC anticipates that it will continue to employ Jenner during the CAT Fee 2024-1 Period based on among other things, their expertise, history with the project and recognition that their hourly fee rates are in line with market rates for specialized legal expertise. The legal fees will be paid by CAT LLC to Jenner.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
Legal Cost Estimates. CAT LLC estimates that the budget for legal services during the CAT Fee 2024-1 Period will be approximately $4,484,554.50. The budget for legal services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the legal services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual legal costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2024-1 Period will be approximately $652,623. The budget for consulting costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for consulting services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual consulting costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
Financial Advisory Firm: Anchin. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to financial advisory services performed by Anchin. CAT LLC anticipates that it will continue to employ Anchin during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. The fees for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Facilitate bill payments;
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Accounting Firm: Grant Thornton. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to accounting services performed by Grant Thornton. CAT LLC anticipates that it will continue to employ Grant Thornton during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. It is anticipated that Grant Thornton will continue to be engaged as an independent accounting firm to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. The fees for these services will be paid by CAT LLC to Grant Thornton. CAT LLC estimated the budget for the accounting costs for Grant Thornton for the CAT Fee 2024-1 Period based on the anticipated hourly rates and the anticipated services plus an administrative fee.
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's fee schedule. Proposed paragraph (b)(2) of the fee schedule would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300
The requirements of paragraph (b)(2) would apply to CAT Fee 2024-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the second and third quarter of 2024,
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The term “Customer Identifying Information” is defined in Section 1.1 of the CAT NMS Plan to mean
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2024-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not
The Exchange neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
2 p.m. on Thursday, September 5, 2024.
The meeting will be held via remote means and/or at the Commission's headquarters, 100 F Street NE, Washington, DC 20549.
This meeting will be closed to the public.
Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present.
In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission's website at
The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting.
The subject matter of the closed meeting will consist of the following topics:
Institution and settlement of injunctive actions;
Institution and settlement of administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations and enforcement proceedings.
At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that may consist of adjudicatory, examination, litigation, or regulatory matters.
For further information, please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551-5400.
Upon Written Request, Copies Available From Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549-2736.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget a request for extension and approval of the collections of information discussed below.
Section 10(f) of the Investment Company Act of 1940 (the “Act”) prohibits a registered investment company (“fund”) from purchasing any security during an underwriting or selling syndicate if the fund has certain
Rule 10f-3 under the Act permits a fund to engage in a securities transaction that otherwise would violate Section 10(f) if, among other things: (i) the fund's directors have approved procedures for purchases made in reliance on the rule, regularly review fund purchases to determine whether they comply with these procedures, and approve necessary changes to the procedures; and (ii) a written record of each transaction effected under the rule is maintained for six years, the first two of which in an easily accessible place.
Rule 10f-3 also conditionally allows managed portions of fund portfolios to purchase securities offered in otherwise off-limits primary offerings. To qualify for this exemption, Rule 10f-3 requires that the subadviser that is advising the purchaser be contractually prohibited from providing investment advice to any other portion of the fund's portfolio and consulting with any other of the fund's advisers that is a principal underwriter or affiliated person of a principal underwriter concerning the fund's securities transactions.
These requirements provide a mechanism for fund boards to oversee compliance with the rule. The required recordkeeping facilitates the Commission staff's review of Rule 10f-3 transactions during routine fund inspections and, when necessary, in connection with enforcement actions.
The staff estimates that approximately 745 funds engage in at least one Rule 10f-3 transaction each year, for a total of 745 such transactions.
The funds also must maintain and preserve these transactional records in accordance with the rule's recordkeeping requirement, and the staff estimates that it takes a fund approximately 20 minutes per transaction at a time cost of $28 per transaction to comply with this part of the rule.
In addition, fund boards must, no less than quarterly, examine each of these transactions to ensure that they comply with the fund's policies and procedures. The information or materials upon which the board relied in making its determination also must be maintained. The staff estimates that it takes a fund 1 hour per quarter at a cost of $262 per quarter to comply with the maintenance requirement of the rule.
The staff further estimates that reviewing and revising as needed written procedures for Rule 10f-3 transactions takes, on average for each fund, two hours of a compliance attorney's time at a cost of approximately $880
Based on an analysis of Form N-CEN filings, the staff estimates that approximately 589 new funds enter into sub-advisory agreements each year.
The staff estimates that complying with Rule 10f-3's requirements imposes an internal burden of 5,408 hours at an internal cost of approximately $1,755,155. This estimate does not include the time spent to report a fund's
The collection of information required by Rule 10f-3 is necessary to obtain the benefits of the rule. Responses will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
The public may view background documentation for this information collection at the following website:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 350l
Rule 17f-2 (17 CFR 270.17f-2), entitled “Custody of Investments by Registered Management Investment Company,” establishes safeguards for arrangements in which a registered management investment company or business development company (“fund”) is deemed to maintain custody of its own assets, such as when the fund maintains its assets in a facility that provides safekeeping but not custodial services.
Rule 17f-2's requirements are designed to safeguard fund assets from loss by requiring certain specific controls when those assets are not placed and maintained in the custody of a bank or other custodian as permitted under section 17(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-17(f)) (“Act”) and the rules thereunder. Specifically, the requirement that directors designate access persons is intended to ensure that directors evaluate the trustworthiness of insiders who handle fund assets. The requirements that access persons act jointly in handling fund assets, prepare a written notation of each transaction, and transmit the notation to another designated person are intended to reduce the risk of misappropriation of fund assets by access persons, and to ensure that adequate records are prepared, reviewed by a responsible third person, and available for examination by the Commission. The requirement that auditors verify fund assets without notice twice each year is intended to provide an additional deterrent to the misappropriation of fund assets and to detect any irregularities. Less frequent examinations by a fund's accountants could impair the ability of the Commission's examination staff to ascertain the fund's compliance with the rule.
The Commission staff estimates that each fund makes 974 responses and spends an average of 252 hours annually in complying with the rule's requirements.
The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act, and is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. Complying with the collections of information required by rule 17f-2 is mandatory for those funds that maintain custody of their own assets. Responses will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
The public may view background documentation for this information collection at the following website:
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
Cboe EDGA Exchange, Inc. (the “Exchange” or “Cboe EDGA”) proposes to adopt a fee schedule entitled “Consolidated Audit Trail Funding Fees”
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
Operating Committee to approve an operating budget for CAT LLC on an annual basis. It requires the budget to “include the projected costs of the Company, including the costs of developing and operating the CAT for the upcoming year, and the sources of all revenues to cover such costs, as well as the funding of any reserve that the Operating Committee reasonably deems appropriate for the prudent operation of the Company.” Section 11.1(a)(i) of the CAT NMS Plan further states that:
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2024-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2024-1 Period will be approximately $652,623. The budget for consulting costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for consulting services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual consulting costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
Financial Advisory Firm: Anchin. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to financial advisory services performed by Anchin. CAT LLC anticipates that it will continue to employ Anchin during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. The fees for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Facilitate bill payments;
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Accounting Firm: Grant Thornton. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to accounting services performed by Grant Thornton. CAT LLC anticipates that it will continue to employ Grant Thornton during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. It is anticipated that Grant Thornton will continue to be engaged as an independent accounting firm to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. The fees for these services will be paid by CAT LLC to Grant Thornton. CAT LLC estimated the budget for the accounting costs for Grant Thornton for the CAT Fee 2024-1 Period based on the anticipated hourly rates and the anticipated services plus an administrative fee.
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
The Exchange neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
The Exchange proposes to amend the NYSE Price List (“Price List”) to establish fees for Industry Members
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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period from July 16, 2024 through December 31, 2024, CAT LLC will use the proceeds from the CAT Fee 2024-1 and the related Participant CAT fees to repay such notes.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontrator [
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calcuated [
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
Law Firm: WilmerHale. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by WilmerHale. CAT LLC anticipates that it will continue to employ WilmerHale during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project and recognition that the hourly fee rates for this law firm are anticipated to be in line with market rates for specialized legal expertise. WilmerHale's billing rates are negotiated on an annual basis and are determined with reference to the rates charged by other leading law firms for similar work. The Participants assess WilmerHale's performance and review prospective budgets and staffing plans submitted by WilmerHale on an annual basis. The legal fees will be paid by CAT LLC to WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budet [
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Faciliate [
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, a “Consolidated Audit Trail Funding Fees” section would be added to the Exchange's Price List, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(3) to the Consolidated Audit Trail Funding Fees section of the Price List. Proposed paragraph (a)(3) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) to the Consolidated Audit Trail Funding Fees section of the Price List would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) to the Consolidated Audit Trail Funding Fees section of the Price List also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) to the Consolidated Audit Trail Funding Fees section of the Price List would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) to the Consolidated Audit Trail Funding Fees section of the Price List would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) to the Consolidated Audit Trail Funding Fees section of the Price List also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) to the Consolidated Audit Trail Funding Fees section of the Price List would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) to the Consolidated Audit Trail Funding Fees section of the Price List would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the Consolidated Audit Trail Funding Fees section of its Price List to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange proposes to add this requirement to the Exchange's Price List. Proposed paragraph (b)(2) to the Consolidated Audit Trail Funding Fees section of the Price List would state:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to
The requirements of paragraph (b)(2) would apply to CAT Fee 2024-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the second and third quarter of 2024,
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The term “Customer Identifying Information” is defined in Section 1.1 of the CAT NMS Plan to mean
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2024-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the Price List. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to reserve Options 2, Section 10, Directed Market Makers.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
BX proposes to reserve Options 2, Section 10, Directed Market Makers. The Exchange does not currently offer Directed Order
BX received approval for its Directed Order functionality in 2015.
With the removal of the Directed Order functionality, the Exchange proposes to reserve the description of a Directed Order within paragraph (a)(2) of Options 3, Section 7, Types of Orders and Order and Quote Protocols. The Exchange also proposes to remove references to Directed Market Maker or “DMM” allocation entitlements within Options 3, Section 10, Order Book Allocation.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that it is consistent with the Act to remove BX's Directed Order functionality, which is not operative, because it would protect investors and the general public by avoiding confusion as whether the Exchange offers this functionality. BX received approval for its Directed Order functionality in 2015.
The Exchange also believes that removing references to a Directed Order within Options 3, Section 7(a)(2) and removing references to Directed Market Maker or “DMM” allocation entitlements within Options 3, Section 10 will bring greater clarity to the unavailability of the Directed Order functionality. Amending the clause in Options 3, Section 10(a)(2)(iii)(2) related to All-or-None Orders is consistent with the Act because All-or-None Orders are to be executed in their entirety or not at all. All-or-None Orders do not rest on the order book on BX and would not be allocated pursuant to Options 3, Section 10, which describes order book allocation for resting orders.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange's proposal to remove BX's Directed Order functionality does not impose an undue burden on intramarket competition because no Market Maker has ever utilized this functionality as the functionality has never been operative. The Exchange also believes that removing references to a Directed Order within Options 3, Section 7(a)(2) and removing references to Directed Market Maker or “DMM” allocation entitlements within Options 3, Section 10 will bring greater clarity to the unavailability of the Directed Order functionality. The Exchange's proposal to remove BX's Directed Order functionality does not impose an undue burden on intermarket competition as other options exchanges may elect to offer Directed Order functionality. The Exchange notes that today other options exchanges offer this functionality.
Amending the clause in Options 3, Section 10(a)(2)(iii)(2) related to All-or-None Orders does not impose an undue burden on intramarket competition because All-or-None Orders are to be executed in their entirety or not at all and they do not rest on the order book. Amending the clause in Options 3, Section 10(a)(2)(iii)(2) related to All-or-None Orders does not impose an undue burden on intermarket competition because other options exchanges have similar rules for order allocation for resting orders only. Also, the all-or-none order type on another exchange could allow it to rest on the order book.
Because the foregoing 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 for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of the 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 shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
Cboe BZX Exchange, Inc. (the “Exchange” or “Cboe BZX”) proposes to adopt a fee schedule entitled “Consolidated Audit Trail Funding Fees”
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition,
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period from July 16, 2024 through December 31, 2024, CAT LLC will use the proceeds from the CAT Fee 2024-1 and the related Participant CAT fees to repay such notes.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. It is anticipated that AWS will provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools during the CAT Fee 2024-1 Period. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools), as well as various environments for CAT, such as development, performance testing, test, and production environments. AWS will perform cloud hosting services for both the CAT transaction database as well as the CAT Customer and Account Information System (“CAIS”) during the CAT Fee 2024-1 Period.
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2024-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
Operating Fee Estimates. CAT LLC estimates that the budget for operating fees during the CAT Fee 2024-1 Period will be approximately $14,008,947.50. The budget for operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual operating fees incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee Filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% decrease of $151,202 from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of $81,250 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2024-1 Period will be approximately $652,623. The budget for consulting costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for consulting services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual consulting costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the insurance costs from the Original 2024 Budget. CAT LLC's proposed annual budget for insurance costs for 2024 decreased by $525,680 from the Original 2024 Budget, from $1,868,025 to $1,342,345. For the Original 2024 Budget, CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the 2023 insurance premiums plus a 15% year-over-year increase. However, the budgeted insurance costs as set forth in the Updated 2024 Budget were based on the actual insurance quote from USI for 2024.
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the
Financial Advisory Firm: Anchin. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to financial advisory services performed by Anchin. CAT LLC anticipates that it will continue to employ Anchin during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. The fees for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Facilitate bill payments;
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Accounting Firm: Grant Thornton. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to accounting services performed by Grant Thornton. CAT LLC anticipates that it will continue to employ Grant Thornton during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. It is anticipated that Grant Thornton will continue to be engaged as an independent accounting firm to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. The fees for these services will be paid by CAT LLC to Grant Thornton. CAT LLC estimated the budget for the accounting costs for Grant Thornton for the CAT Fee 2024-1 Period based on the anticipated hourly rates and the anticipated services plus an administrative fee.
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of Budgeted CAT Costs 2024-1 other than the reserve. Accordingly, the reserve for the CAT Fee 2024-1 Period was calculated by multiplying the Budgeted CAT Costs 2024-1 other than the reserve amount, which is $110,781,540, by 25%.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
(i) Phase 2a
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
The Exchange neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (the “Act”)
Pursuant to the provisions of Section 19(b)(1) of the Act IEX is filing with the Commission a proposed rule change to establish fees for Industry Members
The text of the proposed rule change is available at the Exchange's website at
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.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2024-1 to recover the reasonably budgeted CAT costs for July 16, 2024 through December 31, 2024, in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2024-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2024-1 (“Fee Rate 2024-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2024-1”) for the period from July 16, 2024 through December 31, 2024 (“CAT Fee 2024-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the four-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2024-1 as the first CAT Fee related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee 2024-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2024-1 “would be calculated as described in paragraph II” of Section 11.3(a)(i)(A) of the CAT NMS Plan, which states that “[d]uring each year, the Operating Committee will calculate a new Fee Rate by dividing the reasonably budgeted CAT costs for the remainder of the year by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the remainder of the year.”
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
Operating Committee to approve an operating budget for CAT LLC on an annual basis. It requires the budget to “include the projected costs of the Company, including the costs of developing and operating the CAT for the upcoming year, and the sources of all revenues to cover such costs, as well as the funding of any reserve that the Operating Committee reasonably deems appropriate for the prudent operation of the Company.” Section 11.1(a)(i) of the CAT NMS Plan further states that:
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2024 for CAT LLC in December 2023 (“Original 2024 Budget”).
As described in detail below, the Budgeted CAT Costs 2024-1 would be $138,476,925. CEBBs collectively will be responsible for one-third of the Budged CAT Costs 2024-1 (which is $46,158,975), and CEBSs collectively will be responsible for one-third of Budgeted CAT Costs 2024-1 (which is $46,158,975).
The following describes in detail Budgeted CAT Costs 2024-1 for the CAT Fee 2024-1 Period. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below are reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down Budgeted CAT Costs 2024-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period from July 16, 2024 through December 31, 2024, CAT LLC will use the proceeds from the CAT Fee 2024-1 and the related Participant CAT fees to repay such notes.
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the cloud hosting services costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $76,278,426 in technology costs for cloud hosting services for the CAT Fee 2024-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the CAT Fee 2024-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontrator [
The cost for AWS cloud services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to CAT LLC. During the CAT 2024-1 Period, it is expected that AWS will provide cloud hosting services for volumes of CAT Data far in excess of the volume predictions set forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT Reporters are submitting their data to the CAT, it “must be sized to receive[,] process and load more than 58 billion records per day,”
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2024-1 Period will be approximately $76,278,426. The budget for cloud hosting services costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for cloud hosting services costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the cloud hosting services costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2024-1 Period based on an assumption of 30% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for CAIS. CAT LLC determined these growth assumptions in coordination with FCAT based on an analysis of a variety of existing data and alternative growth scenarios. In addition, the budget for cloud hosting services for the CAT Fee 2024-1 Period includes a budget for the cost of re-processing data as approved by the CAT Operating Committee.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for cloud hosting services costs from the prior CAT Fee filing. CAT LLC's proposed annual budget for cloud hosting services costs for 2024 decreased about 3.5% from the Original 2024 Budget to the Updated 2024 Budget, from $154,624,108 to $148,789,981. Although there were expected cost increases related to data volume growth and the associated compute and storage of the increased data levels, as well as from additional capacity for OTQT systems that were added to meet the performance standards set forth in the requirements of the recent SEC exemptive order from November 2023,
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $14,008,947.50 in technology costs for operating fees for the CAT Fee 2024-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
Plan Processor: FCAT. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT a negotiated monthly fixed price for the operation of the CAT. This fixed price contract was negotiated on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the breadth of services provided and market rates for similar types of activity. It is anticipated that FCAT will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversee the security of the CAT;
• Monitor the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provide support to subcontractors under the Plan Processor Agreement;
• Provide support in discussions with the Participants and the SEC and its staff;
• Operate the FINRA CAT Helpdesk;
• Facilitate communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administer the CAT website and all of its content;
• Maintain cyber security insurance related to the CAT; and
• Provide technical support and assistance with connectivity, data access, and user support, including the use of CAT Data and query tools, for Participants and the SEC staff.
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Market Data Provider: Exegy. It is anticipated that the operating fees costs for the CAT Fee 2024-1 Period will include costs related to the receipt of certain market data for the CAT pursuant to an agreement between FCAT and Exegy Incorporated (“Exegy”). CAT LLC determined that Exegy would provide market data that included all data elements required by the CAT NMS Plan,
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2024-1 Period based on monthly rates set forth in the Plan Processor Agreement and the agreement with Exegy. CAT LLC also recognized that the operating fees are generally consistent throughout the year. This process for estimating the budget for the operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for operating fees of $13,558,875 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for operating fees for 2024 increased from $27,223,132 to $27,768,718
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the CAIS operating fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $9,278,384.50 in technology costs for CAIS operating fees for the CAT Fee 2024-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of CAIS, and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2024-1 Period, it is anticipated that FCAT will provide CAIS-related services. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for CAIS-related services provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's CAIS-related services on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan, taking into consideration a variety of factors, including the services to be provided and market rates for similar types of activity. During the CAT Fee 2024-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of CAIS.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2024-1 Period will be approximately $9,278,384.50. The budget for CAIS operating fees during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for CAIS operating fees for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual CAIS operating fees costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC calculated the budget for FCAT's CAIS-related services for the CAT Fee 2024-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2024 Budget. The Original 2024 Budget estimated a budget for CAIS operating fees of $10,418,666 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the CAIS operating fees from the Original 2024 Budget. CAT LLC's proposed annual budget for CAIS operating fees for 2024 had a small 2% percent decrease of $491,821 from the Original 2024 Budget to the Updated 2024 Budget, from $20,691,740 to $20,199,919. Correspondingly, the proposed budget for CAIS operating fees for the third and fourth quarters of 2024 had a small 1% percentage decrease of $151,202, from $10,273,076 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the change request fees set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $162,500 in technology costs for change request fees for the CAT Fee 2024-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
During the CAT Fee 2024-1 Period, it is anticipated that CAT LLC will engage FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The budget for change requests for the CAT Fee 2024-1 Period includes a placeholder of $162,500 for potential change request fees that may be necessary in accordance with the Plan Processor Agreement. The placeholder amount was determined based on prior experience with change requests related to the CAT.
CAT LLC estimates that the budget for change requests during the CAT Fee 2024-1 Period will be approximately $162,500. The budget for change requests during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the change requests for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual change request costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2024-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2024 Budget. The Original 2024 Budget estimated a change request budget of
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the change request fees from the Original 2024 Budget. CAT LLC's proposed annual budget for change requests for 2024 decreased by $81,250 from the Original 2024 Budget to the Updated 2024 Budget, from $243,750 to $162,500. CAT LLC has reduced the annual budget for a placeholder for change request fees for 2024 by one-third, as time has passed without additional change requests anticipated by this placeholder amount. Correspondingly, the proposed budget for change requests for the third and fourth quarters remained the same at $162,500 for the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the capitalized developed technology costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,101,990 in technology costs for capitalized developed technology costs for the CAT Fee 2024-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for CAIS in accordance with the Plan Processor Agreement with FCAT, as well as costs related to a set of technology changes to be implemented by FCAT.
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2024-1 Period will be approximately $4,101,990. The budget for capitalized developed technology costs during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for capitalized developed technology costs for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual capitalized developed technology costs incurred in July 2024 (as CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. The Original 2024 Budget estimated a budget for capitalized developed technology costs of $2,300,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in capitalized developed technology costs from the Original 2024 Budget. CAT LLC's proposed budget for capitalized developed technology costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for capitalized developed technology costs for 2024 increased by $5,461,480 from the Original 2024 Budget of $2,300,000 to the Updated 2024 Budget of $7,761,480.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the legal costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $4,484,554.50 in legal costs for the CAT Fee 2024-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2024-1 Period.
Law Firm: WilmerHale. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by WilmerHale. CAT LLC anticipates that it will continue to employ WilmerHale during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project and recognition that the hourly fee rates for this law firm are anticipated to be in line with market rates for specialized legal expertise. WilmerHale's billing rates are negotiated on an annual basis and are determined with reference to the rates charged by other leading law firms for similar work. The Participants assess WilmerHale's performance and review prospective budgets and staffing plans submitted by WilmerHale on an annual basis. The legal fees will be paid by CAT LLC to WilmerHale.
During the CAT Fee 2024-1 Period, it is anticipated that WilmerHale will
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal interpretations of CAT NMS Plan requirements;
• Provide legal support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team;
• Draft SRO rule filings related to the CAT Compliance Rule;
• Manage corporate governance matters, including supporting Operating Committee meetings and preparing resolutions and consents;
• Assist with communications with the industry, including CAT Alerts and presentations;
• Provide guidance regarding the confidentiality of CAT Data;
• Assist with cost management analyses and proposals;
• Assist with commercial contract-related matters, including change orders, Plan Processor Agreement items, and subcontract matters;
• Provide support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues;
• Assist with CAT budget and FCAT costs;
• Assist other counsel for CAT on litigation-related matters; and
• Assist with legal responses related to third-party data requests.
CAT LLC estimated the budget for the legal costs for WilmerHale for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including WilmerHale fee rates, historical legal fees, information related to pending legal issues and potential future legal issues, and discussions with WilmerHale.
Law Firm: Jenner. It is anticipated that legal costs during the CAT Fee 2024-1 Period will include costs related to the legal services performed by Jenner. CAT LLC anticipates that it will continue to employ Jenner during the CAT Fee 2024-1 Period based on among other things, their expertise, history with the project and recognition that their hourly fee rates are in line with market rates for specialized legal expertise. The legal fees will be paid by CAT LLC to Jenner.
During the CAT Fee 2024-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against Chair Gensler, the SEC and CAT LLC challenging the validity of the Rule 613 and the CAT and alleging various constitutional, statutory, and common law claims (“Texas Litigation”);
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2024-1 Period through an analysis of a variety of factors, including Jenner fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with Jenner.
Legal Cost Estimates. CAT LLC estimates that the budget for legal services during the CAT Fee 2024-1 Period will be approximately $4,484,554.50. The budget for legal services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the legal services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual legal costs incurred in July 2024 (as the CAT Fee 2024-1 Period began halfway through July, on July 16, 2024).
CAT LLC estimated the budget for the legal services for the CAT Fee 2024-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues, and discussions with the law firms. This process for estimating the budget for the legal services for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2024 Budget. The Original 2024 Budget estimated a budget for legal costs of $2,440,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the legal costs from the Original 2024 Budget. CAT LLC's proposed budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget. The annual budget for legal costs for 2024 increased from the Original 2024 Budget to the Updated 2024 Budget, from $4,460,000 to $8,146,599. Correspondingly, the proposed budget for legal costs for the third and fourth quarters increased from $2,020,000
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the consulting costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $652,623 in consulting costs for the CAT Fee 2024-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2024-1 Period. These consulting costs include costs for advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses.
It is anticipated that the costs for CAT during CAT Fee 2024-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2024-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
CAT LLC estimates that the budet [
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2024-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, as well as discussions with Deloitte. The Original 2024 Budget estimated a budget for consulting cost of $800,000 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the consulting costs from the Original 2024 Budget. CAT LLC's proposed annual budget for consulting costs for 2024 has not changed from the Original 2024 Budget to the Updated 2024 Budget; it remains $1,600,000. Correspondingly, the proposed budget for consulting costs for the third and fourth quarters of 2024 decreased by $85,580 (which is approximately 11%), from $800,000 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the insurance costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,342,345 in insurance costs for the CAT Fee 2024-1 Period. The insurance costs represent the costs to be incurred for insurance for CAT during the CAT Fee 2024-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2024-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during CAT Fee 2024-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2024-1 Period based on the actual insurance quote from USI for 2024. The annual premiums would be paid by CAT LLC to USI.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the professional and administration costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $428,544.50 in professional and administration costs for the CAT Fee 2024-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
Financial Advisory Firm: Anchin. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to financial advisory services performed by Anchin. CAT LLC anticipates that it will continue to employ Anchin during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. The fees for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2024-1 Period, including the following:
• Update and maintain internal controls;
• Provide cash management and treasury functions;
• Faciliate [
• Provide monthly bookkeeping;
• Review vendor invoices and documentation in support of cash disbursements;
• Provide accounting research and consultations on various accounting, financial reporting and tax matters;
• Address not-for-profit tax and accounting considerations;
• Prepare tax returns;
• Address various accounting, financial reporting and operating inquiries from Participants;
• Develop and maintain annual operating and financial budgets, including budget to actual fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee and various CAT working groups;
• Prepare monthly, quarterly and annual financial statements;
• Support the annual financial statement audits by an independent auditor;
• Review historical costs from inception;
• Provide accounting and financial information in support of SEC filings; and
• Perform additional ad hoc accounting and financial advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based on historical costs adjusted for cost of living rate increases, and projected incremental advisory and support services. The budgeted costs for the CAT Fee 2024-1 Period are based on the estimated annual costs, minus actual costs through June and estimated costs for July.
Accounting Firm: Grant Thornton. It is anticipated that the professional and administration costs for the CAT Fee 2024-1 Period will include costs related to accounting services performed by Grant Thornton. CAT LLC anticipates that it will continue to employ Grant Thornton during CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise and fees, which are anticipated to remain in line with market rates for these financial advisory services. It is anticipated that Grant Thornton will continue to be engaged as an independent accounting firm to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. The fees for these services will be paid by CAT LLC to Grant Thornton. CAT LLC estimated the budget for the accounting costs for Grant Thornton for the CAT Fee 2024-1 Period based on the anticipated hourly rates and the anticipated services plus an administrative fee.
Professional and Administration Cost Estimates. CAT LLC estimates that the budget for professional and administration services during the CAT Fee 2024-1 Period will be approximately $428,544.50. The budget for professional and administration services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the professional and administration services for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual professional and administration costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the professional and administration costs for the CAT Fee 2024-1 Period based on a review of past professional and administration costs, potential future professional and administration needs, the proposed rates and other contractual issues, as well as discussions with Anchin and Grant Thornton. This process for estimating the budget for the professional and administration costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the professional and administration costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for professional and administration costs of $395,930 for the first two quarters of 2024.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the professional and administration costs from the Original 2024 Budget. CAT LLC's proposed annual budget for professional and administration costs for 2024 had a very minor increase of $2,666 from the Original 2024 Budget, from $821,264 to $823,930. CAT LLC's proposed annual budget for professional and administration costs for 2024 has not changed in a material way for Anchin and Grant Thornton costs. Correspondingly, the proposed budget for professional and administration costs for the third and fourth quarters of 2024 increased by $25,617 (which is approximately 6%), from $425,334 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the public relations costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $43,225 in public relations costs for the CAT Fee 2024-1 Period. The public relations costs represent the fees paid to a public relations firm for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC will be better positioned to understand and address CAT matters to the benefit of all market participants.
It is anticipated that the public relations costs for the CAT Fee 2024-1 Period will include costs related to the public relations services performed by RF|Binder Partners Inc. (“RF|Binder”). CAT LLC anticipates that it will continue to employ RF|Binder during the CAT Fee 2024-1 Period based on, among other things, the firm's relevant expertise, history with the project, and fees, which are anticipated to remain in line with market rates for these public relations services. It is anticipated that, during the CAT Fee 2024-1 Period, RF|Binder will provide services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
CAT LLC estimates that the budget for public relations services during the CAT Fee 2024-1 Period will be approximately $43,225. The budget for public relations services during the CAT Fee 2024-1 Period is calculated based on the Updated 2024 Budget. Specifically, this estimate was calculated by adding the budgeted amounts for the public relations for the third and fourth quarter of 2024 as set forth in the Updated 2024 Budget and subtracting one half of the actual public relations costs incurred in July 2024 (as CAT Fee 2024-1 Period began half way through July, on July 16, 2024).
CAT LLC estimated the budget for the public relations costs for the CAT Fee 2024-1 Period based on a review of past public relations costs, potential future public relations needs, the proposed rates and other contractual issues, as well as discussions with RF|Binder. CAT LLC also recognized that public relations costs are generally consistent throughout the year. This process for estimating the budget for the public relations costs for the CAT Fee 2024-1 Period is the same process by which CAT LLC estimated the public relations costs for the Original 2024 Budget. The Original 2024 Budget estimated a budget for public relations costs of $46,200 for the the [
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee Filing, this filing describes the changes in the public relations costs from the Original 2024 Budget. CAT LLC's proposed annual budget for public relations costs for 2024 had a very minor increase of $875 from the Original 2024 Budget to the Updated 2024 Budget, from $92,400 to $93,275. Correspondingly, the proposed budget for public relations costs for the third and fourth quarters of 2024 increased by $875, from $46,200 in the Original 2024 Budget
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the reserve costs set forth in the budget. The Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that includes $27,695,385 for a reserve for the CAT Fee 2024-1 Period. Section 11.1(a)(i) of the CAT NMS Plan states that the budget shall include a reserve. Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the budget will include an amount reasonably necessary to allow the Company to maintain a reserve of not more than 25% of the annual budget. To the extent collected CAT fees exceed CAT costs, including the reserve of 25% of the annual budget, such surplus shall be used to offset future fees. For the avoidance of doubt, the Company will only include an amount for the reserve in the annual budget if the Company does not have a sufficient reserve (which shall be up to but not more than 25% of the annual budget). For the avoidance of doubt, the calculation of the amount of the reserve would exclude the amount of the reserve from the budget.
In light of the fact that CAT LLC currently does not maintain any reserve, CAT LLC determined to include a reserve in the amount of 25% of
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for a reserve from the prior CAT Fee filing. Prior to July 16, 2024, all CAT costs were paid by the Participants via notes. Accordingly, to date, CAT LLC has not maintained any reserve. With the commencement of CAT Fees, CAT LLC proposes to include costs for a reserve of $27,695,385 in Budgeted CAT Costs 2024-1.
The calculation of Fee Rate 2024-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2024-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for a four-month recovery period for CAT Fee 2024-1 by multiplying by 4/12ths the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has remained relatively constant. For example, the executed equivalent share volume for 2021 was 3,963,697,612,395, the executed equivalent share volume for 2022 was 4,039,821,841,560.31, and the executed equivalent share volume for 2023 was 3,868,940,345,680.6. Accordingly, the projected total executed equivalent share volume for the four-month period for CAT Fee 2024-1 is projected to be 1,326,917,946,968.403 executed equivalent shares.
The projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2024-1 would be calculated by dividing Budgeted CAT Costs 2024-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the four-month recovery period for CAT Fee 2024-1, as described in detail above.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2024-1 on a monthly basis for four months, from November 2024 until February 2025.
To implement CAT Fee 2024-1, the Exchange proposes to add a new paragraph to “Consolidated Audit Trail Funding Fees” section of the Exchange's fee schedule, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2024-1 in October 2024, which shall set forth the CAT Fee 2024-1 fees calculated based on transactions in September 2024, and shall receive an invoice for CAT Fee 2024-1 for each month thereafter until January 2025.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing
(C) Notwithstanding the last invoice date of January 2025 for CAT Fee-2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(3)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2024-1 in October 2024 and the fees set forth in that invoice would be calculated based on transactions executed in September 2024. The payment for the first invoice would be required within 30 days after the receipt of the first invoice (unless a longer period is indicated), as described in paragraph (b)(2) of the fee schedule.
Proposed paragraph (a)(3)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2024-1. Specifically, after the first invoices are provided to CAT Executing Brokers in October 2024, invoices will be sent to CAT Executing Brokers each month thereafter until January 2025.
Proposed paragraph (a)(3)(B) of the fee schedule would describe the invoices for CAT Fee 2024-1. Proposed paragraph (a)(3)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2024-1 on a monthly basis.” Proposed paragraph (a)(3)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2024-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000035 per executed equivalent share.”
Since CAT Fee 2024-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2024-1 may collect more or less than two-thirds of Budgeted CAT Costs 2024-1. To the extent that CAT Fee 2024-1 collects more than two-thirds of Budgeted CAT Costs 2024-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2024-1 collects less than two-thirds of Budgeted CAT Costs 2024-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(3)(C) of the fee schedule would describe how long CAT Fee 2024-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2025 for CAT Fee 2024-1 in paragraph 3(A), CAT Fee 2024-1 shall continue in effect after January 2025, with each CAT Executing Broker receiving an invoice for CAT Fee 2024-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2024-1 will no longer be in effect.”
Finally, proposed paragraph (a)(3)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2024-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2024-1 in accordance with paragraph (b).”
The Exchange proposes to add paragraph (b)(1) to the “Consolidated Audit Trail Funding Fees” section of its fee schedule to describe the manner of payment of Industry Member CAT fees. The CAT NMS Plan requires the Operating Committee to establish a system for the collection of CAT fees.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a) within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If a CAT Executing Broker fails to pay any such CAT fee when due, such CAT Executing Broker shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2024-1 is in effect as well as the total amount invoiced for CAT Fee 2024-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2024-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the second and third quarter of 2024,
The CAT system functionality required by Rule 613 and the CAT NMS Plan related to order and transaction data has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to order and transaction data occurred over four phases: Phases 2a, 2b, 2c and 2d.
The Quarterly Progress Reports state that “Phase 2a was fully implemented as of October 26, 2020.”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Reports state that “Phase 2b was fully implemented as of January 4, 2021.”
The Quarterly Progress Reports state that “Phase 2c was implemented as of April 26, 2021.”
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Quarterly Progress Reports state that “Phase 2d was fully implemented as of December 13, 2021.”
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data includes verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2a, 2b, 2c and 2d data and to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any related allocation information provided in an Allocation Report. As CAT LLC reported on its Quarterly Progress Reports, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The CAT System functionality required by Rule 613 and the CAT NMS Plan related to Customer information has been developed, successfully tested, and fully implemented, including the requirements related to regulatory access. The implementation of CAT requirements related to Customer information occurred during Phase 2e. As described in the Quarterly Progress Reports and summarized below, Phase 2e has been fully implemented as of May 31, 2024.
The Q2 & Q3 2024 Quarterly Progress Report indicates that Phase 2e was fully implemented as of May 31, 2024.
The Financial Accountability Milestone related to Period 4 requires that CAT provide functionality that permits the Participants and the Commission to access Phase 2e Industry Member Data (in addition to the Phase 2a, 2b, 2c and 2d Industry Member Data, as discussed above). As CAT LLC reported on its Q2 & Q3 Quarterly Progress Report, regulators had efficient access to Phase 2e Industry Member Data via the query tool functionality required under the CAT NMS Plan by July 15, 2024.
The Financial Accountability Milestones related to Period 4 require the implementation of the CAT System “at the initial Error Rates specified by Section 6.5(d)(i) or less.” The average overall error rate as of July 15, 2024, was less than 5%, which is the initial Error Rate specified by Section 6.5(d)(i) of the CAT NMS Plan. The average overall error rate was calculated by dividing the compliance errors by processed records.
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2024-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, professional and administration, and public relations costs.
The proposed CAT Fee 2024-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining CAT Fees as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for CAT Fees, is reasonable and satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
The budget for the upcoming year (or remainder of the year, as applicable), including a brief description of each line item in the budget, including (1) the technology line items of cloud hosting services, operating fees, CAIS operating fees, change request fees, and capitalized developed technology costs, (2) legal, (3) consulting, (4) insurance, (5) professional and administration and (6) public relations costs, a reserve and/or such other categories as reasonably determined by the Operating Committee to be included in the budget, and the reason for changes in each such line item from the prior CAT fee filing.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2024-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2024-1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates continuing to receive certain market data from Exegy during the CAT Fee 2024-1 Period. CAT LLC anticipates that Exegy will continue to provide data that meets the SIP Data requirements of the CAT NMS Plan and that the fees are reasonable and in line with market rates for market data received.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be reasonable for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is reasonable to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from June 2023 through May 2024 was 3,980,753,840,905.21 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the four months in which CAT Fee 2024-1 Period would be payable by multiplying by 4/12ths (
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that imposing CAT Fee 2024-1 with a fee rate of $0.000035 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with Budgeted CAT Costs 2024-1 and such budgeted costs would be spread out over a four-month period. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, CAT Fee 2024-1 is significantly lower than fees assessed pursuant to Section 31 (
CAT Fee 2024-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2024-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2024-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2024-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of Budgeted CAT Costs 2024-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2024-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1—Budgeted CAT Costs 2024-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2024-1 Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2024-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2024-1 is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of CAT Fees calculated pursuant to the CAT Funding Model on affected categories of market participants, including Participants (including exchanges and FINRA), Industry Members (including subcategories of Industry Members, such as alternative trading systems, CAT Executing Brokers and market makers), and investors generally, and considered market effects related to equities and options, among other things. CAT Fee 2024-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2024-1 and the resulting fee rate for CAT Fee 2024-1 is reasonable. Therefore, CAT Fee 2024-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2024-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2024-1 is reasonable and the resulting fee rate for CAT Fee 2024-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2024-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
Not applicable.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On May 16, 2024, Nasdaq ISE, LLC (“Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Commission did not receive any comments. The Commission is publishing this notice to solicit comments on Amendment No. 1 from interested persons and is approving the
Currently, the Exchange may open for trading series of options on certain symbols that expire at the close of business on each of the next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that are business days beyond the current week and are not business days in which standard expiration series, Monthly Options Series or Quarterly Options Series expire (“Short Term Option Daily Expirations”).
The Exchange proposes to expand the Short Term Option Series Program to permit the listing of two Monday expirations beyond the current week for options on GLD, SLV, and TLT (“Monday ETP Expirations”). The proposed Monday ETP Expirations would be similar to the current Monday SPY, QQQ, and IWM Short Term Option Daily Expirations set forth in Supplementary Material .03 to Options 4, Section 5, such that the Exchange may open for trading on any Friday or Monday that is a business day (beyond the current week) series of options on GLD, SLV, and TLT to expire on any Monday of the month that is a business day and is not a Monday in which standard expiration options series, Monthly Options Series, or Quarterly Options Series expire. In the case of a series that is listed on a Friday and expires on a Monday, it must be listed at least one business week and one business day prior to the expiration.
Monday ETP Expirations would be treated similarly to existing Monday SPY, QQQ, and IWM Expirations. The interval between strike prices for the proposed Monday ETP Expirations would be the same as those currently applicable to the Short Term Option Series Program.
The Exchange represents that it would implement this rule change within 30 days after Commission approval and would issue an Options Trader Alert to notify Members of the implementation date.
After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.
In support of its proposal, the Exchange states it does not believe that any market disruptions will be encountered with the introduction of Monday ETP Expirations.
The Exchange examined the average daily contracts traded in GLD, SLV, and TLT five months before and five months after the introduction of Wednesday expirations to assess whether there was new interest from adding these alternative expirations. According to data provided by the Exchange, there was a general volume increase in terms of average daily contracts traded in these three symbols in the five-month period following the introduction of Wednesday expirations.
The Exchange also examined the lifecycle volume of GLD, SLV, and TLT in terms of average daily contracts traded, going from 50 days before expiration to the expiration date, to see how that lifecycle volume changed before and after the introduction of Wednesday expirations. The data provided by the Exchange shows an increase in volume in terms of average daily contracts traded as the expiration date approaches.
Additionally, the Exchange provided data that shows post-close movements between 4:00 and 5:30 p.m. Eastern Time that indicates that GLD, SLV, and TLT are generally less volatile (strike-wise) than SPY, QQQ, and IWM.
The Exchange's proposal is reasonably designed as a limited expansion of Monday expirations. As noted above, the Exchange currently offers Short Term Option Daily Expirations on SPY, QQQ, and IWM, including Monday expirations. The Exchange proposes to limit the number of Monday ETP Expirations to two expirations beyond the current week. The Exchange also proposes to limit the listing of additional Monday expirations to the three ETPs, which generally have similar or lower volatility in terms of post-closing and end of day volatility as SPY, QQQ, and IWM. And, like SPY, QQQ, and IWM, the ETPs have multiple highly-correlated instruments available for hedging.
Based on the foregoing, the Commission believes the proposal reasonably balances the Exchange's desire to accommodate market participants by offering a wider array of investment opportunities with the need to avoid unnecessary proliferation of options series. Additionally, this limited expansion of Monday ETP Expirations may provide the investing public and other market participants more flexibility to closely tailor their investment and hedging decisions using options on these ETPs, thus allowing them to better manage their risk exposure. For these reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) of the Act
Interested persons are invited to submit written data, views, and arguments concerning whether Amendment No. 1 is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of notice of the filing of Amendment No. 1 in the
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On July 26, 2024, the Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934 (“Act”)
The Proposal was published for comment in the
On August 23, 2024, DTC withdrew the Proposal (SR-DTC-2024-07).
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Amendment 2.
This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the Commonwealth of KENTUCKY (FEMA-4804-DR), dated 07/23/2024.
Issued on 08/21/2024.
Vanessa Morgan, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205-6734.
The notice of the President's major disaster declaration for Private Non-Profit organizations in the Commonwealth of KENTUCKY, dated 07/23/2024, is hereby amended to include the following area as adversely affected by the disaster.
All other information in the original declaration remains unchanged.
Notice of request for public comment and submission to OMB of proposed collection of information.
The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB.
The Department will accept comments from the public up to November 4, 2024.
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You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence.
Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Andrea Battista, who may be reached at
We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
Pursuant to Part 122 of the International Traffic in Arms Regulation (ITAR), and section 38 of the Arms Export Control Act, 22 U.S.C. 2778, any person who engages in the United States in the business of manufacturing or exporting or temporarily importing defense articles, or furnishing defense services, is required to register with the Department of State, Directorate of Defense Trade Controls (DDTC). Pursuant to Part 129 of the ITAR, any U.S. person wherever located, and any foreign person located in the United States or otherwise subject to the jurisdiction of the United States, who engages in the business of brokering activities, is required to register with DDTC. DDTC uses the information provided by registrants to meet the mandates described in Part 122 and Part 129 of the ITAR. As appropriate, such information may be shared with other U.S. Government entities. This information is currently used in the review and action on registration requests and to ensure compliance with defense trade laws and regulations.
Statement of Registration submissions are made via a completed DS-2032 which may be accessed from DDTC's website and submitted electronically.
Notice of request for public comment.
The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB.
The Department will accept comments from the public up to November 4, 2024.
You may submit comments by any of the following methods:
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You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence.
Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Daniel Carson—2025 E Street NW, Washington, DC 20520 who may be reached on (202) 227-6016 or at
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review.
The Affidavit of Relationship (AOR) is required by the Department of State to establish qualification for access to the Priority-3 (P-3) Family Reunification category of the United States Refugee Admissions Program (USRAP). The P-3 category, along with the other categories of cases that have access to USRAP, is outlined in the annual Report to Congress on Proposed Refugee Admissions, which is submitted on behalf of the President in fulfillment of
In order to access the USRAP through P-3, an applicant must have an Affidavit of Relationship (AOR) filed on his or her behalf by a U.S-based family member. The AOR also informs the U.S-based family member that DNA evidence of all claimed parent-child relationships between the U.S-based family member and parents and/or unmarried children under 21 is required as a condition of access to P-3 processing; it further informs the U.S-based family member that the costs of DNA testing will be borne by the U.S. Government. DNA testing between the QFM and any derivative applicant(s) (unmarried child under the age of 21), to prove the existence of their claimed family relationship, will be at no expense to the U.S. Government.
This information collection currently involves the limited use of electronic techniques. An anchor may complete an AOR at any local office of a Resettlement Agency (RA) that has a cooperative agreement with the Department of State to assist refugees who have been resettled in the United States. In order to file an AOR, a U.S-based family member must be at least 18 years of age and have been admitted to the United States as a refugee or granted asylum in the United States no more than five years prior to the filing of the AOR. The AOR is available electronically, is completed electronically with the assistance of RA staff, and is submitted electronically by RA staff to a Department of State-contracted facility, where it is manually uploaded into the USRAP case management system. In addition, the RA local office prints a copy for the respondent's ink signature, then submits the signed form to the RA headquarters.
The U.S. Advisory Commission on Public Diplomacy (ACPD) will hold an in-person public meeting with online access on Monday, September 30, 2024. A panel of experts will discuss the role international expositions have in promoting public diplomacy with an eye towards the USA Pavilion at Expo 2025 in Osaka, Japan. The meeting will be held at Meridian International Center, 1630 Crescent Place NW, Washington, DC 20009.
This meeting is open to the public, including the media and members and staff of governmental and non-governmental organizations. To attend the event, please register at
To request reasonable accommodation, please email ACPD Program Assistant Kristy Zamary at
Since 1948, the ACPD has been charged with appraising activities intended to understand, inform, and influence foreign publics and to increase the understanding of, and support for, these same activities. The ACPD conducts research that provides honest assessments of public diplomacy efforts, and disseminates findings through reports, white papers, and other publications. It also holds public symposiums that generate informed discussions on public diplomacy issues and events. The Commission reports to the President, Secretary of State, and Congress and is supported by the Office of the Under Secretary of State for Public Diplomacy and Public Affairs.
For more information on the U.S. Advisory Commission on Public Diplomacy, please visit
Office of the United States Trade Representative.
Notice and request for comments.
The Office of the United States Trade Representative (USTR), through the Trade Policy Staff Committee (TPSC), publishes the National Trade Estimate Report on Foreign Trade Barriers (NTE Report) each year. USTR invites comments to assist it and the TPSC in identifying significant foreign barriers to, or distortions of, U.S. exports of goods and services, U.S. foreign direct investment, and U.S. electronic commerce for inclusion in the NTE Report. USTR also will consider responses to this notice as part of the annual review of the operation and effectiveness of all U.S. trade agreements regarding telecommunications products and services that are in force with respect to the United States.
October 17, 2024 at 11:59 p.m. ET: Deadline for submission of comments.
USTR strongly prefers electronic submissions made through the Federal eRulemaking Portal:
Laura Buffo, Chair of the Trade Policy Staff Committee, at
Section 181 of the Trade Act of 1974, as amended (19 U.S.C. 2241), requires USTR annually to publish the NTE Report, which sets out an inventory of significant foreign barriers to, or distortions of, U.S. exports of goods and services, including agricultural commodities and U.S. intellectual property; foreign direct investment by U.S. persons, especially if such investment has implications for trade in goods or services; and U.S. electronic commerce. The inventory facilitates U.S. negotiations aimed at reducing or eliminating these barriers and is a valuable tool in enforcing U.S. trade laws and agreements and strengthening the rules-based trading system. You can find the 2024 NTE Report on USTR's website at
To assist USTR in preparing the NTE Report, commenters should submit information related to one or more of the following categories of foreign trade barriers:
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Please provide, if available, the titles of relevant laws or measures and a description of the concerns with which the laws or measures relate to the significant foreign barriers or distortions identified. Commenters should place particular emphasis on any practices that may violate U.S. trade agreements. USTR also is interested in receiving new or updated information pertinent to the barriers covered in the 2024 NTE Report as well as information on new barriers. If USTR does not include in the 2025 NTE Report information that it receives pursuant to this notice, it will maintain the information for potential use in future discussions or negotiations with trading partners.
Commenters should submit information related to one or more of the following export markets to be covered in the report: Algeria, Angola, the Arab League, Argentina, Australia, Bahrain, Bangladesh, Bolivia, Brazil, Brunei, Cambodia, Canada, Chile, China, Colombia, Costa Rica, Cote d'Ivoire, Dominican Republic, Ecuador, Egypt, El Salvador, Ethiopia, the European Union, Ghana, Guatemala, Honduras, Hong Kong, India, Indonesia, Israel, Japan, Jordan, Kenya, Korea, Kuwait, Laos, Malaysia, Mexico, Morocco, New Zealand, Nicaragua, Nigeria, Norway, Oman, Pakistan, Panama, Paraguay, Peru, the Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Ukraine, the United Arab Emirates, the United Kingdom, Uruguay, and Vietnam. Commenters
In addition, Section 1377 of the Omnibus Trade and Competitiveness Act of 1988 (19 U.S.C. 3106) (Section 1377) requires USTR annually to review the operation and effectiveness of U.S. telecommunications trade agreements that are in force with respect to the United States. The purpose of the review is to determine whether any foreign government that is a party to one of those agreements is failing to comply with that government's obligations or is otherwise denying, within the context of a relevant agreement, “mutually advantageous market opportunities” to U.S. telecommunications products or services suppliers. USTR will consider responses to this notice in the review called for in Section 1377 and highlight both ongoing and emerging barriers to U.S. telecommunications services and goods exports in the 2025 NTE Report.
To the extent possible, each comment should include an estimate of the potential increase in exports of goods or services of the United States, U.S. foreign direct investment, or U.S. electronic commerce that would result from removing any significant foreign trade barrier the comment identifies, as well as a description of the methodology the commenter used to derive the estimate. Commenters should express estimates within the following value ranges: less than $25 million; $25 million to $100 million; $100 million to $500 million; and over $500 million.
To be assured of consideration, submit your written comments by the October 17, 2024 11:59 p.m. ET deadline. All submissions must be in English. USTR strongly encourages submissions via
To submit via
You will receive a tracking number upon completion of the submission procedure at
For further information on using
If you are unable to provide submissions as requested, please contact Laura Buffo, Chair of the Trade Policy Staff Committee, in advance of the deadline at
General information concerning USTR is available at
If you ask USTR to treat information you submit as BCI, you must certify that the information is business confidential and you would not customarily release it to the public. For any comments submitted electronically containing BCI, the file name of the business confidential version should begin with the characters `BCI.' You must clearly mark any page containing BCI with `BUSINESS CONFIDENTIAL' on the top of that page. Filers of submissions containing BCI also must submit a public version that will be placed in the docket for public inspection. The file name of the public version should begin with the character `P.' Follow the `BCI' and `P' with the name of the person or entity submitting the comments.
USTR will post written submissions in the docket for public inspection, except properly designated BCI. You can view comments on
National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).
Notice and request for comments on a new information collection.
NHTSA invites public comments about our intention to request approval from the Office of Management and Budget (OMB) for a new information collection. Before a Federal agency can collect certain information from the public, it must receive approval from OMB. Under procedures established by the Paperwork Reduction Act of 1995, before seeking OMB approval, Federal agencies must solicit public comment on proposed collections of information, including extensions and reinstatement of previously approved collections.
Comments must be submitted on or before November 4, 2024.
You may submit comments identified by the Docket No. NHTSA-2024-0052 through any of the following methods:
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Jeremiah Singer, National Highway Traffic Safety Administration, 1200 New Jersey Ave. SE, Washington, DC 20590; email
Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The National Highway Traffic Safety Administration (NHTSA) of the U.S. Department of Transportation is seeking approval to conduct 11 voluntary information collections a part of a one-time research study involving up to 80 licensed drivers of various ages for a research study to examine the effectiveness of lateral control warnings in advanced driver assistance systems (ADAS) for improving driver response. The respondents will participate in two separate driving data collection sessions. Within this study, NHTSA's contractor, the Virginia Tech Transportation Institute (VTTI), will instrument two research vehicles with data acquisition systems (DASs). These DASs include video cameras and sensors that allow for collecting continuous data that encompasses driver behavior and vehicle performance. The completion of the two drives will take place on different days. The complete data collection effort is estimated to be 808 burden hours to the study participants. Recruitment of study respondents will be from Southwest Virginia, specifically the New River Valley and surrounding areas (Roanoke, Salem, etc.). The target for the study is 50 participants; therefore, the research team will contact up to an estimated 340 potential research participants in order to identify approximately 85 respondents who will be eligible for participation and complete the informed consent process, estimating that up to 80 respondents will participate in the driving sessions. Since the research study involves driving sessions on two different days, recruitment of up to 80 respondents is needed to account for attrition and potential replacements to ensure that the research study includes 50 participants who complete both the Session 1 and Session 2 drives. Upon arriving for their first session, each enrolled participant will go through the consenting process. The consenting process will include an overview of the study, an explanation of the consent form, and an opportunity for the potential participants to ask questions and seek clarification. Following the consenting process, participants who sign up to participate will complete a brief vision and hearing evaluation, ensuring that they meet the basic vision requirements of driver's licensure in Virginia (20/40) and can hear experimenter instructions. Tracking for color blindness will also be included, as there are visual notifications throughout the study. Participants will then be asked to complete a 10-minute questionnaire related to their previous knowledge of and experience with the systems under evaluation. Thereafter, the enrolled participants will be instructed to perform a series of controlled driving tests on the Virginia Smart Roads facilities with one of the test vehicles. Each series of controlled driving tests on the Smart Roads will last about 2 hours and will be preceded by a 15-minute familiarization with the vehicle, followed by a 30-minute post-driving questionnaire and debriefing session. The drivers who complete the first session will return a different day for a second driving session in which they will be instructed to drive a prescribed route on public roads in Southwest Virginia. This second driving session will last approximately 4 hours, with a 15-minute break in between; this will be preceded by a 45-minute preparation and followed by a 30-minute post driving questionnaire and debriefing. The planned data collection
NHTSA's mission is to save lives, prevent injuries, and reduce traffic-related health care and other economic costs. To further this mission, NHTSA conducts research as a foundation for the development of motor vehicle standards and traffic safety programs. Lane departure crashes, including single-vehicle run-off-road crashes, non-collision rollovers, sideswipe crashes, and head-on crashes between two vehicles traveling in opposite directions, account for a large proportion of fatal and injury crashes on U.S. roads. Lane support systems (LSS), a type of lateral-control ADAS, predominantly comprise two complementary technologies: lane departure warning (LDW) and lane keep assistance (LKA) systems. LDW detects and alerts drivers when their vehicle is about to leave the current travel lane, whereas LKA redirects the lateral movement of the vehicle to prevent it from leaving the current travel lane. Numerous studies have estimated the effect of LSS technologies on police-reported crashes, with all reviewed studies finding a positive impact. Based on the comparison of multiple prevention systems and warning-only systems, previous studies have suggested that prevention systems are more effective than warning-only systems because they do not rely on a timely and appropriate response from the driver. Crash situations typically unfold quickly; thus, by the time the driver responds to the warning, it may be too late, particularly when the driver is distracted, drowsy, or fails to notice the warning right away. Therefore, the effectiveness of warning systems largely depends on human factors. While studies have demonstrated the effectiveness of LSS at reducing the intended crash types and the potential of LSS to save countless lives with widespread use, these systems are unfortunately associated with a high “nuisance” factor resulting from false or unnecessary alerts. This inevitably leads to system deactivation, with indications that drivers turn LDW systems off as much as 50 percent of the time due to annoying alerts and overly aggressive steering corrections.
NHTSA will use the information collected to produce a technical report containing summary statistics and tables. No identifying information or individual responses will be reported. The technical report will be made available to a variety of audiences interested in improving highway safety through the agency website and the National Transportation Library. This collection will provide valuable information about optimal lateral control ADAS toward maximizing the safety benefits of these systems.
NHTSA was established by the Highway Safety Act of 1970 (23 U.S.C. 101). Its Congressional mandate is to reduce the number of deaths, injuries, and economic losses resulting from motor vehicle crashes on our nation's highways. To accomplish this mission, NHTSA has statutory authority to conduct crash injury research and collect relevant data in the interest of public health. Specifically, NHTSA is authorized to: (1) engage in research on all phases of highway safety and traffic conditions; (2) undertake collaborative research and development projects with non-Federal entities for the purposes of crash data collection and analysis; and (3) conduct research and collect information to determine the relationship between motor vehicles and crashes, and personal injury or deaths resulting from such crashes. This information collection supports the department's strategic goal of safety.
Subchapter V of chapter 301 of title 49 of the United States Code (U.S.C.) authorizes the Secretary of Transportation to conduct “motor vehicle safety research, development, and testing programs and activities, including activities related to new and emerging technologies that impact or may impact motor vehicle safety.” 49 U.S.C. 30182. Pursuant to section 1.95 of title 49 of the Code of Federal Regulations (CFR), the Secretary has delegated this authority to the National Highway Traffic Safety Administration (NHTSA).
Respondents to this collection will be members of the public recruited from Blacksburg, VA, and surrounding areas. Effort will be made to recruit equal numbers of adult males and females, including participants with different levels of experience owning or driving a vehicle with LSS. This is an experimental study that will examine the effectiveness and preferences of lateral control warnings in ADAS for improving driver response. As such, the participants in this experimental research design are not expected nor intended to be a representative sample of all drivers in the U.S. Study participants will be licensed drivers between the ages of 25 and 65.
The target for the study is for 50 participants to complete both sessions with valid data collected for each; therefore, the research team will contact up to an estimated 340 potential research participants to identify approximately 85 respondents who will be eligible for participation and will complete the informed consent process, estimating that up to 80 respondents will participate in the driving sessions. Since the research study involves driving sessions on two different days, recruitment of up to 80 respondents is needed to account for attrition and potential replacements (
This is a one-time information collection.
The total estimated burden for this one-time information collection is 808 hours total, or 269 annual burden hours (based on a 3-year period of performance). Further details are provided below.
This ICR includes 11 information collections, which are described below.
An estimated 340 potential participants will answer a Recruitment Screening Questionnaire (Form001) over the phone to determine if they qualify for the study. Participants will be screened over the phone to determine eligibility, with recruitment personnel recording responses on a paper form using an anonymized ID. Respondents are expected to take an estimated average of 15 minutes to complete the questionnaire and will complete this questionnaire once, resulting in a total of 85 burden hours (28 annual burden hours) for the screening of potential participants. Recruitment of study respondents is from Southwest Virginia, specifically the New River Valley and surrounding areas (Roanoke, Salem, etc.).
Based on an estimate that 25 percent of those who begin the screening process will be eligible and interested in participating, we anticipate an estimated 85 potential participants for the consenting process; these participants will be individually scheduled for an appointment to go to the contractor's facilities in Blacksburg, VA. The research team will select up to 80 individuals, each of whom will receive instructions to come to the VTTI facility at a particular date and time. While NHTSA estimates that 85 respondents will start the informed consent, NHTSA estimates that only 80 will complete informed consent, anticipating that either some respondents may choose not to proceed with the study or that the experimenter may determine that they should not participate (uncooperative, impaired, etc.). The visit to the VTTI facility will begin with a consenting process that includes an overview of the study, an explanation of the consent form, and an opportunity for the potential participants to ask questions and get clarification. Those individuals who consent to the study and enroll will complete the Informed Consent form and move on to the next process. This consent process and completion of the Informed Consent form are expected to take 30 minutes and will be completed only during the first session, resulting in a total of 43 burden hours (14 annual burden hours). This is a paper form, which participants are required to sign two copies of, keeping one for their records.
Following the consenting process, the experimenter will administer a brief vision and hearing evaluation for a maximum of 80 respondents. The purpose of this evaluation is to ensure that participants meet the basic vision requirements of driver's licensure in Virginia (20/40), and to confirm that they can hear instructions provided by the experimenter when looking away. The hearing evaluation consists of repeating approximately five statements back to the experimenter. Results will be completed only during the first session and will be recorded on paper. This evaluation is expected to take 5 minutes, resulting in a total of 7 burden hours (2 annual burden hours).
Following the consenting process, respondents will be asked to complete a 10-minute Knowledge and Experience Questionnaire (on paper) related to their previous knowledge of and experience with the systems under evaluation. The burden is calculated as 10 minutes per person and is to be completed once per respondent for a maximum of 80 respondents, resulting in a total of 13 burden hours (4 annual burden hours).
To assess preferences regarding LDW modality and timing under dynamic scenarios, study participants will experience a series of controlled driving tests with the LDW mockup vehicle on the Smart Roads test track. Each participant will drive continuously on closed loops while experiencing modality and timing conditions (independent and in combination, where applicable) incorporated in the LDW mockup vehicle, while data are collected by the DAS. No other traffic will be present on the part of the Smart Roads in use during participant sessions. After the participant performs a few loops to become familiar with the vehicle and the test track without instructions to depart the lane, they will be instructed to gradually deviate towards one of the lines until the departure warnings are triggered. Drivers will then be instructed to carefully perform a corrective maneuver back to the center of the lane after the warning. Not including the questionnaire elements referenced below (collection instruments 6 and 7), this driving session is expected to take 100 minutes, including vehicle familiarization, drive-time, and breaks. For a maximum of 80 participants, this results in a total of 133 burden hours (44 annual burden hours). At the conclusion of this first session, participants will receive instruction to return on another day for the second session.
Before, during, and following this behind-the-wheel session, drivers will provide feedback via questionnaires administered by the experimenter. This “post-condition” questionnaire, with an estimated time to complete of 5 minutes, will be administered up to 12 times for a total time of 60 minutes per participant. Administered to up to 80 participants, this results in a total of 80 burden hours (27 annual burden hours). By experiencing variations of LDW modality and timing, participants will be better equipped to provide acceptance and preference feedback across the experienced options.
Following completion of the full driving session, participants will be asked to complete a final post-drive questionnaire, capturing feedback pertaining to all conditions experienced. Administered to up to 80 participants, the estimated time to complete is 5 minutes, for a total of 7 burden hours (2 annual burden hours).
To assess driver response to naturally occurring LDW and LKA actuations, two independent driving data collection efforts will be conducted on public roads in Southwest Virginia (the community surrounding the VTTI facility). The drivers who complete the controlled driving sessions will return to the contractor's facilities for a second session, during which they will be put into one of two groups and asked to individually drive a pre-determined (prescribed) route using one of the test vehicles, experiencing different modality, activation timing, and variation of LDW, LKA, and LDW/LKA conditions while driving as they normally would.
Each participant in the first group will drive a prescribed route using the LDW mockup vehicle. Each driving session will be part of a sub-study that aims to clarify the effects of the two independent LDW design variables (modality and activation timing) on driver performance safety indicators (
At the halfway point, participants will complete the “post-route” questionnaire, which is estimated to take 10 minutes. They will complete this same questionnaire a second time after completing their second drive. For up to 48 participants, this equates to a total of 16 burden hours (5 annual burden hours).
Each participant from the second group will complete the same prescribed drive but using the LDW/LKA factory vehicle rather than the LDW mockup vehicle. This experiment will address objective driver performance and subjective qualitative preferences under four system activation modes (none, LDW only, LKA only, and LDW with LKA). At the halfway point, a member of the research team will switch the modality/timing combination. A remote experimenter tool will allow the experimenter to monitor the session and allow interfacing with the DAS. The total driving session duration for each participant will be approximately 4 hours, split into two sub-sessions. Including orientation to the research vehicle and prescribed route, along with a 15-minute break at the halfway point, the total estimated time to complete this driving session is approximately 5 hours and 10 minutes. For up to 32 participants, this equates to a total of 165 burden hours (55 annual burden hours).
At the halfway point, participants will complete the “post-route” questionnaire, which is estimated to take 10 minutes. They will complete this same questionnaire a second time after completing their second drive. For up to 32 participants, this equates to a total of 11 burden hours (4 annual burden hours).
Annual burden hours were estimated by first dividing the total number of respondents per information collection by three and then rounding to the nearest whole number. Based on the estimates of 113 annual respondents for the screener questionnaire, 28 annual respondents for the informed consent, 27 annual respondents to each of the Session 1 information collections, 16 annual respondents to each of the Session 2 LDW Subset information collections, and 11 annual respondents to each of the Session 2 LDW/LKA Subset information collections, NHTSA has estimated that the annual burden for the collections is 269 hours. The total estimated burden for this one-time information collection is 808 hours.
To calculate the opportunity cost to participants in this study, NHTSA used the average (mean) hourly earnings from employers in all industry sectors in the State of Virginia, which the Bureau of Labor Statistics lists at $34.91.
This ICR includes 11 information collections, which are described below. Total burden estimates for each information collection are provided in Table 1 and annual burden estimates for each information collection are provided in Table 2. Rounding is applied in the tables, where appropriate.
Table 2 summarizes the annual burden estimates.
The only cost burdens respondents will incur are costs related to travel to and from the research location. The costs are minimal and are expected to be offset by the compensation that will be provided to the research participants. NHTSA estimates that, on average, each of the participants will travel less than 15 miles one-way to the research location (30 miles round trip), for a total of 60 miles for the two study drive days. Using the IRS standard mileage rate of $0.67 per mile,
Office of the Comptroller of the Currency (OCC), Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995 (PRA). In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC is soliciting comment concerning the renewal of its information collection titled, “Debt Cancellation Contracts and Debt Suspension Agreements.” The OCC also is giving notice that it has sent the collection to OMB for review.
Comments must be received by October 3, 2024.
Commenters are encouraged to submit comments by email, if possible. You may submit comments by any of the following methods:
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•
•
•
Written comments and recommendations for the proposed information collection should also be sent within 30 days of publication of this notice to
You may review comments and other related materials that pertain to this information collection following the close of the 30-day comment period for this notice by the method set forth in the next bullet.
•
• For assistance in navigating
Shaquita Merritt, Clearance Officer, (202) 649-5490, Chief Counsel's Office, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services.
Under the PRA (44 U.S.C. 3501
Section 37.6 requires the disclosures to be readily understandable and meaningful. The content of the short and long form may vary, depending on whether a bank elects to provide a summary of the conditions and exclusions in the long form disclosures or refer the customer to the pertinent paragraphs in the contract. For example, the short form disclosure requires a bank to instruct the customer to read carefully both the long form disclosures and the contract for a full explanation of the contract terms, while the long form gives a bank the option of either: (i) summarizing the limitations; or (ii) advising the customer that a complete explanation of the eligibility requirements, conditions, and exclusions is available in the contract and identifying the paragraphs where the customer may find that information.
Section 37.6 and appendices A and B to part 37 require a bank to provide the following disclosures (summarized below), as appropriate:
• Anti-tying (short and long form)—A bank must inform the customer that purchase of the product is optional and
• Explanation of debt suspension agreement (long form)—A bank must disclose that if a customer activates the agreement, the customer's duty to pay the loan principal and interest is only suspended and the customer must fully repay the loan after the period of suspension has expired.
• Amount of the fee (long form)—A bank must make disclosures regarding the amount of the fee. The content of the disclosure depends on whether the credit is open-end or closed-end. In the case of closed-end credit, the bank must disclose the total fee. In the case of open-end credit, the bank must either: (i) disclose that the periodic fee is based on the account balance multiplied by a unit cost and provide the unit cost; or (ii) disclose the formula used to compute the fee.
• Lump sum payment of fee (short and long form)—A bank must disclose, where appropriate, that a customer has the option to pay the fee in a single payment or in periodic payments and that adding the fee to the amount borrowed will increase the cost of the contract. This disclosure is not appropriate in the case of a DCC or DSA provided in connection with a home mortgage loan where the option to pay the fee in a single payment is not available.
• Lump sum payment of fee with no refund (short and long form)—A bank must disclose that the customer has the option to choose a contract with or without a refund provision. This disclosure must also state that the prices of refund and no-refund products are likely to differ.
• Refund of fee paid in lump sum (short and long form)—If a bank permits a customer to pay the fee in a single payment and add the fee to the amount borrowed, the bank must disclose its cancellation policy. The disclosure informs the customer of the bank's refund policy, as applicable,
• Whether use of a card or credit line is restricted (long form)—A bank must inform a customer if the customer's activation of the contract would prohibit the customer from incurring additional charges on the credit card or using the credit line.
• Termination of a DCC or DSA (long form)— If termination is permitted during the life of the loan, a bank must include an explanation of the circumstances under which a customer or the bank may terminate the contract.
• Additional disclosures (short form)—A bank must inform customers that it will provide additional information before the customer is required to pay for the product.
• Eligibility requirements, conditions, and exclusions (short and long form)—A bank must describe any material limitations relating to the DCC or DSA.
Section 37.7 requires a bank to obtain a customer's written affirmative election to purchase a contract and written acknowledgment of receipt of the disclosures required by § 37.6. The section further provides that the election and acknowledgment must be conspicuous, simple, direct, readily understandable, and designed to call attention to their significance.
Pursuant to § 37.7(b), if the sale of the contract occurs by telephone, the customer's affirmative election to purchase and acknowledgment of receipt of the required short form may be made orally, provided the bank: (i) maintains sufficient documentation to show that the customer received the short form disclosures and then affirmatively elected to purchase the contract; (ii) mails the affirmative written election and written acknowledgment, together with the long form disclosures required by § 37.6, to the customer within 3 business days after the telephone solicitation and maintains sufficient documentation to show it made reasonable efforts to obtain the documents from the customer; and (iii) permits the customer to cancel the purchase of the contract without penalty within 30 days after the bank has mailed the long form disclosures to the customer.
Pursuant to § 37.7(c), if the DCC or DSA is solicited through written materials such as mail inserts or “take one” applications and the bank provides only the short form disclosures in the written materials, then the bank shall mail the acknowledgment, together with the long form disclosures, to the customer. The bank may not obligate the customer to pay for the contract until after the bank has received the customer's written acknowledgment of receipt of disclosures, unless the bank takes certain steps, maintains certain documentation, and permits the customer to cancel the purchase within 30 days after mailing the long form disclosures to the customer. Section 37.7(d) permits the customer's affirmative election and acknowledgment to be made electronically.
Comments continue to be invited on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimate of the burden of the collection of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Internal Revenue Service (IRS), Treasury.
Notice of filing and request for comments.
This notice of filing announces that a petition has been filed requesting that propylene glycol methyl ether be added to the list of taxable substances. This notice of filing also requests comments on the petition. This notice of filing is not a determination that the list of taxable substances is modified.
Written comments and requests for a public hearing must be received on or before November 4, 2024.
Commenters are encouraged to submit public comments or requests for a public hearing relating to this petition electronically via the Federal eRulemaking Portal at
Camille Edwards Bennehoff at (202) 317-6855 (not a toll-free number).
(a)
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Propylene glycol methyl ether is made from propylene, chlorine, sodium hydroxide, and methane. Taxable chemicals constitute 100.00 percent by weight of the materials used to produce this substance.
(6)
Additional information on the production process:
• The propylene glycol methyl ether alkoxylation reaction (methanol + propylene oxide) is base catalyzed, using a small amount of metal hydroxide to produce methoxide. Once methoxide is made, it is regenerated following conversion to the product in the presence of propylene oxide. Regenerated methoxide in the presence of propylene oxide will perpetually react until all propylene oxide is consumed or the reaction is halted through the use of controls.
○ Since the amount of metal hydroxide used to produce propylene glycol methyl ether is very small, the metal hydroxide has been excluded from the stoichiometric material consumption equation; including the metal hydroxide would lead to a distorted conversion factor.
(7)
(8)
(i)
(ii)
(9)
Internal Revenue Service (IRS), Treasury.
Notice of filing and request for comments.
This notice of filing announces that a petition has been filed requesting that ethylene glycol phenyl ether be added to the list of taxable substances. This notice of filing also requests comments on the petition. This notice of filing is not a determination that the list of taxable substances is modified.
Written comments and requests for a public hearing must be received on or before November 4, 2024.
Commenters are encouraged to submit public comments or requests for a public hearing relating to this petition electronically via the Federal eRulemaking Portal at
Camille Edwards Bennehoff at (202) 317-6855 (not a toll-free number).
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Ethylene glycol phenyl ether is made from ethylene, benzene, and propylene. Taxable chemicals constitute 76.00 percent by weight of the materials used to produce this substance.
(6)
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(ii)
(9)
Internal Revenue Service (IRS), Treasury.
Notice of filing and request for comments.
This notice of filing announces that a petition has been filed requesting that propylene glycol phenyl ether be added to the list of taxable substances. This notice of filing also requests comments on the petition. This notice of filing is not a determination that the list of taxable substances is modified.
Written comments and requests for a public hearing must be received on or before November 4, 2024.
Commenters are encouraged to submit public comments or requests for a public hearing relating to this petition electronically via the Federal eRulemaking Portal at
Camille Edwards Bennehoff at (202) 317-6855 (not a toll-free number).
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Propylene glycol phenyl ether is made from propylene, chlorine, sodium hydroxide, and benzene. Taxable chemicals constitute 91.00 percent by weight of the materials used to produce this substance.
(6)
Additional information on the production process:
• The propylene glycol phenyl ether alkoxylation reaction (phenol + propylene oxide) is base catalyzed, using a small amount of metal hydroxide. Once phenoxide is made, it is regenerated following conversion to the product in the presence of propylene oxide. Regenerated phenoxide in the presence of propylene oxide will perpetually react until all propylene oxide is consumed or the reaction is halted through the use of controls.
○ Since the amount of metal hydroxide used to produce propylene glycol phenyl ether is very small, the metal hydroxide has been excluded from the stoichiometric material consumption equation; including the metal hydroxide would lead to a distorted conversion factor.
(7)
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(i)
(ii)
(9)
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning waiver of 60-Day rollover requirement.
Written comments should be received on or before November 4, 2024 to be assured of consideration.
Direct all written comments to Andres Garcia, Internal Revenue Service, room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or by email to
Requests for additional information or copies of the form should be directed to Sara Covington, at (202) 317-5744 or Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet, at
Upon receipt of a self-certification, a plan administrator or IRA trustee may accept the contribution and treat it as having satisfied the requirements for a waiver of the 60-day requirement. Currently, the only way for a taxpayer to obtain a waiver of the 60 day requirement with respect to an amount distributed to a state unclaimed property fund is to apply to the Internal Revenue Service (IRS) for a favorable ruling, which is issued by the Tax Exempt and Government Entities Division (TE/GE). The user fee for a ruling is $10,000. The program outlined in this revenue procedure permits taxpayers to receive the benefits of a waiver without paying a user fee.
The following paragraph applies to all the collections of information covered by this notice.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained if their contents may become material in the administration of any internal revenue
Internal Revenue Service (IRS), Treasury.
Notice of filing and request for comments.
This notice of filing announces that a petition has been filed requesting that diethylene glycol monomethyl ether be added to the list of taxable substances. This notice of filing also requests comments on the petition. This notice of filing is not a determination that the list of taxable substances is modified.
Written comments and requests for a public hearing must be received on or before November 4, 2024.
Commenters are encouraged to submit public comments or requests for a public hearing relating to this petition electronically via the Federal eRulemaking Portal at
Camille Edwards Bennehoff at (202) 317-6855 (not a toll-free number).
(a)
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Diethylene glycol monomethyl ether is made from ethylene and methane. Taxable chemicals constitute 59.00 percent by weight of the materials used to produce this substance.
(6)
Additional information on the production process:
• The diethylene glycol monomethyl ether reaction (methanol + EO) is base catalyzed, using a small amount of metal hydroxide to produce methoxide.
○ Since the amount of metal hydroxide used to produce propylene glycol methyl ether is very small, the metal hydroxide has been excluded from the stoichiometric material consumption equation; including the metal hydroxide would lead to a distorted conversion factor.
• Once methoxide is made, it is regenerated following conversion to the product in the presence of EO as follows:
○ Methoxide + 2 EO → diethylene glycol monomethyl ether-alkoxide
○ Diethylene glycol monomethyl ether-alkoxide + methanol → diethylene glycol monomethyl ether + methoxide (goes back to participate in the reaction above).
• Regenerated methoxide in the presence of EO will perpetually react until all EO is consumed or the reaction is halted through the use of controls.
(7)
(8)
(i)
(ii)
(9)
Internal Revenue Service (IRS), Treasury.
Notice of filing and request for comments.
This notice of filing announces that a petition has been filed requesting that methoxytriglycol be added to the list of taxable substances. This notice of filing also requests comments on the petition. This notice of filing is not a determination that the list of taxable substances is modified.
Written comments and requests for a public hearing must be received on or before November 4, 2024.
Commenters are encouraged to submit public comments or requests for a public hearing relating to this petition electronically via the Federal eRulemaking Portal at
Camille Edwards Bennehoff at (202) 317-6855 (not a toll-free number).
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Methoxytriglycol is made from ethylene and methane. Taxable chemicals constitute 60.00 percent by weight of the materials used to produce this substance.
(6)
Additional information on the production process:
• The methoxytriglycol reaction (methanol + EO) is base catalyzed, using a small amount of metal hydroxide to produce methoxide.
○ Since the amount of metal hydroxide used to produce propylene glycol methyl ether is very small, the metal hydroxide has been excluded from the stoichiometric material consumption equation; including the metal hydroxide would lead to a distorted conversion factor.
• Once methoxide is made, it is regenerated following conversion to the product in the presence of EO as follows:
• Regenerated methoxide in the presence of EO will perpetually react until all EO is consumed or the reaction is halted through the use of controls.
(7)
(8)
(i)
(ii)
(9)
Internal Revenue Service (IRS), Treasury.
Notice of filing and request for comments.
This notice of filing announces that a petition has been filed
Written comments and requests for a public hearing must be received on or before November 4, 2024.
Commenters are encouraged to submit public comments or requests for a public hearing relating to this petition electronically via the Federal eRulemaking Portal at
Camille Edwards Bennehoff at (202) 317-6855 (not a toll-free number).
(a)
(b)
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(ii)
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(5)
Propylene glycol methyl ether acetate is made from propylene, chlorine, sodium hydroxide, and methane. Taxable chemicals constitute 93.00 percent by weight of the materials used to produce this substance.
(6)
Additional information on the production process:
• The propylene glycol methyl ether alkoxylation reaction (methanol + propylene oxide) is base catalyzed, using a small amount of metal hydroxide to produce methoxide. Once methoxide is made, it is regenerated following conversion to the product in the presence of propylene oxide. Regenerated methoxide in the presence of propylene oxide will perpetually react until all propylene oxide is consumed or the reaction is halted through the use of controls.
○ Since the amount of metal hydroxide used to produce propylene glycol methyl ether is very small, the metal hydroxide has been excluded from the stoichiometric material consumption equation; including the metal hydroxide would lead to a distorted conversion factor.
• After the production of methanol from syngas, methanol is reacted with CO to produce acetic acid. This process is commonly referred to as carbonylation. The reaction is typically catalyzed by either a rhodium or iridium-based catalyst and involves iodomethane as a key intermediate.
• Acetic acid when combined with propylene glycol methyl under specific conditions (temperature, pressure, pH, etc.) produces propylene glycol methyl ether acetate. This reaction is commonly known as esterification (or Fischer Esterification). Esterification typically involves a basic or acid catalytic species and can generate water or an aqueous hydroxide as byproduct depending on the pH. Once the final reaction contents are dehydrated and separated, commercial grade propylene glycol methyl ether acetate is obtained.
(7)
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(ii)
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Internal Revenue Service (IRS), Treasury.
Notice of filing and request for comments.
This notice of filing announces that a petition has been filed requesting that propylene glycol n-propyl ether be added to the list of taxable substances. This notice of filing also requests comments on the petition. This notice of filing is not a determination that the list of taxable substances is modified.
Written comments and requests for a public hearing must be received on or before November 4, 2024.
Commenters are encouraged to submit public comments or requests for a public hearing relating to this petition electronically via the Federal eRulemaking Portal at
Camille Edwards Bennehoff at (202) 317-6855 (not a toll-free number).
(a)
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(5)
Propylene glycol n-propyl ether is made from propylene, chlorine, sodium hydroxide, ethylene, and methane. Taxable chemicals constitute 100.00 percent by weight of the materials used to produce this substance.
(6)
Additional information on the production process:
• The propylene glycol n-propyl ether alkoxylation reaction (n-propanol + propylene oxide) is base catalyzed, using a small amount of metal hydroxide to produce methoxide. Once propoxide is made, it is regenerated following conversion to the product in the presence of propylene oxide. Regenerated propoxide in the presence of propylene oxide will perpetually react until all propylene oxide is consumed or the reaction is halted through the use of controls.
• Since the amount of metal hydroxide used to produce propylene glycol n-propyl ether is very small, the metal hydroxide has been excluded from the stoichiometric material consumption equation; including the metal hydroxide would lead to a distorted conversion factor.
(7)
(8)
(i)
(ii)
(9)
Departmental Offices, Department of the Treasury.
Notice of information collection; request for comment.
The Department of the Treasury will submit the following
Comments should be received on or before October 3, 2024 to be assured of consideration.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Copies of the submissions may be obtained from Spencer W. Clark by emailing
Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act (5 U.S.C. ch. 10), that the Veterans' Advisory Committee on Rehabilitation (hereinafter the Committee) will meet on Monday, September 16, 2024, and Tuesday, September 17, 2024. The meeting sessions will begin and end as follows:
Sessions are open to the public, except when the Committee is conducting a tour of VA facilities. Tours of VA facilities are closed to protect Veterans' privacy and personal information, by 5 U.S.C. 552b(c)(6).
The purpose of the Committee is to advise the Secretary of VA on the rehabilitation needs of Veterans with disabilities and the administration of VA's rehabilitation programs.
During the open sessions, the Committee will receive briefings on various Veterans Health Administration and Veterans Benefits Administration (VBA) programs designed to enhance the rehabilitative potential of Veterans with disabilities. In the closed session, the Committee will tour the Seattle VA Medical Center located at 1660 S. Columbian Way, Seattle, WA 98108.
Members of the public may submit written statements until Wednesday, September 11, 2024, for the Committee's review to Ms. Latrese Thompson, Designated Federal Officer, Veterans Benefits Administration (28), 1800 G Street NW, Washington, DC 20006, or at
Members of the public may attend in person or virtually using the following Microsoft Teams link by computer or mobile app:
The Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act, 5 U.S.C. ch. 10, that a meeting of the VA National
The meetings are open to the public, except when the Council is conducting tours of VA facilities. Tours of VA facilities are closed to protect Veterans' privacy and personal information, in accordance with 5 U.S.C sec. 552b(c)(6).
The purpose of the Council is to advise the Secretary on matters affecting partnerships between VA and its academic affiliates.
On September 25, 2024, the Council will begin the session with presentations from the New Mexico VAHCS on Academic Relationships and Albuquerque VA programs, and will receive additional updates on MISSION Act, section 403. In the afternoon, the Council will receive presentations from the New Mexico VAHCS programs and conduct a panel discussion with New Mexico VAHCS Chief residents. The Council will also receive updates from the Diversity in the Healthcare Workforce Subcommittee (DHWS), the Strategic Academic Advisory Council (SAAC), and the Clinician Educator Protected Time for Teaching Subcommittee for discussions and recommendations. The Council will receive public comments from 4:30 p.m. to 5:00 p.m. CST. The meeting will adjourn that day at 5:00 p.m. CST.
On September 26, 2024, the meeting session will be closed to the public, as the Council tours the University of New Mexico medical facilities. Tours of medical facilities are closed to protect privacy and personal information, in accordance with 5 U.S.C sec. 552b(c)(6). The meeting will adjourn at 12:45 p.m. CST.
Interested persons may attend and present oral statements to the Council on September 25, 2024, during the public comment period. The designated public dial in number to attend the conference is 872 701 0185. At the prompt, enter meeting ID 496 340 763#. A sign-in sheet for those who want to give comments will be available at the meeting. Individuals who speak are invited to submit a 1-2-page summary of their comments at the time of the meeting for inclusion in the official meeting record. Oral presentations will be limited to five minutes or less, depending on the number of participants. Interested parties may also provide written comments for review by the Council prior to the meeting to Ms. Nellie Mitchell, Designated Federal Officer, or at any time via email to
The Department of Veterans Affairs (VA) gives notice under the Federal Advisory Committee Act, 5 U.S.C. ch.10, that the Advisory Committee on Minority Veterans will meet virtually on September 25, 2024. The meeting sessions will begin and end as follows:
This meeting is open to the public.
The Committee on Minority Veterans advises the Secretary of Veterans Affairs with respect to the administration of benefits by the Department for Veterans who are minority group members, by reviewing reports and studies on compensation, health care, rehabilitation, outreach, and other benefits and services administered by the Department.
On September 25, 2024, the Committee will receive briefings and updates from the Advisory Committee Management Office, Veterans Affairs Deputy Chief of Staff, Veterans Experience Office, Veterans Health Administration, Veterans Benefits Administration, and National Cemetery Administration. The Committee will receive public comments from 2:00 p.m. to 2:15 p.m. Individuals who speak are invited to submit a 1-2-page summary of their comments at the time of the meeting for inclusion in the official meeting record. Members of the public may also submit written statements for the Committee's review to Mr. Dwayne E. Campbell, Department of Veterans Affairs, Center for Minority Veterans (00M), 810 Vermont Avenue NW, Washington, DC, 20420, or email at
Veterans Benefits Administration, Department of Veterans Affairs.
Notice.
In compliance with the Paperwork Reduction Act (PRA) of 1995, this notice announces that the Veterans Benefit Administration, Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden, and it includes the actual data collection instrument.
Comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice by clicking on the following link
VA PRA information: Maribel Aponte, (202) 461-8900,
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The