[Federal Register Volume 90, Number 87 (Wednesday, May 7, 2025)]
[Notices]
[Pages 19334-19337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-07967]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102980; File No. 4-698]
Order Granting Temporary Conditional Exemptive Relief, Pursuant
to Section 36 of the Securities Exchange Act of 1934 and Rule 608(e) of
Regulation NMS Under the Exchange Act, Relating to Granularity of
Timestamps Specified in Section 6.8(b) and Section 3 of Appendix D of
the National Market System Plan Governing the Consolidated Audit Trail
May 2, 2025.
I. Introduction
By letter dated March 24, 2025, Consolidated Audit Trail, LLC
(``CAT LLC'') on behalf of BOX Exchange LLC, Cboe BYX Exchange, Inc.,
Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange,
Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial Industry
Regulatory Authority, Inc. (``FINRA''), Investors Exchange LLC, Long-
Term Stock Exchange, Inc., MEMX LLC, Miami International Securities
Exchange LLC, MIAX Emerald, LLC, MIAX PEARL, LLC, MIAX Sapphire, LLC,
Nasdaq BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,
Nasdaq PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange
LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc. and NYSE
National, Inc. (collectively, the ``Participants'') to the National
Market System Plan Governing the Consolidated Audit Trail (``CAT NMS
Plan''),\1\ requested that the Securities and Exchange Commission
(``Commission'' or ``SEC'') provide exemptive relief to the
Participants, pursuant to its authority under Section 36 of the
Securities Exchange Act of 1934 (``Exchange Act'') \2\ and Rule 608(e)
of Regulation NMS under the Exchange Act, from the timestamp
granularity requirements of Section 6.8(b) and
[[Page 19335]]
Section 3 of Appendix D of the CAT NMS Plan.\3\
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\1\ The CAT NMS Plan was approved by the Commission, as
modified, on November 15, 2016. See Securities Exchange Act Release
No. 79318, 81 FR 84696 (Nov. 23, 2016) (``CAT NMS Plan Approval
Order'').
\2\ 15 U.S.C. 78mm(a)(1).
\3\ See letter from Brandon Becker, CAT NMS Plan Operating
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated
March 24, 2025 (the ``March 24, 2025 Exemption Request''). Unless
otherwise noted, capitalized terms are used as defined in the CAT
NMS Plan.
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Section 36 of the Exchange Act grants the Commission the authority,
with certain limitations, to ``conditionally or unconditionally exempt
any person, security, or transaction . . . from any provision or
provisions of [the Exchange Act] or of any rule or regulation
thereunder, to the extent that such exemption is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.'' \4\ Under Rule 608(e) of Regulation NMS, the
Commission may ``exempt from [Rule 608], either unconditionally or on
specified terms and conditions, any self-regulatory organization,
member thereof, or specified security, if the Commission determines
that such exemption is consistent with the public interest, the
protection of investors, the maintenance of fair and orderly markets
and the removal of impediments to, and perfection of the mechanism of,
a national market system.'' \5\
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\4\ 15 U.S.C. 78mm(a)(1).
\5\ 17 CFR 242.608(e).
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For the reasons set forth below, this Order grants the
Participants' request for a temporary exemption from Section 6.8(b) and
Section 3 of Appendix D of the CAT NMS Plan as set forth in the March
24, 2025 Exemption Request, subject to certain conditions.
II. Description
The CAT NMS Plan sets forth certain requirements regarding the
granularity of timestamps accepted by the CAT system. Specifically,
Section 6.8(b) of the CAT NMS Plan states ``[e]ach Participant shall,
and through its Compliance Rule shall require its Industry Members to,
report information required by SEC Rule 613 and this Agreement to the
Central Repository in milliseconds,'' but that ``[t]o the extent that
any Participant's order handling or execution systems utilize
timestamps in increments finer than the minimum required in this
Agreement, such Participant shall utilize such finer increment when
reporting CAT Data to the Central Repository so that all Reportable
Events reported to the Central Repository can be adequately
sequenced.'' \6\ Section 6.8(b) further states that ``each Participant
shall, through its Compliance Rule: (i) require that, to the extent
that its Industry Members utilize timestamps in increments finer than
the minimum required in this Agreement in their order handling or
execution systems, such Industry Members shall utilize such finer
increment when reporting CAT Data to the Central Repository.'' \7\ In
addition, Section 3 of Appendix D of the CAT NMS Plan states that the
Central Repository must be able to ``[a]ccept time stamps on order
events handled electronically to the finest level of granularity
captured by CAT Reporters.''
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\6\ Notwithstanding other requirements of Section 6.8(b), the
CAT NMS Plan provides that Participants and Industry Members are
permitted to record and report Manual Order Events and the time of
allocation on Allocation Reports in increments up to and including
one second. See CAT NMS Plan Section 6.8(b).
\7\ The CAT NMS Plan defines ``Compliance Rule'' to mean, ``with
respect to a Participant, the rule(s) promulgated by such
Participant as contemplated by Section 3.11.'' See CAT NMS Plan
Section 1.1.
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Section 6.8(c) of the CAT NMS Plan imposes further requirements on
Participants regarding analysis of timestamp granularity. Specifically,
Section 6.8(c) of the CAT NMS Plan requires the Chief Compliance
Officer to, ``[i]n conjunction with Participants' and other appropriate
Industry Member advisory groups,'' ``annually evaluate and make a
recommendation to the Operating Committee as to whether industry
standards have evolved such that: . . . (ii) the required time stamp in
Section 6.8(b) should be in finer increments.''
On April 8, 2020, the Commission granted the Participants
conditional exemptive relief, for five years (until April 8, 2025) and
subject to certain conditions, pursuant to Section 36 of the Exchange
Act and Rule 608(e) of Regulation NMS under the Exchange Act, relating
to the granularity of timestamps specified in Section 6.8(b) and
Section 3 of Appendix D of the CAT NMS Plan.\8\ The April 2020
Exemptive Relief Order, as conditions for relief and consistent with
the request from the Participants,\9\ required both Participants and
Industry Members (through Compliance Rules) to truncate timestamps in
increments more granular than nanoseconds to nanoseconds for submission
to the CAT, and additionally required the Central Repository to accept
timestamps on order events handled electronically to a nanosecond
granularity.\10\
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\8\ See Securities Exchange Act Release No. 88608 (Apr. 8,
2020), 85 FR 20743 (Apr. 14, 2020) (``April 2020 Exemptive Relief
Order'').
\9\ See letter from Mike Simon, CAT NMS Plan Operating Committee
Chair, to Vanessa Countryman, Secretary, Commission, dated February
3, 2020, available at: https://www.catnmsplan.com/sites/default/files/2020-03/Simon-to-Countryman-Timestamp-Granularity-and-Relationship-IDs-%28Final%202.3.20%29.pdf.
\10\ See April 2020 Exemptive Relief Order, supra note 8, at
20744-45.
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III. Request for Relief
In the March 24, 2025 Exemption Request, CAT LLC, on behalf of the
Participants, requests that the Commission temporarily exempt the
Participants from the requirement in Section 6.8(b) of the CAT NMS Plan
that Participants reporting CAT Data to the Central Repository utilize
timestamps finer than nanoseconds to the extent that the Participant's
order handling or execution systems utilize timestamps in increments
finer than nanoseconds. In addition, the Participants request that the
Commission temporarily exempt the Participants from the requirement in
Section 6.8(b) of the CAT NMS Plan for each Participant, through its
Compliance Rule, to require that, to the extent that its Industry
Members utilize timestamps in increments finer than nanoseconds in
their order handling or execution systems, such Industry Members
utilize such finer increment when reporting CAT Data to the Central
Repository. Lastly, the Participants request that the Commission
temporarily exempt the Participants from the requirement in Section 3
of Appendix D of the CAT NMS Plan for the Central Repository to be able
to accept timestamps on order events handled electronically to the
finest level of granularity captured by CAT Reporters. CAT LLC states
that the relief granted by the April 2020 Exemptive Relief Order
expires on April 8, 2025, and CAT LLC believes that this exemptive
relief should be extended for an additional five-year period from the
date that the Commission grants the exemptive relief.
Consistent with the April 2020 Exemptive Relief Order, CAT LLC
specifies three conditions to the exemption.\11\ The first condition
requires any Participant that captures timestamps in increments more
granular than nanoseconds to truncate the timestamp after the
nanosecond level for submission to CAT, and not round up or down in
such circumstances.\12\ The second condition requires the Participants,
through their Compliance Rules, to continue to require Industry Members
that capture timestamps in increments more granular than nanoseconds to
truncate the timestamps, after the nanosecond level for submission to
CAT, and not round
[[Page 19336]]
up or down in such circumstances.\13\ The third condition requires the
Central Repository to accept timestamps on order events handled
electronically to a nanosecond granularity.\14\
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\11\ See March 24, 2025 Exemption Request, supra note 3, at 3-4.
\12\ See March 24, 2025 Exemption Request, supra note 3, at 3.
\13\ Participants would require that electronic timestamps
submitted by Participants and Industry Members be truncated by
Participants and Industry Members if they capture timestamps in
increments more granular than nanoseconds, stating that rounding a
timestamp would suggest an event occurred later or earlier than it
actually occurred, while truncation treats all timestamps as if they
were provided with the same level of granularity. See March 24, 2025
Exemption Request, supra note 3, at 3-4.
\14\ See March 24, 2025 Exemption Request, supra note 3, at 4.
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The Participants state that they continue to believe that the cost
of providing the ability to utilize timestamps in the CAT in a finer
granularity than nanoseconds outweighs the benefits.\15\ The
Participants state that, based on discussions with the Plan Processor,
that Participants understand that expanding the capture of timestamp
granularity to picoseconds by the Plan Processor would take at least
six to nine months at an estimated cost of approximately $900,000 to
$1,100,000, and that this effort would include technical specification
and database modifications, modifying query tools to support querying
and sequencing at a picosecond granularity.\16\ The Participants also
state that they continue to understand that exchanges currently utilize
timestamps only to the nanosecond and do not utilize timestamps to
picoseconds or to finer increments.\17\
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\15\ The Participants state that as part of the part of the
annual evaluation required pursuant to Section 6.8(c) of the CAT NMS
Plan, the Chief Compliance Officer has conducted an annual analysis
of timestamp granularity since the adoption of the April 2020
Exemptive Relief Order. To date, the Chief Compliance Officer has
concluded that accepting timestamps in granularity up to nanoseconds
is consistent with industry practices and provides adequate
granularity for regulator use. See March 24, 2025 Exemption Request,
supra note 3, at 4-5.
\16\ See March 24, 2025 Exemption Request, supra note 3, at 2,
4.
\17\ See March 24, 2025 Exemption Request, supra note 3, at 4.
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In addition, the Participants state that CAT Reportable Events can
be adequately sequenced in the CAT without requiring timestamps in a
finer granularity than nanoseconds, and that the requested relief would
serve to preserve the reliability and accuracy of the data reported to
the Central Repository.\18\ The Participants state that the CAT NMS
Plan separately requires Industry Members to synchronize their clocks
to within 50 milliseconds of the time maintained by the National
Institute of Standards and Technology (``NIST'').\19\ Because of this
standard, the Participants state that any two separate clocks can vary
by 100 milliseconds; therefore, requiring timestamps in finer
granularity than nanoseconds would not improve the ability to sequence
events with any reasonable degree of reliability or otherwise enhance
regulatory use versus the status quo.\20\
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\18\ See March 24, 2025 Exemption Request, supra note 3, at 4.
\19\ See March 24, 2025 Exemption Request, supra note 3, at 4
n.12 (citing CAT NMS Plan Section 6.8(a)(ii)).
\20\ See March 24, 2025 Exemption Request, supra note 3, at 4.
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IV. Discussion
The Commission has carefully considered the information provided by
the Participants in support of the Participants' exemption request from
Section 6.8(b) and Section 3 of Appendix D of the CAT NMS Plan with
respect to timestamp granularity, as well as a comment letter received
in support of the Participants' exemption request.\21\ Based on the
information provided by the Participants in the March 24, 2025
Exemption Request, the Commission believes that the exemptive relief
would provide cost savings and avoid immediate build time for the Plan
Processor while not negatively impacting the ability of regulators to
use CAT. As stated above, the Participants state that it would take at
least six to nine months and approximately $900,000 to $1,100,000 to
modify the Plan Processor to accept picosecond timestamps. The
Participants state that, as described above, Section 6.8(c) of the CAT
NMS Plan will require annual review of timestamp granularity.\22\
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\21\ See Letter from Howard Meyerson, Managing Director,
Financial Information Forum, dated March 28, 2025 (``March FIF
Letter''), available at: https://www.sec.gov/comments/4-698/4698-585555-1689862.pdf.
\22\ In the March 24, 2025 Exemption Request, the Participants
state that an analysis of the timestamp granularity would continue
to be required as part of the annual evaluation required to be
performed by the Chief Compliance Officer pursuant to Section 6.8(c)
of the CAT NMS Plan. If the Operating Committee determines that this
analysis concludes that the benefit of the CAT Reporters reporting,
and the Central Repository providing the ability to accept,
timestamps in finer granularity than nanoseconds outweighs the
burdens, then the timestamp exemption could be terminated or be
revised to reflect more granular timestamps than nanoseconds in
accordance with the analysis. See March 24, 2025 Exemption Request,
supra note 3, at 5 n.14.
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The Commission has previously stated that regulators need
sufficiently granular timestamps to sequence events across orders and
within order lifecycles, and that a lack of uniform and granular
timestamps can limit the ability of regulators to sequence events
accurately and link data with information from other data sources.\23\
The Participants state that they continue to understand that exchanges
currently utilize timestamps only to the nanosecond and do not utilize
timestamps to picoseconds or to finer increments, and Participants
state that the CAT NMS Plan requires Industry Members to synchronize
their clocks to within 50 milliseconds of the time maintained by
NIST.\24\ Nanoseconds are smaller than milliseconds or microseconds and
so the Participants' proposal would result in the collection of
information that is at least as granular as existing data sources. The
Participants also state that they believe that CAT Reportable Events
can be adequately sequenced in the CAT without requiring timestamps in
a finer granularity than nanoseconds, and the Participants believe that
the requested relief would serve to preserve the reliability and
accuracy of the data reported to the Central Repository.\25\
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\23\ See CAT NMS Plan Approval Order, supra note 1, at 84808-09,
84813.
\24\ See March 24, 2025 Exemption Request, supra note 3, at 4.
See also March FIF Letter, supra note 23, at 2 (stating that 50
milliseconds is 50 million times greater than a nanosecond). The
commenter also states that the CAT NMS Plan requires clock
synchronization by the CAT Plan Participants to within 100
microseconds, which is 100,000 times greater than a nanosecond. Id.
\25\ See March 24, 2025 Exemption Request, supra note 3, at 4.
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The proposed approach described in the March 24, 2025 Exemption
Request would require both Participants and Industry Members to
truncate timestamps in increments more granular than nanoseconds to
nanoseconds for submission to the CAT, and the Central Repository will
be required to accept timestamps on order events handled electronically
to a nanosecond granularity. Based on the foregoing, the Commission
believes that, pursuant to Section 36 of the Exchange Act, this
exemption is appropriate in the public interest and consistent with the
protection of investors, and that pursuant to Rule 608(e), this
exemption is consistent with the public interest, the protection of
investors, the maintenance of fair and orderly markets and the removal
of impediments to, and the perfection of a national market system to
exempt the SROs from Section 6.8(b) and Section 3 of Appendix D of the
CAT NMS Plan with respect to timestamp granularity for a period of five
years.
Accordingly, it is hereby ordered, pursuant to Section 36(a)(1) of
the Exchange Act,\26\ and Rule 608(e) of the Exchange Act \27\ and with
respect to the
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proposed approaches specifically described above, that the Participants
are granted a five-year exemption from the timestamp granularity
requirement set forth in Section 6.8(b) and Section 3 of Appendix D of
the CAT NMS Plan, subject to the conditions described above.
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\26\ 15 U.S.C. 78mm(a)(1).
\27\ 17 CFR 242.608(e).
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07967 Filed 5-6-25; 8:45 am]
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