[Federal Register Volume 90, Number 129 (Wednesday, July 9, 2025)]
[Notices]
[Pages 30370-30394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-12711]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103379; File No. SR-CBOE-2025-044]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Establish
Fees for Industry Members Related to Reasonably Budgeted Costs of the
National Market System Plan Governing the Consolidated Audit Trail for
the Period From July 1, 2025 Through December 31, 2025
July 3, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on June 27, 2025, Cboe Exchange, Inc. (the
``Exchange'' or ``Cboe Options'') filed with the Securities and
Exchange Commission (the ``SEC'' or ``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its ``Consolidated Audit Trail Funding Fees'' \3\ fee schedule
to establish fees for Industry Members \4\ related to reasonably
budgeted CAT costs of the National Market System Plan Governing the
Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan'') for the
period from July 1, 2025 through December 31, 2025. The text of the
proposed rule change is provided in Exhibit 5.
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\3\ The Exchange and each of its affiliated exchanges (Cboe BYX
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc.,
Cboe EDGA Exchange, Inc., and Cboe EDGX Exchange, Inc.) are filing
to make the same amendment to the ``Consolidated Audit Trail Funding
Fees'' fee schedule.
\4\ An ``Industry Member'' is defined as ``a member of a
national securities exchange or a member of a national securities
association.'' See Exchange Rule 7.20(u); see also Section 1.1 of
the CAT NMS Plan. Unless otherwise specified, capitalized terms used
in this rule filing are defined as set forth in the CAT NMS Plan
and/or the CAT Compliance Rule. See Chapter 7, Section B of the
Exchange's Rulebook.
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The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/us/options/regulation/rule_filings/), at the Exchange's Office of the Secretary, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On July 11, 2012, the Securities and Exchange Commission (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.\5\
On November 15, 2016, the Commission approved the CAT NMS Plan.\6\
Under the CAT NMS Plan, the Operating Committee has the discretion to
establish funding for CAT LLC to operate the CAT, including
establishing fees for Industry Members to be assessed by CAT LLC that
would be implemented on behalf of CAT LLC by the Participants.\7\ The
Operating Committee adopted a revised funding model to fund the CAT
(``CAT Funding Model''). On September 6, 2023, the Commission approved
the CAT Funding Model after concluding that the model was reasonable
and that it satisfied the requirements of Section 11A of the Securities
Exchange Act of 1934 (the ``Exchange Act'') and Rule 608 thereunder.\8\
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\5\ Securities Exchange Act Release No. 67457 (July 18, 2012),
77 FR 45722 (Aug. 1, 2012).
\6\ Securities Exchange Act Release No. 79318 (Nov. 15, 2016),
81 FR 84696 (Nov. 23, 2016) (``CAT NMS Plan Approval Order'').
\7\ Section 11.1(b) of the CAT NMS Plan.
\8\ Securities Exchange Act Release No. 98290 (Sept. 6, 2023),
88 FR 62628 (Sept. 12, 2023) (``CAT Funding Model Approval Order'').
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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'').\9\
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\9\ Under the CAT Funding Model, the Operating Committee may
establish CAT Fees related to CAT costs going forward. Section
11.3(a) of the CAT NMS Plan. This filing only establishes CAT Fee
2025-2 related to reasonably budgeted CAT costs for the period from
July 1, 2025 through December 31, 2025 as described herein; it does
not address any other potential CAT Fees related to CAT costs. Any
such other CAT Fee will be subject to a separate fee filing. In
addition, under the CAT Funding Model, the Operating Committee may
establish one or more Historical CAT Assessments. Section 11.3(b) of
the CAT NMS Plan. This filing does not address any Historical CAT
Assessments.
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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
[[Page 30371]]
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').'' \10\ In establishing a CAT
Fee, the Operating Committee will calculate a ``Fee Rate'' for the
relevant period. Then, for each month in which a CAT Fee is in effect,
each CEBB and CEBS would be required to pay the fee for each
transaction in Eligible Securities executed by the CEBB or CEBS from
the prior month as set forth in CAT Data, where the fee for each
transaction will be calculated by multiplying the number of executed
equivalent shares in the transaction by one-third and by the Fee
Rate.\11\
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\10\ Section 11.3(a) of the CAT NMS Plan.
\11\ In approving the CAT Funding Model, the Commission stated
that, ``[t]he proposed recovery of Prospective CAT Costs is
appropriate.'' CAT Funding Model Approval Order at 62651.
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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.\12\ The CAT Funding Model is designed to
require that the Participants contribute to the recovery of the
remaining one-third of the budgeted CAT costs.\13\ Participants would
be subject to the same Fee Rate as CEBBs and CEBSs.\14\ While CAT Fees
charged to Industry Members become effective in accordance with the
requirements of Section 19(b) of the Exchange Act,\15\ CAT fees charged
to Participants are implemented via an approval of the CAT fees by the
Operating Committee in accordance with the requirements of the CAT NMS
Plan.\16\ Accordingly, this filing does not address Participant CAT
fees as they are described in the CAT NMS Plan.\17\
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\12\ Section 11.3(a)(iii)(A) of the CAT NMS Plan.
\13\ Section 11.3(a)(ii)(A) of the CAT NMS Plan.
\14\ Section 11.3(a)(ii) of the CAT NMS Plan.
\15\ Section 11.3(a)(i)(A)(I) of the CAT NMS Plan.
\16\ CAT Funding Model Approval Order at 62659.
\17\ See Section 11.3(a)(ii) and Appendix B of the CAT NMS Plan.
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CAT LLC proposes to charge CEBBs and CEBSs (as described in more
detail below) CAT Fee 2025-2 to recover the reasonably budgeted CAT
costs for the period from July 1, 2025 through December 31, 2025 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.' '' \18\
The Plan further states that ``[o]nce the Operating Committee has
approved such Fee Rate, the Participants shall be required to file with
the SEC pursuant to Section 19(b) of the Exchange Act CAT Fees to be
charged to Industry Members calculated using such Fee Rate.'' \19\
Accordingly, the purpose of this filing is to implement a CAT Fee on
behalf of CAT LLC for Industry Members, referred to as CAT Fee 2025-2,
in accordance with the CAT NMS Plan.
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\18\ Section 11.1(b) of the CAT NMS Plan.
\19\ Section 11.3(a)(i)(A)(I) of the CAT NMS Plan.
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(1) CAT Executing Brokers
CAT Fee 2025-2 will be charged to each CEBB and CEBS for each
applicable transaction in Eligible Securities.\20\ The CAT NMS Plan
defines a ``CAT Executing Broker'' to mean:
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\20\ In its approval of the CAT Funding Model, the Commission
determined that charging CAT fees to CAT Executing Brokers was
reasonable. In reaching this conclusion, the Commission noted that
the use of CAT Executing Brokers is appropriate because the CAT
Funding Model is based upon the calculation of executed equivalent
shares, and, therefore, charging CAT Executing Brokers would reflect
their executing role in each transaction. Furthermore, the
Commission noted that, because CAT Executing Brokers are already
identified in transaction reports from the exchanges and FINRA's
equity trade reporting facilities recorded in CAT Data, charging CAT
Executing Brokers could streamline the billing process. CAT Funding
Model Approval Order at 62629.
(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.\21\
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\21\ Section 1.1 of the CAT NMS Plan. Note that CEBBs and CEBSs
may, but are not required to, pass-through their CAT Fees to their
clients, who may, in turn, pass their fees to their clients until
they are imposed ultimately on the account that executed the
transaction. See CAT Funding Model Approval Order at 62649.
The following fields of the Participant Technical Specifications
indicate the CAT Executing Brokers for the transactions executed on an
exchange:
[[Page 30372]]
Equity Order Trade (EOT) \22\
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Include
No. Field name Data type Description key
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12.n.8/13.n.8.............. member.............. Member Alias............ The identifier for the
member firm that is
responsible for the
order on this side of
the trade.
Not required if there is
no order for the side
as indicated by the
NOBUYID/NOSELLID
instruction.
This must be provided if C
orderID is provided.
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Option Trade (OT) \23\
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Include
No. Field name Data type Description key
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16.n.13/17.n.13............ member.............. Member Alias............ The identifier for the R
member firm that is
responsible for the
order.
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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:
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\22\ See Table 23, Section 4.7 (Order Trade Event) of the CAT
Reporting Technical Specifications for Plan Participants, Version
4.1.1 r1 (Apr. 14, 2025), https://www.catnmsplan.com/sites/default/files/2025-04/04.14.2025_CAT_Reporting_Technical_Specifications_for_Participants_4.1.1-r1.pdf (``CAT Reporting Technical Specifications for Plan
Participants'').
\23\ See Table 51, Section 5.2.5.1 (Simple Option Trade Event)
of the CAT Reporting Technical Specifications for Plan Participants.
\24\ See Table 61, Section 6.1 (TRF/ORF/ADF Transaction Data
Event) of the CAT Reporting Technical Specifications for Plan
Participants.
TRF/ORF/ADF Transaction Data Event (TRF) \24\
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Include
No. Field name Data type Description key
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26......................... reportingExecutingMp Member Alias............ MPID of the executing R
id. party.
28......................... contraExecutingMpid. Member Alias............ MPID of the contra-side C
executing party.
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(2) Calculation of Fee Rate 2025-2
The Operating Committee determined the Fee Rate to be used in
calculating CAT Fee 2025-2 (``Fee Rate 2025-2'') by dividing the
reasonably budgeted CAT costs (``Budgeted CAT Costs 2025-2'') for the
period from July 1, 2025 through December 31, 2025 (``CAT Fee 2025-2
Period'') by the reasonably projected total executed share volume of
all transactions in Eligible Securities for the six-month recovery
period, as discussed in detail below.\25\ Based on this calculation,
the Operating Committee has determined that Fee Rate 2025-2 would be
$0.00002651641828376661 per executed equivalent share. This rate is
then divided by three and rounded to determine the fee rate of
$0.000009 per executed equivalent share that will be assessed to CEBBs
and CEBSs, as also discussed in detail below.
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\25\ Section 11.3(a)(i) of the CAT NMS Plan.
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(A) CAT Fee 2025-2 Period
CAT LLC proposes to implement CAT Fee 2025-2 as the third CAT Fee
related to Prospective CAT Costs. CAT LLC proposes to commence CAT Fee
2025-2 during the year, rather than at the beginning of the year.
Accordingly, CAT Fee 2025-2 ``would be calculated as described in
paragraph (II)'' of Section 11.3(a)(i)(A) of the CAT NMS Plan,\26\
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.'' \27\ For CAT Fee 2025-2,
the reasonably budgeted CAT costs for ``the remainder of the year'' are
the reasonably budgeted CAT costs from July 1, 2025 through December
31, 2025 as set forth in the updated annual budget for 2025 for CAT LLC
approved by the Operating Committee on May 19, 2025 (``Updated 2025 CAT
Budget'').\28\
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\26\ Section 11.3(a)(i)(A)(IV) of the CAT NMS Plan.
\27\ Section 11.3(a)(i)(A)(II) of the CAT NMS Plan.
\28\ The Updated 2025 CAT Budget is available on the CAT website
(https://www.catnmsplan.com/sites/default/files/2025-05/05.19.25-CAT-LLC-2025-Financial_and_Operating-Budget.pdf).
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(B) Executed Equivalent Shares for Transactions in Eligible Securities
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 (i.e., 100 executed equivalent shares or such other
applicable multiplier); and (3) each executed share for a transaction
in OTC Equity Securities will be counted as 0.01 executed equivalent
share.\29\
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\29\ Section 11.3(a)(i)(B) of the CAT NMS Plan. In approving the
CAT Funding Model, the Commission concluded that ``the use of
executed equivalent share volume as the basis of the proposed cost
allocation methodology is reasonable and consistent with the
approach taken by the funding principles of the CAT NMS Plan.'' CAT
Funding Model Approval Order at 62640.
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(C) Budgeted CAT Costs 2025-2
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
[[Page 30373]]
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.'' \30\ Section
11.1(a) of the CAT NMS Plan describes the requirement for the 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:
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\30\ Section 11.3(a)(i)(C) of the CAT NMS Plan.
[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
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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 2025 for CAT LLC
(``Original 2025 CAT Budget'') in November 2024.\31\ In May 2025, the
Operating Committee approved an updated budget for 2025, referred to as
the Updated 2025 CAT Budget. The Updated 2025 CAT Budget includes
actual costs for each category for the first quarter of 2025, with
updated estimated costs for each category for the second, third and
fourth quarters of 2025. The updated costs for the third and fourth
quarters set forth in the Updated 2025 CAT Budget (i.e., Budgeted CAT
Costs 2025-2) are the costs used in calculating CAT Fee 2025-2. The
2025 CAT budgets, both the Original 2025 CAT Budget and the Updated
2025 CAT Budget, were prepared on the accrual basis of accounting,
whereas prior CAT budgets were prepared on the cash basis of
accounting.\32\
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\31\ The Original 2025 CAT Budget is available on the CAT
website (https://www.catnmsplan.com/sites/default/files/2024-11/11.20.24-CAT-LLC-2025-Financial_and_Operating-Budget.pdf).
\32\ CAT budgets for periods prior to 2025 were prepared on the
cash basis of accounting, as such budgets were primarily used to
determine the dollar amount of promissory notes from the
Participants that were required to fund the ongoing operations of
the CAT. Commencing in 2025, with the contemplated recovery of costs
from Industry Members and the Participants via CAT Fees, the
Original 2025 CAT Budget was prepared on the accrual basis of
accounting to properly match projected revenues with estimated
expenses incurred. A cash basis budget reflects expenditures when
paid, while an accrual basis budget reflects expenditures when
incurred. In moving from a cash basis budget to an accrual basis
budget there is no double counting of expenses.
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As described in detail below, the Budgeted CAT Costs 2025-2 would
be $60,726,412. CEBBs collectively will be responsible for one-third of
the Budged [sic] CAT Costs 2025-2 (which is $20,242,137.33), and CEBSs
collectively will be responsible for one-third of the Budgeted CAT
Costs 2025-2 (which is $20,242,137.33).
The following describes in detail the Budgeted CAT Costs 2025-2 for
CAT Fee 2025-2. 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.\33\
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\33\ Section 11.3(a)(iii)(B) of the CAT NMS Plan.
Each of the costs described below are reasonable, appropriate and
necessary for the creation, implementation and maintenance of CAT.
The following table breaks down the Budgeted CAT Costs 2025-2 into
the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS
Plan.\34\ The Budgeted CAT Costs 2025-2 reflect the costs set forth in
the third and fourth quarters of the Updated 2025 CAT Budget. The
Budgeted CAT Costs 2025-2 are the costs used in calculating CAT Fee
2025-2.
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\34\ Note that costs and related cost calculations provided in
this filing may reflect minor variations from the budgeted costs due
to rounding.
\35\ With respect to certain costs that were ``appropriately
excluded,'' such excluded costs relate to the amortization of
capitalized technology costs, which are amortized over the life of
the Plan Processor Agreement. As such costs have already been
otherwise reflected in the filing, their inclusion would double
count the capitalized technology costs. In addition, amortization is
a non-cash expense.
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Budgeted CAT costs 2025-2 \b\
Budget category (i.e., costs for Q3-Q4 of 2025)
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Capitalized Developed Technology \c\ $0
Costs \a\...........................
Technology Costs..................... 108,551,142
Cloud Hosting Services........... \d\ 82,222,276
Operating Fees................... \e\ 15,453,942
CAIS Operating Fees.............. \f\ 10,374,924
Change Request Fees.............. \g\ 500,000
Legal................................ \h\ 3,631,342
Consulting........................... \i\ 866,167
Insurance............................ \j\ 1,594,452
Professional and administration...... \k\ 609,818
Public relations..................... \l\ 0
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Subtotal......................... 115,252,921
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Reserve.............................. \m\ (54,526,510)
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Total Budgeted CAT Costs 2025-2.. 60,726,412
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\a\ The non-cash amortization of these capitalized developed technology
costs to be incurred during the CAT Fee 2025-2 Period have been
appropriately excluded from the above table.\35\
\b\ Budgeted CAT Costs 2025-2 described in this table of costs were
determined based an analysis of a variety of factors, including
historical costs/invoices, estimated costs from respective vendors/
service providers, contractual terms with vendors/service providers,
anticipated service levels and needs, and discussions with vendors and
Participants.
[[Page 30374]]
\c\ This cost number for capitalized developed technology costs is
calculated by adding together the Capitalized Developed Technology
Costs and the Software License Fee--2025, each for the third and
fourth quarters of 2025 as set forth in the Updated 2025 CAT Budget:
($0 + $0) + ($0 + $0) = $0.
\d\ This cost number for cloud hosting services is calculated by adding
together the cloud hosting services costs for the third and fourth
quarters of 2025 as set forth in the Updated 2025 CAT Budget:
$40,362,043 + $41,860,233 = $82,222,276.
\e\ This cost number for operating fees is calculated by adding together
the operating fees and the Cyber Insurance Premium Adjustment, each
for the third and fourth quarters of 2025 as set forth in the Updated
2025 CAT Budget: ($7,225,473 + $7,225,473) + ($501,498 + $501,498) =
$15,453,942.
\f\ This cost number for CAIS operating fees is calculated by adding
together the CAIS operating fees for the third and fourth quarters of
2025 as set forth in the Updated 2025 CAT Budget: $5,187,462 +
$5,187,462 = $10,374,924.
\g\ This cost number for change request fees is calculated by adding
together the placeholder for possible change requests for the third
and fourth quarters of 2025 as set forth in the Updated 2025 CAT
Budget: $250,000 + $250,000 = $500,000.
\h\ This cost number for legal services is calculated by adding together
the legal costs for the third and fourth quarters of 2025 as set forth
in the Updated 2025 CAT Budget: $1,815,671 + $1,815,671 = $3,631,342.
\i\ This cost number for consulting services is calculated by adding
together the consulting costs for the third and fourth quarters of
2025 as set forth in the Updated 2025 CAT Budget: $433,084 + $433,083
= $866,167.
\j\ This cost number for insurance is calculated by adding together the
insurance costs for the third and fourth quarters of 2025 as set forth
in the Updated 2025 CAT Budget: $1,594,452 + $0 = $1,594,452.
\k\ This cost number for professional and administration services is
calculated by adding together the professional and administration
costs for the third and fourth quarters of 2025 as set forth in the
Updated 2025 CAT Budget: $414,818 + $195,000 = $609,818.
\l\ This cost number for public relations is calculated by adding
together the public relations costs for the third and fourth quarters
of 2025 as set forth in the Updated 2025 CAT Budget: $0 + $0 = $0.
\m\ This reduction in the reserve is calculated by adding together the
25% Incremental Liquidity Reserve Accrued during 2025 for the third
and fourth quarters of 2025 as set forth in the Updated 2025 CAT
Budget: $27,263,255 + $27,263,255 = $54,526,510.
To the extent that CAT LLC enters into notes with Participants or
others to pay costs incurred during the period in which CAT Fee 2025-2
is in effect, CAT LLC will use the proceeds from CAT Fee 2025-2 and the
related Participant CAT fees to repay such notes.
The following table compares the annual budgeted CAT costs as set
forth in the updated annual CAT budget for 2024 approved by the
Operating Committee in July 2024 (``Updated 2024 CAT Budget''),\36\ the
Original 2025 CAT Budget and the Updated 2025 CAT Budget, and is
provided for informational purposes. In each case, the costs provided
reflect the costs for the entire year for each of the budgets; this
differs from the above chart which focuses on budgeted costs for only
the third and fourth quarters of 2025, which, as noted, are the costs
that are used in the calculation of the fee rate in this fee filing.
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\36\ Consolidated Audit Trail, LLC 2024 Financial and Operating
Budget--Mid-Year Update--July 2024 (https://www.catnmsplan.com/sites/default/files/2024-08/07.31.24-CAT-LLC-2024-Financial_and_Operating-Budget.pdf).
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Full year 2024 Full year 2025 Full year 2025
budgeted CAT budgeted CAT budgeted CAT
Budget category costs from costs from costs from
updated 2024 CAT original 2025 updated 2025 CAT
budget \a\ CAT budget budget
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Capitalized Developed Technology Costs \b\................ $7,761,480 $3,923,360 $4,871,962
Technology Costs.......................................... 196,921,118 234,925,808 211,548,471
Cloud Hosting Services................................ 148,789,981 182,594,630 159,230,937
Operating Fees \c\.................................... 27,768,718 30,831,330 30,817,686
CAIS Operating Fees................................... 20,199,919 20,749,848 20,749,848
Change Request Fees................................... 162,500 750,000 750,000
Legal..................................................... 8,146,599 5,720,000 7,370,002
Consulting................................................ 1,600,000 1,750,000 1,749,998
Insurance................................................. 1,342,345 1,594,452 1,594,452
Professional and administration........................... 823,930 882,456 1,193,090
Public relations.......................................... 93,275 50,000 6,575
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Subtotal.............................................. 216,688,747 248,846,076 228,334,551
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Reserve................................................... 13,847,693 23,842,200 (13,858,958)
-----------------------------------------------------
Total Budgeted CAT Costs.............................. 230,536,440 272,688,276 214,475,593
----------------------------------------------------------------------------------------------------------------
\a\ As noted above, the Updated 2024 CAT Budget was prepared on the cash basis of accounting, while the Original
2025 CAT Budget and the Updated 2025 CAT Budget were prepared on the accrual basis of accounting.
\b\ This cost number is calculated by adding together the Capitalized Developed Technology Costs and the
Software License Fee for each budget.
\c\ This cost number is calculated by adding together the Operating fees and the Cyber Insurance Premium
Adjustment for each budget.
In addition, the following table compares the first quarter of the
Original 2025 CAT Budget with the first quarter of the Updated 2025 CAT
Budget. The Updated 2025 CAT Budget includes actual costs for January,
February and March 2025, whereas the Original 2025 CAT Budget included
budgeted costs for these three months. The variance from the first
quarter of the Original 2025 CAT Budget to the actuals for the first
quarter of 2025 (as set forth in the Updated 2025 CAT Budget) in the
last column of the following chart are used in this filing in
supporting the reasonableness of the estimates for each category of
costs.
[[Page 30375]]
----------------------------------------------------------------------------------------------------------------
First quarter of Variance from first quarter of
Budget category original 2025 CAT Actuals for first original 2025 CAT budget to actuals
budget quarter of 2025 for first quarter of 2025
----------------------------------------------------------------------------------------------------------------
Capitalized Developed Technology $3,923,360 $4,871,962 Increase by $948,602.\b\
Costs \a\.
Technology Costs................. 52,490,273 49,181,253
Cloud Hosting Services....... 39,640,542 36,357,017 Decrease by $3,283,525.\c\
Operating Fees \d\........... 7,662,270 7,636,774 Decrease by $25,496.
CAIS Operating Fees.......... 5,187,462 5,187,462 No change.
Change Request Fees.......... 0 0 No change.
Legal............................ 1,430,000 1,922,990 Increase by $492,990.\e\
Consulting....................... 437,500 450,745 Increase by $13,245.
Insurance........................ 0 0 No change.
Professional and administration.. 168,750 297,513 Increase by $128,763.
Public relations................. 12,500 6,575 Decrease by $5,925.
------------------------------------------------------------------------------
Total........................ 58,462,385 56,731,038 Decrease by $1,731,347.
----------------------------------------------------------------------------------------------------------------
\a\ This cost number is calculated by adding together the capitalized developed technology costs and the
software license fee for each budget.
\b\ The variance is the result of costs related to the software license fee for CAIS in accordance with the Plan
Processor Agreement with FCAT.
\c\ The variance is attributable to, among other things, (1) a decrease in costs related to changes made
pursuant to an amendment to the CAT NMS Plan to implement cost savings measures \37\ (``Cost Savings
Amendment''), and (2) cost decreases related to optimizations resulting in reduced procesing [sic] and storage
costs.
\d\ This cost number is calculated by adding together the operating fees and the cyber insurance premium
adjustment for each budget.
\e\ The variance is attributable to unanticipated issues that required additional legal efforts on behalf of CAT
LLC that developed after the budget was created.
(i) Technology Costs--Cloud Hosting Services
(a) Description of Cloud Hosting Services Costs
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 $82,222,276 in technology
costs for cloud hosting services for the CAT Fee 2025-2 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 2025-2 Period.
---------------------------------------------------------------------------
\37\ Securities Exchange Act Release No. 101901 (Dec. 12, 2024),
89 FR 103033 (Dec. 18, 2024) (``Cost Savings Amendment'').
---------------------------------------------------------------------------
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. 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. FCAT utilizes
such cloud hosting services for a broad array of services for the CAT,
such as data ingestion, data management, and analytic tools for the
CAT. AWS performs cloud hosting services for both the CAT transaction
database as well as the CAT Customer and Account Information System
(``CAIS''). It is anticipated that such cloud hosting services will
continue during the CAT Fee 2025-2 Period.
The cost for AWS cloud services for the CAT is a function of the
volume of CAT Data, largely as a result of the processing and storage
of the CAT Data.\38\ The greater the amount of CAT Data, the greater
the cost of AWS services to CAT LLC. During the CAT Fee 2025-2 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,'' \39\ and that
``[i]t is expected that the Central Repository will grow to more than
29 petabytes of raw, uncompressed data.'' \40\ In contrast with those
estimates, the Q1 2025 data volumes averaged 752 billion events per
day. The Q1 2025 data volumes reflected a 30% year over year growth
rate compared to Q1 2024, which averaged 577 billion events per day,
and reflected a 25% increase from the prior quarter Q4 2024, which
averaged 602 billion events per day. The highest peak data volume to
date of 1.45 trillion events was recorded on April 7, 2025. The top
five peak days were recorded in April 2025.
---------------------------------------------------------------------------
\38\ 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. For further discussion of the
effect of processing timelines on cloud hosting costs, see Section
3(b)(2)(A)(i) below.
\39\ Appendix D-4 of the CAT NMS Plan at n.262.
\40\ Appendix D-5 of the CAT NMS Plan.
---------------------------------------------------------------------------
CAT LLC estimates that the budget for cloud hosting services costs
during the CAT Fee 2025-2 Period will be approximately $82,222,276. The
budget for cloud hosting services costs during the CAT Fee 2025-2
Period is calculated based on the Updated 2025 CAT Budget.
Specifically, this estimate was calculated by adding the budgeted
amounts for cloud hosting services costs for the third and fourth
quarters of 2025 as set forth in the Updated 2025 CAT Budget.\41\
---------------------------------------------------------------------------
\41\ This calculation is $40,362,043 + $41,860,233 =
$82,222,276.
---------------------------------------------------------------------------
CAT LLC estimated the budget for the cost for cloud hosting
services for the
[[Page 30376]]
CAT Fee 2025-2 Period based on an assumption of 40% 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
particular, in determining to use the 40% annual year-over-year volume
growth in events per day, CAT LLC considered, among other things, the
average annual year-over-year volume growth for 2019 through 2024 of
approximately 45%, the average annual year-over-year volume growth for
2020 through 2024 of approximately 30%, and the average monthly growth
rate for 2024 of approximately 50%.\42\
---------------------------------------------------------------------------
\42\ Note that these growth rates are based on events processed
and stored in the CAT. Executed transactions are a small subset of
such events. As a result, the number of transactions in the CAT,
and, hence, the number of executed equivalent shares, is not
directly correlated with the number of events processed in the CAT
or the costs of cloud hosting services for the CAT. Accordingly, the
number of executed equivalent shares may stay relatively constant
from year to year while the number of events processed and stored in
the CAT may grow significantly.
---------------------------------------------------------------------------
This process for estimating the budget for cloud hosting services
costs for the CAT Fee 2025-2 Period is the same process by which CAT
LLC estimated the cloud hosting services costs for the Original 2025
CAT Budget. The Original 2025 CAT Budget estimated a budget for cloud
hosting services of $39,640,542 for the first quarter of 2025. The
actual costs for cloud hosting services for the first quarter of 2025,
which are set forth in the Updated 2025 CAT Budget, were $36,357,017.
Therefore, the variance between budgeted and actual cloud hosting
services costs for this period was an approximate decrease of 8%.
Accordingly, CAT LLC believes that the process for estimating the
budgeted cloud hosting services costs for the CAT Fee 2025-2 Period is
reasonable.
(b) Changes From Prior Fee Filing
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. Accordingly, this filing describes the changes in the cloud
hosting services costs from the Original 2025 CAT Budget, which was
used in the calculation of the prior Prospective CAT Fee, CAT Fee 2025-
1.\43\ Specifically, the following describes the differences (if any)
in the costs for cloud hosting services as set forth in the Original
2025 CAT Budget versus the Updated 2025 CAT Budget for the full year of
2025 as well as for the third and fourth quarters of 2025, and the
reasons for any changes.
---------------------------------------------------------------------------
\43\ Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budgeted costs for cloud hosting services as set
forth in the Original 2025 CAT Budget were $182,594,630, and the annual
2025 budgeted costs for cloud hosting services as set forth in the
Updated 2025 CAT Budget are $159,230,937. Accordingly, budgeted annual
costs for cloud hosting services decreased by $23,363,693 from the
Original 2025 CAT Budget to the Updated 2025 CAT Budget, which is an
approximate 13% reduction in cloud hosting services costs for the full
year of 2025.
Correspondingly, the budgeted costs for cloud hosting services for
the third and fourth quarters of 2025 as set forth in the Original 2025
CAT Budget were $97,748,713,\44\ and the budgeted costs for cloud
hosting services for third and fourth quarters of 2025 as set forth in
the Updated 2025 CAT Budget are $82,222,276.\45\ Accordingly, the
budgeted costs for cloud hosting services for the third and fourth
quarters of 2025 decreased by $15,526,437 from the Original 2025 CAT
Budget to the Updated 2025 CAT Budget, which is approximately a 16%
reduction in cloud hosting services costs for the third and fourth
quarters of 2025.
---------------------------------------------------------------------------
\44\ This calculation is $46,382,724 + $51,365,989 =
$97,748,713.
\45\ This calculation is $40,362,043 + $41,860,233 =
$82,222,276.
---------------------------------------------------------------------------
The decrease in costs for cloud hosting services from the Original
2025 CAT Budget to the Updated 2025 CAT Budget, both for the full year
for 2025 and for the third and fourth quarters of 2025, reflects (1) a
decrease in costs related to changes made pursuant to the Cost Savings
Amendment; (2) cost decreases related to optimizations resulting in
reduced procesing [sic] and storage costs; and (3) volume increases
below the initial projection.
(ii) Technology Costs--Operating Fees
(a) Description of Operating Fees
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 $15,453,942 in technology costs for
operating fees for the CAT Fee 2025-2 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 (e.g., management of the FINRA CAT
Helpdesk, FAQs, website and webinars) and program management as
required by the CAT NMS Plan. Operating fees also include market data
provider costs, as discussed below.
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 2025-2 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, exemptive requests and
amendments 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;
Assist with billing, collection and other CAT fee-related
activity; 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.
[[Page 30377]]
CAT LLC calculated the budget for the FCAT technology costs for
operating fees for the CAT Fee 2025-2 Period based on the recurring
monthly operating fees under the Plan Processor Agreement.
Market Data Provider: Algoseek. It is anticipated that the
operating fees costs for the CAT Fee 2025-2 Period will include costs
related to the receipt of certain market data for the CAT pursuant to
an agreement between FCAT and Algoseek, LLC (``Algoseek''). CAT LLC
determined that Algoseek would provide market data that included data
elements set forth in Section 6.5(a)(ii) of the CAT NMS Plan, and that
the fees were reasonable and in line with market rates for the market
data received. All costs under the contract would be treated as a
direct pass through cost to CAT LLC. CAT LLC estimated the budget for
the costs for Algoseek for the CAT Fee 2025-2 Period based on the
monthly rate set forth in the agreement between Algoseek and FCAT.
Operating Fee Estimates. CAT LLC estimates that the budget for
operating fees during the CAT Fee 2025-2 Period will be approximately
$15,453,942. The budget for operating fees during the CAT Fee 2025-2
Period is calculated based on the Updated 2025 CAT Budget.
Specifically, this estimate was calculated by adding the budgeted
amounts for operating fees for the third and fourth quarters of 2025 as
set forth in the Updated 2025 CAT Budget.\46\
---------------------------------------------------------------------------
\46\ This calculation is ($7,225,473 + $7,225,473) + ($501,498 +
$501,498) = $15,453,942.
---------------------------------------------------------------------------
As discussed above, CAT LLC estimated the budget for the operating
fees during the CAT Fee 2025-2 Period based on monthly rates set forth
in the Plan Processor Agreement and the agreement with Algoseek. 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 2025-2 Period is the same process by
which CAT LLC estimated the operating fees for the Original 2025 CAT
Budget. The Original 2025 CAT Budget estimated a budget for operating
fees of $7,662,270 for the first quarter of 2025.\47\ The actual costs
for operating fees for first quarter of 2025 were $7,636,774.\48\
Therefore, the variance between budgeted and actual operating fees for
this period was not material. Accordingly, CAT LLC believes that the
process for estimating the budgeted operating fees for the CAT Fee
2025-2 Period is reasonable.
---------------------------------------------------------------------------
\47\ This calculation is $7,221,522 + $440,748 = $7,662,270.
\48\ This calculation is $7,196,026 + $440,748 = $7,636,774.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
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.
Accordingly, this filing describes the changes from the operating fees
set forth in the Original 2025 CAT Budget, which was used in the
calculation of the prior Prospective CAT Fee, CAT Fee 2025-1.\49\
Specifically, the following describes the differences (if any) in the
costs for operating fees as set forth in the Original 2025 CAT Budget
versus the Updated 2025 CAT Budget for the full year of 2025 as well as
for the third and fourth quarters of 2025, and the reasons for any
changes.
---------------------------------------------------------------------------
\49\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budgeted costs for operating fees as set forth in
the Original 2025 CAT Budget were $30,831,330,\50\ and the annual 2025
budgeted costs for operating fees as set forth in the Updated 2025 CAT
Budget are $30,817,686 \51\ Accordingly, budgeted annual costs for
operating fees did not change materially from the Original 2025 CAT
Budget to the Updated 2025 CAT Budget for the full year of 2025.
---------------------------------------------------------------------------
\50\ This calculation is $28,886,088 + $1,945,242 = $30,831,330.
\51\ This calculation is $28,872,444 + $1,945,242 = $30,817,686.
---------------------------------------------------------------------------
Correspondingly, the budgeted costs for operating fees for the
third and fourth quarters of 2025 as set forth in the Original 2025 CAT
Budget were $15,446,040,\52\ and the budgeted costs for operating fees
for the third and fourth quarters of 2025 as set forth in the Updated
2025 CAT Budget are $15,453,942.\53\ Accordingly, the budgeted costs
for operating fees for the third and fourth quarters of 2025 did not
change materially from the Original 2025 CAT Budget to the Updated 2025
CAT Budget for the third and fourth quarters of 2025.
---------------------------------------------------------------------------
\52\ This calculation is ($7,221,522 + $7,221,522) + ($501,498 +
$501,498) = $15,446,040.
\53\ This calculation is ($7,225,473 + $7,225,473) + ($501,498 +
$501,498) = $15,453,942.
---------------------------------------------------------------------------
(iii) Technology Costs--CAIS Operating Fees
(a) Description of CAIS Operating Fees
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 $10,374,924 in technology costs for CAIS
operating fees for the CAT Fee 2025-2 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 (e.g., management
of the FINRA CAT Helpdesk, FAQs, website and webinars) and program
management. The CAT is required under the CAT NMS Plan to capture and
store Customer Identifying Information and Customer Account Information
in a database separate from the transactional database and to create a
CAT-Customer-ID for each Customer. As of May 31, 2024, the
implementation of CAIS was completed.\54\
---------------------------------------------------------------------------
\54\ For a discussion of the implementation timeline for CAIS,
see CAT Alert 2023-01.
---------------------------------------------------------------------------
During the CAT Fee 2025-2 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 2025-2 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 2025-2 Period will be approximately $10,374,924. The budget
for CAIS operating fees during the CAT Fee 2025-2 Period is calculated
based on the Updated 2025 CAT Budget. Specifically, this estimate was
calculated by adding the budgeted amounts for CAIS operating fees for
the third and fourth quarters of 2025 as set forth in the Updated 2025
CAT Budget.\55\
---------------------------------------------------------------------------
\55\ This calculation is $5,187,462 + $5,187,462 = $10,374,924.
---------------------------------------------------------------------------
CAT LLC calculated the budget for FCAT's CAIS-related services for
the CAT Fee 2025-2 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 2025-2 Period is
the same process by which CAT LLC estimated the CAIS operating fees for
the Original 2025 CAT Budget. The Original 2025 CAT Budget
[[Page 30378]]
estimated a budget of $5,187,462 for CAIS operating fees for the first
quarter of 2025. The actual costs for CAIS operating fees for the first
quarter of 2025, which are set forth in the Updated 2025 CAT Budget,
were $5,187,462. There was no variance between budgeted and actual CAIS
operating fees for the first quarter of 2025. Accordingly, CAT LLC
believes that the process for estimating the budgeted CAIS operating
fees for the CAT Fee 2025-2 Period is reasonable.
(b) Changes From Prior Fee Filing
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.
Accordingly, this filing describes the changes in CAIS operating fees
from the Original 2025 CAT Budget, which was used in the calculation of
the prior Prospective CAT Fee, CAT Fee 2025-1.\56\ Specifically, the
following describes the differences (if any) in the costs for CAIS
operating fees as set forth in the Original 2025 CAT Budget versus the
Updated 2025 CAT Budget for the full year of 2025 as well as for the
third and fourth quarters of 2025, and the reasons for any changes.
---------------------------------------------------------------------------
\56\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
CAIS operating fees are based on a recurring monthly rate payable
to FCAT and are unchanged from the prior CAT Fee filing. The annual
2025 budgeted costs for CAIS operating fees as set forth in the
Original 2025 CAT Budget were $20,749,848, and the annual 2025 budgeted
costs for CAIS operating fees as set forth in the Updated 2025 CAT
Budget are $20,749,848. Accordingly, the budgeted annual costs for CAIS
operating fees are the same for both the Original 2025 CAT Budget and
the Updated 2025 CAT Budget.
Correspondingly, the budgeted costs for CAIS operating fees for the
third and fourth quarters of 2025 as set forth in the Original 2025 CAT
Budget were $10,374,924, and the budgeted costs for CAIS operating fees
for the third and fourth quarters of 2025 as set forth in the Updated
2025 CAT Budget are $10,374,924.\57\ Accordingly, the budget costs for
CAIS operating fees for the third and fourth quarters of 2025 are the
same for both the Original 2025 CAT Budget and the Updated 2025 CAT
Budget.
---------------------------------------------------------------------------
\57\ This calculation is $5,187,462 + $5,187,462 = $10,374,924,
for both the Original 2025 CAT Budget and the Updated 2025 CAT
Budget.
---------------------------------------------------------------------------
Accordingly, there were no changes in the line item for CAIS
operating fees from the prior CAT Fee filing.
(iv) Technology Costs--Change Request Fees
(a) Description of Change Request Fees
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 $500,000 in technology costs for change
request fees for the CAT Fee 2025-2 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.
The change request budget line is established to include expected
costs to be incurred in which the nature of the costs (i.e.,
capitalization versus expensing) have not yet been determined. Upon the
incurrence of such costs, the final determination of capitalization
versus expensing is determined and then such costs are reclassified
from the change request line to the appropriate technology cost line
item.
During the CAT Fee 2025-2 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 2025-2 Period includes a placeholder of $500,000 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 2025-2 Period will be approximately $500,000. The budget for
change requests during the CAT Fee 2025-2 Period is calculated based on
the Updated 2025 CAT Budget. Specifically, this estimate was calculated
by adding the budgeted amounts for the change requests for the third
and fourth quarters of 2025 as set forth in the Updated 2025 CAT
Budget.\58\
---------------------------------------------------------------------------
\58\ This calculation is $250,000 + $250,000 = $500,000.
---------------------------------------------------------------------------
CAT LLC estimated the budget for the potential change requests for
the CAT Fee 2025-2 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 2025-2 Period is the same process
by which CAT LLC estimated the change requests cost for the Original
2025 CAT Budget. The Original 2025 CAT Budget estimated a change
request budget of $0 for the the [sic] first quarter of 2025. The
actual costs for change requests for the first quarter of 2025, which
are set forth in the Updated 2025 CAT Budget, were $0. There was no
variance between budgeted and actual change request costs for the first
quarter of 2025. Accordingly, CAT LLC believes that the process for
estimating the budgeted change request costs for 2025 is reasonable.
(b) Changes From Prior Fee Filing
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.
Accordingly, this filing describes the changes in the change request
fees from the Original 2025 CAT Budget, which was used in the
calculation of the prior Prospective CAT Fee, CAT Fee 2025-1.\59\
Specifically, the following describes the differences (if any) in the
costs for change requests as set forth in the Original 2025 CAT Budget
versus the Updated 2025 CAT Budget for the full year of 2025 as well as
for the third and fourth quarters of 2025, and the reasons for any
changes.
---------------------------------------------------------------------------
\59\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budgeted costs for change requests as set forth in
the Original 2025 CAT Budget were $750,000, and the annual 2025
budgeted costs for change requests as set forth in the Updated 2025 CAT
Budget are $750,000. Accordingly, budgeted annual costs for change
requests are the same for both the Original 2025 CAT Budget and the
Updated 2025 CAT Budget.
Correspondingly, the budgeted costs for change requests for the
third and fourth quarters of 2025 as set forth in the Original 2025 CAT
Budget were $500,000, and the budgeted costs for change request for the
third and fourth quarters of 2025 as set forth in the Updated 2025 CAT
Budget are
[[Page 30379]]
$500,000.\60\ Accordingly, the budgeted costs for change requests for
the third and fourth quarters of 2025 are the same for both the
Original 2025 CAT Budget and the Updated 2025 CAT Budget.
---------------------------------------------------------------------------
\60\ This calculation is $250,000 + $250,000 = $500,000, for
both the Original 2025 CAT Budget and the Updated 2025 CAT Budget.
---------------------------------------------------------------------------
Accordingly, there were no changes in the line item for change
requests from the prior CAT Fee filing.
(v) Technology Costs--Capitalized Developed Technology Costs
(a) Description of Capitalized Developed Technology Costs
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 $0 in technology
costs for capitalized developed technology costs for the CAT Fee 2025-2
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 2025-2 Period will be approximately
$0. The budget for capitalized developed technology costs during the
CAT Fee 2025-2 Period is calculated based on the Updated 2025 CAT
Budget. Specifically, this estimate was calculated by adding the
budgeted amounts for capitalized developed technology costs for the
third and fourth quarters of 2025 as set forth in the Updated 2025 CAT
Budget.\61\
---------------------------------------------------------------------------
\61\ This calculation is ($0 + $0) + ($0 + $0) = $0.
---------------------------------------------------------------------------
CAT LLC estimated the budget for capitalized developed technology
costs for the CAT Fee 2025-2 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. This process for
estimating the budget for capitalized developed technology costs for
the CAT Fee 2025-2 Period is the same process by which CAT LLC
estimated the capitalized developed technology costs for the Original
2025 CAT Budget. The Original 2025 CAT Budget estimated a budget for
capitalized developed technology costs of $3,923,360 for the first
quarter of 2025.\62\ The actual costs for capitalized developed
technology costs for the first quarter of 2025 were $4,871,962.\63\ The
budgeted costs and the actual costs for the line item of capitalized
developed technology costs for the first quarter of 2025 were the same:
$1,150,000. As a result, this variance is attributable to software
license fees, which is the the [sic] other line item included in the
capitalized developed technology costs for Budgeted CAT Fees 2025-2.
The variance of $948,602 is the result of costs related to the software
license fee for CAIS in accordance with the Plan Processor Agreement
with FCAT. Accordingly, CAT LLC believes that the process for
estimating the budgeted capitalized developed technology costs for the
CAT Fee 2025-2 Period is reasonable.
---------------------------------------------------------------------------
\62\ This calculation is $1,150,000 + $2,773,360 = $3,923,360.
\63\ This calculation is $1,150,000 + $3,721,962 = $4,871,962.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
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. Accordingly, this filing describes the changes in the
capitalized developed technology costs from the Original 2025 CAT
Budget, which was used in the calculation of the prior Prospective CAT
Fee, CAT Fee 2025-1.\64\ Specifically, the following describes the
differences (if any) in the costs for capitalized developed technology
costs as set forth in the Original 2025 CAT Budget versus the Updated
2025 CAT Budget for the full year of 2025 as well as for the third and
fourth quarters of 2025, and the reasons for any changes.
---------------------------------------------------------------------------
\64\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budget for capitalized developed technology costs
as set forth in the Original 2025 CAT Budget were $3,923,360,\65\ and
the annual 2025 budget for capitalized developed technology costs as
set forth in the Updated 2025 CAT Budget are $4,871,962.\66\
Accordingly, the annual budget for capitalized developed technology
costs increased by $948,602 from the Original 2025 CAT Budget to the
Updated 2025 CAT Budget for the full year of 2025. This increase in the
annual budget for capitalized developed technology costs was the result
of costs related to the software license fee for CAIS in accordance
with the Plan Processor Agreement with FCAT.
---------------------------------------------------------------------------
\65\ This calculation is $1,150,000 + $2,773,360 = $3,923,360.
\66\ This calculation is $1,150,000 + $3,721,962 = $4,871,962.
---------------------------------------------------------------------------
In addition, the budget for capitalized developed technology costs
for the third and fourth quarters of 2025 as set forth in the Original
2025 CAT Budget was $0,\67\ and the budgeted capitalized developed
technology costs for the third and fourth quarters of 2025 as set forth
in the Updated 2025 CAT Budget was $0.\68\ Accordingly, the budgeted
capitalized developed technology costs for the third and fourth
quarters of 2025 was the same for both the Original 2025 CAT Budget and
the Updated 2025 CAT Budget for the third and fourth quarters of 2025.
---------------------------------------------------------------------------
\67\ This calculation is ($0 + $0) + ($0 + $0) = $0.
\68\ This calculation is ($0 + $0) + ($0 + $0) = $0.
---------------------------------------------------------------------------
(vi) Legal Costs
(a) Description of Legal 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 $3,631,342 in legal costs for the CAT Fee 2025-2
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 2025-2 Period.
Law Firm: WilmerHale. It is anticipated that legal costs during the
CAT Fee 2025-2 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 2025-2 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 2025-2 Period, it is anticipated that WilmerHale
will provide legal services related to the following:
[[Page 30380]]
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 guidance with respect to 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 and amendments, 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;
Provide legal guidance with respect to the CAT budgets;
Provide background assistance to other counsel for CAT
matters;
Assist with legal responses related to third-party data
requests; and
Provide legal support regarding CAT policies and
procedures.
CAT LLC estimated the budget for the legal costs for WilmerHale for
the CAT Fee 2025-2 Period through an analysis of a variety of factors,
including WilmerHale fee rates, historical legal fees, and information
related to pending legal issues and potential future legal issues.
Law Firm: Jenner. It is anticipated that legal costs during the CAT
Fee 2025-2 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 2025-2 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 2025-2 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 the SEC Chair, the SEC
and CAT LLC challenging the validity of Rule 613 and the CAT and
alleging various constitutional, statutory, and common law claims; \69\
(2) CAT LLC's intervention in a lawsuit in the Eleventh Circuit filed
by various parties against the SEC challenging the SEC's approval of
the CAT Funding Model; \70\ and (3) a lawsuit in the Eleventh Circuit
filed by Citadel Securities LLC seeking review of the SEC's May 20,
2024 order \71\ granting the Participants temporary conditional
exemptive relief related to the reporting of bids and/or offers made in
response to a request for quote or other form of solicitation response
provided in standard electronic format that is not immediately
actionable.\72\ Litigation involving CAT LLC is an expense of operating
the CAT, and, therefore, is appropriately an obligation of both
Participants and Industry Members under the CAT Funding Model.
---------------------------------------------------------------------------
\69\ Davidson v. Gensler, Case No. 6:24-cv-197 (W.D. Tex.).
\70\ American Securities Ass'n v. Securities and Exchange
Commission, Case No. 23-13396 (11th Cir.).
\71\ Securities Exchange Act Release No. 100181 (May 20, 2024),
89 FR 45715 (May 23, 2024).
\72\ Citadel Securities LLC v. United States Securities and
Exchange Commission, Case No. 24-12300 (11th Cir.).
---------------------------------------------------------------------------
CAT LLC estimated the budget for the legal costs for Jenner for the
CAT Fee 2025-2 Period through an analysis of a variety of factors,
including Jenner's fee rates, historical legal fees, and information
related to pending legal issues and potential future legal issues.
Legal Cost Estimates. CAT LLC estimates that the budget for legal
services during the CAT Fee 2025-2 Period will be approximately
$3,631,342. The budget for legal services during the CAT Fee 2025-2
Period is calculated based on the Updated 2025 CAT Budget.
Specifically, this estimate was calculated by adding the budgeted
amounts for the legal services for the third and fourth quarters of
2025 as set forth in the Updated 2025 CAT Budget.\73\
---------------------------------------------------------------------------
\73\ This calculation is $1,815,671 + $1,815,671 = $3,631,342.
---------------------------------------------------------------------------
CAT LLC estimated the budget for the legal services for the CAT Fee
2025-2 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. This process
for estimating the budget for the legal services for CAT Fee 2025-2
Period is the same process by which CAT LLC estimated the legal cost
for the Original 2025 CAT Budget. The Original 2025 CAT Budget
estimated a budget for legal costs of $1,430,000 for the first quarter
of 2025. The actual costs for legal services for the first quarter of
2025, which are set forth in the Updated 2025 Budget, were $1,922,990.
The increase of $492,990 was due to unanticipated issues that required
additional legal efforts on behalf of CAT LLC that developed after the
budget was created. Such additional costs were primarily due to
additional legal work in responding to an SEC examination related to
the CAT, for commercial contract-related matters, including with regard
to the Plan Processor Agreement, and related to cost savings
initiatives. Accordingly, CAT LLC believes that the process for
estimating the budgeted legal costs for the CAT Fee 2025-2 Period is
reasonable.
(b) Changes From Prior Fee Filing
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.
Accordingly, this filing describes the changes in the legal costs from
the Original 2025 CAT Budget, which was used in the calculation of the
prior Prospective CAT Fee, CAT Fee 2025-1.\74\ Specifically, the
following describes the differences (if any) in the legal costs as set
forth in the Original 2025 CAT Budget versus the Updated 2025 CAT
Budget for the full year of 2025 as well as for the third and fourth
quarters of 2025, and the reasons for any changes.
---------------------------------------------------------------------------
\74\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budgeted legal costs as set forth in the Original
2025 CAT Budget were $5,720,000, and the annual 2025 budgeted legal
costs as set forth in the Updated 2025 CAT Budget are $7,370,002.
Accordingly, the annual budget for legal costs increased by $1,650,002
from the Original 2025 CAT Budget to the Updated 2025 CAT Budget for
the full year of 2025.
Correspondingly, the budgeted legal costs for the third and fourth
quarters of 2025 as set forth in the Original 2025 CAT Budget were
$2,860,000,\75\ and the budgeted legal costs for the third and fourth
quarters of 2025 as set forth in the Updated 2025 CAT Budget are
$3,631,342.\76\ Accordingly, the budget for legal costs for the third
and fourth quarters of 2025 increased by $771,342 from the Original
2025 CAT Budget to the Updated 2025 CAT Budget for the third and fourth
quarters of 2025.
---------------------------------------------------------------------------
\75\ This calculation is $1,430,000 + $1,430,000 = $2,860,000.
\76\ This calculation is $1,815,671 + $1,815,671 = $3,631,342.
---------------------------------------------------------------------------
This budgeted increase in the legal costs in the Updated 2025 CAT
Budget
[[Page 30381]]
from the Original 2025 Budget, both for the full year for 2025 and for
the third and fourth quarters of 2025, was primarily due to an
anticipated increase in legal costs related to litigation matters as
well as regulatory and corporate legal matters.
(vii) Consulting Costs
(a) Description of Consulting Costs
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 $866,167 in consulting costs for the CAT
Fee 2025-2 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 2025-2 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 the CAT Fee 2025-2
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 2025-2 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 2025-2 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 2025-2 Period will be approximately $866,167. The budget for
consulting costs during the CAT Fee 2025-2 Period is calculated based
on the Updated 2025 CAT Budget. Specifically, this estimate was
calculated by adding the budgeted amounts for consulting services for
the third and fourth quarters of 2025 as set forth in the Updated 2025
CAT Budget.\77\
---------------------------------------------------------------------------
\77\ This calculation is $433,084 + $433,083 = $866,167.
---------------------------------------------------------------------------
CAT LLC estimates the budget for the consulting costs for Deloitte
for the CAT Fee 2025-2 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. This process
for estimating the budget for consulting costs for the CAT Fee 2025-2
Period is the same process by which CAT LLC estimated the consulting
costs for the Original 2025 CAT Budget. The Original 2025 CAT Budget
estimated a budget for consulting services of $437,500 for the first
quarter of 2025. The actual costs for consulting services for the first
quarter of 2025, which are set forth in the Updated 2025 CAT Budget,
were $450,745. Therefore, the variance between budgeted and actual
consulting costs for the first quarter of 2025 was approximately 3%.
Accordingly, CAT LLC believes that the process for estimating the
budgeted consulting costs for the CAT Fee 2025-2 Period is reasonable.
(b) Changes From Prior Fee Filing
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.
Accordingly, this filing describes the changes in the consulting costs
from the Original 2025 CAT Budget, which was used in the calculation of
the prior Prospective CAT Fee, CAT Fee 2025-1.\78\ Specifically, the
following describes the differences (if any) in the consulting costs as
set forth in the Original 2025 CAT Budget versus the Updated 2025 CAT
Budget for the full year of 2025 as well as for the third and fourth
quarters of 2025, and the reasons for any changes.
---------------------------------------------------------------------------
\78\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budget for consulting costs as set forth in the
Original 2025 CAT Budget was $1,750,000, and the annual 2025 budget for
consulting costs as set forth in the Updated 2025 CAT Budget is
approximately $1,750,000. Accordingly, the annual budget for consulting
costs has not changed from the Original 2025 CAT Budget to the Updated
2025 CAT Budget for the full year of 2025.
Correspondingly, the budget for consulting costs for the third and
fourth quarters of 2025 as set forth in the Original 2025 CAT Budget
was $875,000,\79\ and the budget for consulting costs for the third and
fourth quarters of 2025 as set forth in the Updated 2025 CAT Budget is
$866,167.\80\ Accordingly, the budget for consulting costs for the
third and fourth quarters of 2025 decreased by $8,833 (which is
approximately 1%), from the Original 2025 CAT Budget to the Updated
2025 CAT Budget. Therefore, the budget for consulting costs for the
third and fourth quarters of 2025 remained nearly the same in the
Original 2025 CAT Budget and the Updated 2025 CAT Budget.
---------------------------------------------------------------------------
\79\ This calculation is $437,500 + $437,500 = $875,000.
\80\ This calculation is $433,084 + $433,083 = $866,167.
---------------------------------------------------------------------------
(viii) Insurance Costs
(a) Description of Insurance Costs
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 $1,594,452 in insurance costs for the
CAT Fee 2025-2 Period. The insurance costs represent the costs to be
incurred for insurance for CAT during the CAT Fee 2025-2 Period.
It is anticipated that the insurance costs for CAT during the CAT
Fee 2025-2 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 the CAT Fee 2025-2 Period, and notes that the annual
premiums for these policies were competitive for the
[[Page 30382]]
coverage provided. CAT LLC estimated the budget for the insurance costs
for the CAT Fee 2025-2 Period based on the insurance estimate from USI
for 2025. The annual premiums would be paid by CAT LLC to USI.\81\
---------------------------------------------------------------------------
\81\ Note that CAT LLC generally pays its USI insurance premiums
once per year, and such payment is scheduled to occur during the
third quarter of 2025.
---------------------------------------------------------------------------
The budgeted insurance costs for the CAT Fee 2025-2 Period are
based on an insurance cost estimate from USI for 2025. Accordingly, CAT
LLC believes that the process for estimating the budgeted insurance
costs for the CAT Fee 2025-2 Period is reasonable.
(b) Changes From Prior Fee Filing
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.
Accordingly, this filing describes the changes in the insurance costs
from the Original 2025 CAT Budget, which was used in the calculation of
the prior Prospective CAT Fee, CAT Fee 2025-1.\82\ Specifically, the
following describes the differences (if any) in insurance costs as set
forth in the Original 2025 CAT Budget versus the Updated 2025 CAT
Budget for the full year of 2025 as well as for the third and fourth
quarters of 2025, and the reasons for any changes.
---------------------------------------------------------------------------
\82\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budgeted insurance costs as set forth in the
Original 2025 CAT Budget were $1,594,452, and the annual 2025 budgeted
insurance costs as set forth in the Updated 2025 CAT Budget are
$1,594,452. Accordingly, the annual budgeted insurance costs remained
the same for the Original 2025 CAT Budget and the Updated 2025 CAT
Budget for the full year of 2025.
Correspondingly, the budgeted insurance costs for the third and
fourth quarters of 2025 as set forth in the Original 2025 CAT Budget
were $1,594,452,\83\ and the budgeted insurance costs for the third and
fourth quarters of 2025 as set forth in the Updated 2025 CAT Budget are
$1,594,452.\84\ Accordingly, the budgeted insurance costs for the third
and fourth quarters of 2025 remained the same in the Original 2025 CAT
Budget and the Updated 2025 CAT Budget for the third and fourth
quarters of 2025.
---------------------------------------------------------------------------
\83\ This calculation is $1,594,452 + $0 = $1,594,452.
\84\ This calculation is $1,594,452 + $0 = $1,594,452.
---------------------------------------------------------------------------
(ix) Professional and Administration Costs
(a) Description of Professional and Administration 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 $609,818 in
professional and administration costs for the CAT Fee 2025-2 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.\85\ The professional and administration
costs would include costs related to accounting and accounting advisory
services to support the operating and financial functions of CAT,
financial statement audit services by an independent accounting firm,
preparation of tax returns, and various cash management and treasury
functions. The professional and administration costs represent the fees
to be paid to Anchin Block & Anchin (``Anchin'') and Grant Thornton LLP
(``Grant Thornton'') for financial services during the CAT Fee 2025-2
Period.
---------------------------------------------------------------------------
\85\ Section 9.2 of the CAT NMS Plan.
---------------------------------------------------------------------------
Financial Advisory Firm: Anchin. It is anticipated that the
professional and administration costs for the CAT Fee 2025-2 Period
will include costs related to financial advisory services performed by
Anchin. CAT LLC anticipates that it will continue to employ Anchin
during the CAT Fee 2025-2 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 2025-2 Period, including the following:
Update and maintain internal controls;
Provide cash management and treasury functions;
Facilitate bill payments to vendors;
Facilitate repayments of promissory notes to Participants;
Provide monthly bookkeeping;
Review vendor invoices and documentation in support of
cash disbursements;
Review documentation to ensure that repayments of
promissory notes to Participants are in accordance with established
policies and procedures;
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;
Review and reconcile the monthly FINRA CAT reports/
analyses related to billings, collections, outstanding accounts
receivable and cash account;
Perform certain verification, completeness, and validation
testing related to the monthly FINRA CAT reports/analyses related to
billings;
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.
Accounting Firm: Grant Thornton. It is anticipated that the
professional and administration costs for the CAT Fee 2025-2 Period
will include costs related to accounting services performed by Grant
Thornton. CAT LLC anticipates that it will continue to employ Grant
Thornton during the CAT Fee 2025-2 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
[[Page 30383]]
LLC estimated the budget for the accounting costs for Grant Thornton
for the CAT Fee 2025-2 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 2025-2 Period will be approximately $609,818. The budget for
professional and administration services during the CAT Fee 2025-2
Period is based on the Updated 2025 CAT Budget. CAT LLC estimated the
budget for the professional and administration costs for the CAT Fee
2025-2 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 2025-2
Period is the same process by which CAT LLC estimated the professional
and administration costs for the Original 2025 CAT Budget. The Original
2025 CAT Budget estimated a budget for professional and administration
costs of $168,750 for the first quarter of 2025. The actual costs for
professional and administration services for the first quarter of 2025,
which are set forth in the Updated 2025 Budget, were $297,513. The
increase of $128,763 was due to unanticipated issues that required
additional professional and administration efforts on behalf of CAT LLC
that developed after the budget was created. Such additional costs were
primarily due to increases in both financial advisory costs and
accounting costs as a result of incremental controls and procedures
relating to billings and collections of fees from Participants and
Industry Members and the corresponding repayments of promissory notes
on historical costs as well as incremental subsequent events procedures
relating to the 2023 audit for CAT LLC. Accordingly, CAT LLC believes
that the process for estimating the budgeted professional and
administration costs for the CAT Fee 2025-2 Period is reasonable.
(b) Changes From Prior Fee Filing
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. Accordingly, this filing describes the changes in the
professional and administration costs from the Original 2025 CAT
Budget, which was used in the calculation of the prior Prospective CAT
Fee, CAT Fee 2025-1.\86\ Specifically, the following describes the
differences (if any) in the professional and administration costs as
set forth in the Original 2025 CAT Budget versus the Updated 2025 CAT
Budget for the full year of 2025 as well as for the third and fourth
quarters of 2025, and the reasons for any changes.
---------------------------------------------------------------------------
\86\ See Fee Filing for CAT Fee 2025-1.
---------------------------------------------------------------------------
The annual 2025 budgeted professional and administration costs as
set forth in the Original 2025 CAT Budget were $882,456, and the annual
2025 budgeted professional and administration costs as set forth in the
Updated 2025 CAT Budget are $1,193,090. Accordingly, the budgeted
annual costs for professional and administration services increased by
$310,634 from the Original 2025 CAT Budget to the Updated 2025 CAT
Budget for the full year of 2025.
Correspondingly, the budgeted costs for professional and
administration services for the third and fourth quarters of 2025 as
set forth in the Original 2025 CAT Budget were $444,246,\87\ and the
budgeted costs for professional and administration services services
[sic] for the third and fourth quarters of 2025 as set forth in the
Updated 2025 CAT Budget are $609,818.\88\ Accordingly, the budgeted
costs for professional and administration services for the third and
fourth quarters of 2025 increased by $165,572 from the Original 2025
CAT Budget to the Updated 2025 CAT Budget for the third and fourth
quarters of 2025.
---------------------------------------------------------------------------
\87\ This calculation is $168,750 + $275,496 = $444,246.
\88\ This calculation is $414,818 + $195,000 = $609,818.
---------------------------------------------------------------------------
This budgeted increase in the professional and administration costs
in the Updated 2025 CAT Budget from the Original 2025 Budget, both for
the full year for 2025 and for the third and fourth quarters of 2025,
was primarily due to increases in both financial advisory costs and
accounting costs as a result of additional anticipated efforts related
to billings and collections of fees from Participants and Industry
Members, coupled with expected incremental efforts related to
supporting CAT LLC's independent auditors for the 2024 audit.
(x) Public Relations Costs
(a) Description of Public Relations 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 $0 in public relations costs for the CAT
Fee 2025-2 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.
Because CAT LLC anticipates that it will not engage a public relations
firm for the third and fourth quarters of 2025, the budget for public
relations costs for this period is $0.
(b) Changes From Prior Fee Filing
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.
Accordingly, this filing describes the changes in the public relations
costs from the Updated 2025 CAT Budget, which was used in the
calculation of the prior Prospective CAT Fee, CAT Fee 2025-1.\89\
Specifically, the following describes the differences (if any) in the
public relations costs as set forth in the Original 2025 CAT Budget
versus the Updated 2025 CAT Budget for the full year of 2025 as well as
for the third and fourth quarters of 2025, and the reasons for any
changes.
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\89\ See Fee Filing for CAT Fee 2025-1.
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The annual budgeted public relations costs for 2025 as set forth in
the Original 2025 CAT Budget were $50,000, and the annual budgeted
public relations costs for 2025 as set forth in the Updated 2025 CAT
Budget are $6,575. Accordingly, the annual budget for public relations
cost for 2025 decreased by $43,425 from the Original 2025 CAT Budget to
the Updated 2025 CAT Budget for the full year of 2025.
Correspondingly, the budgeted costs for public relations services
for the third and fourth quarters of 2025 as set forth in the Original
2025 CAT Budget were $25,000,\90\ and the budgeted costs for public
relations services for the third and fourth quarters of 2025 as set
forth in the Updated 2025 CAT Budget are $0.\91\ Accordingly, the
budgeted costs for public relations services for the third and fourth
quarters of 2025 decreased by $25,000 from the Original 2025 CAT Budget
to the Updated 2025 CAT Budget for the third and fourth quarters of
2025.
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\90\ This calculation is $12,500 + $12,500 = $25,000.
\91\ This calculation is $0 + $0 = $0.
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[[Page 30384]]
This budgeted decrease in the public relations costs from the
Original 2025 CAT Budget to the Updated 2025 CAT Budget, both for the
full year for 2025 and for the third and fourth quarters of 2025, was
primarily due to CAT LLC's anticipation that it would not engage a
public relations firm for the remainder of 2025.
(xi) Reserve
(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 a reserve amount for 2025. 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.
CAT LLC determined to maintain a reserve in the amount of 25% of
the total expenses set forth in Updated 2025 CAT Budget (which does not
include the reserve amount). Accordingly, the total 25% reserve was
calculated by multiplying the total expenses set forth in the Updated
2025 CAT Budget (other than the reserve) by 25%, which is
$57,083,638.\92\
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\92\ The reserve was calculated by multiplying $228,334,551 by
25%, which equals approximately $57,083,638.
---------------------------------------------------------------------------
The Updated 2025 CAT Budget states that CAT LLC had accrued
$70,942,596 for the reserve as of the beginning of 2025, and an
additional $28,846,075 during the first quarter of 2025, from the
collection of CAT Fees 2024-1 and 2025-1 and the related Participant
CAT Fees. In addition, the Updated 2025 CAT Budget anticipates the
collection of an additional $11,821,477 during the second quarter of
2025 via CAT Fee 2025-1 and the related Participant CAT Fee.
Accordingly, the Updated 2025 CAT Budget estimates that CAT LLC would
collect a surplus reserve amount through June 2025 of $54,526,412 over
the 25% reserve amount of $57,083,638.\93\ The following chart
summarizes the calculation of the surplus reserve amount included in
Budgeted CAT Costs 2025-2 and used to calculate CAT Fee 2025-2:
---------------------------------------------------------------------------
\93\ This calculation is ($70,942,596 + $28,846,075 +
$11,821,477)-$57,083,638 = $54,526,412.
------------------------------------------------------------------------
------------------------------------------------------------------------
1. Total reserve as of the beginning of 2025............ $70,942,596
2. Total reserve collected during the Q1 2025........... 28,846,075
3. Total reserve estimated for Q2 2025.................. 11,821,477
---------------
4. TOTAL RESERVE COLLECTED or ESTIMATED TO BE 111,610,148
COLLECTED by END of Q2 of 2025 (Row 1 + Row 2 + Row
3).................................................
5. Budgeted 2025 Reserve (Total 2025 CAT costs other 57,083,638
than reserve ($228,334,551) multiplied by 25%).........
---------------
TOTAL SURPLUS RESERVE (Row 4-Row 5)................. 54,526,412
------------------------------------------------------------------------
Such surplus was related, in part, to (i) the collection of CAT
fees in excess of the budgeted CAT costs for 2024 and 2025 in light of
the greater actual executed equivalent share volume than the projected
executed equivalent share volume for CAT Fees 2024-1 and 2025-1, and
(ii) a reduction in anticipated budgeted costs associated with the
implementation of certain cost savings measures approved by the SEC
pertaining to the processing of options market maker quotes and the
storage of certain data.\94\
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\94\ See Cost Savings Amendment.
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As set forth in the Budgeted CAT Costs 2025-2, the surplus reserve
balance of $54,526,412 would be used to offset a portion of CAT costs
for the third and fourth quarters of 2025, thereby reducing the fee
rate to be paid for CAT Fee 2025-2. Specifically, the total costs used
to calculate the fee rate for CAT Fee 2025-2 would be reduced by the
amount of the surplus reserve as set forth in the following table:
------------------------------------------------------------------------
------------------------------------------------------------------------
1. Total Budgeted CAT Costs 2025-2 Other than Reserve $115,252,921
(i.e., costs for Q3 and Q4 of 2025)....................
2. Surplus Reserve...................................... (54,526,510)
---------------
3. Total Budgeted CAT Costs 2025-2 (Row 1-Row 2).... 60,726,412
------------------------------------------------------------------------
Accordingly, the fee rate for CAT Fee 2025-2 is calculated based on
this reduced amount of $60,726,412, resulting in a fee rate of
$0.000009 per executed equivalent share. If the fee rate for CAT Fee
2025-2 were calculated solely based on the reasonably budgeted costs
for CAT for July-December 2025 excluding the reduction in that amount
due to the surplus reserve offset (that is, based on $115,252,921, not
$60,726,412), the fee rate would be the higher rate of $0.000017.\95\
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\95\ See CAT Fee Alert 2025-2 (5/29/25).
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(b) Changes From Prior Fee Filing
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. Accordingly,
this filing describes the changes in the reserve from the Original 2025
CAT Budget, which was used in the calculation of the prior Prospective
CAT Fee, CAT Fee 2025-1.\96\
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\96\ See Fee Filing for CAT Fee 2025-1.
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For the Original 2025 CAT Budget, CAT LLC determined to maintain a
reserve in the amount of 25% of budgeted CAT costs (other than the
reserve). Accordingly, the total 25% reserve was calculated by
multiplying the budgeted CAT costs (other than the reserve) as set
forth in the Original 2025 CAT Budget (which is $248,846,076) by 25%,
for a target reserve amount of
[[Page 30385]]
$62,211,519. However, the Original 2025 CAT Budget recognized that a
portion of the reserve--$38,369,315--would have been previously
collected, and therefore would not need to be included the budgeted CAT
costs to be recovered by the CAT Fees. Specifically, the Original 2025
CAT Budget recognized that there was (i) a liquidity reserve balance of
$27,695,385 at the beginning of 2025, (ii) a favorable variance of
$10,084,698 for budgeted versus actual cloud hosting services costs
covering the period from July 16, 2024 through September 30, 2024, and
(iii) a Participation Fee from a new Participant in the CAT NMS Plan of
$589,232. These three items totaled $38,369,315. Accordingly, the
Original 2025 CAT Budget only included $23,842,200 to be collected
towards the reserve via the CAT Fee. This $23,842,200 is calculated by
reducing the total 25% reserve amount of $62,211,519 by the $38,369,315
previously collected for the reserve. In the Original 2025 CAT Budget,
the budget anticipated collecting the remaining reserve amount of
$23,842,200 evenly throughout the year, that is, $5,960,500 for each
quarter.
As discussed above, CAT LLC determined to maintain a reserve in the
amount of 25% of the budgeted CAT costs (other than the reserve).
Accordingly, the total 25% reserve was calculated by multiplying the
budgeted CAT costs (other than the reserve) as set forth in the Updated
2025 CAT Budget (which is $228,334,551) by 25%, for a target reserve
amount of $57,083,638.\97\ However, the Updated 2025 CAT Budget states
that CAT LLC had accrued $70,942,596 for the reserve as of the
beginning of 2025, and an additional $28,846,075 during the first
quarter of 2025, from the collection of CAT Fees 2024-1 and 2025-1 and
the related Participant CAT Fees. In addition, the Updated 2025 CAT
Budget anticipates the collection of an additional $11,821,477 during
the second quarter of 2025 via CAT Fee 2025-1 and the related
Participant CAT Fee. Accordingly, the Updated 2025 CAT Budget estimates
that CAT LLC would collect a surplus reserve amount through June 2025
of $54,526,412 in excess of the 25% targeted reserve amount of
$57,083,638.\98\ Accordingly, the Updated 2025 CAT Budget anticipates
reducing the recoverable CAT costs by $54,526,412 in the second half of
2025, specifically a reduction of $27,263,255 in each of the third and
fourth quarters of 2025.
---------------------------------------------------------------------------
\97\ The reserve was calculated by multiplying $228,334,551 by
25%, which equals approximately $57,083,638.
\98\ This calculation is ($70,942,596 + $28,846,075 +
$11,821,477)-$57,083,638 = $54,526,412.
---------------------------------------------------------------------------
As discussed above, such surplus reserve balance of $54,526,412
would be used to offset a portion of CAT costs for the third and fourth
quarters of 2025, thereby reducing the fee rate for CAT Fee 2025-2 in
accordance with Section 11.1(a)(ii) of the CAT NMS Plan. Section
11.1(a)(ii) of the CAT NMS Plan states that ``[t]o 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.''
(D) Projected Total Executed Equivalent Share Volume
The calculation of Fee Rate 2025-2 also requires the determination
of the projected total executed equivalent share volume of transactions
in Eligible Securities for the CAT Fee 2025-2 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.'' \99\ The Operating Committee is required to
base its projection on the prior twelve months, but it may use its
discretion to analyze the likely volume for the upcoming year. Such
discretion would allow the Operating Committee to use its judgment when
estimating projected total executed equivalent share volume if the
volume over the prior twelve months was unusual or otherwise unfit to
serve as the basis of a future volume estimate.\100\
---------------------------------------------------------------------------
\99\ Section 11.3(a)(i)(D) of the CAT NMS Plan.
\100\ CAT Funding Model Approval Order at 62651.
---------------------------------------------------------------------------
The total executed equivalent share volume of transactions in
Eligible Securities for the 12-month period from April 2024 through
March 2025 was 4,580,287,680,646.28 executed equivalent shares. The
Operating Committee has determined to calculate the projected total
executed equivalent share volume for the six-month recovery period for
CAT Fee 2025-2 by multiplying by one-half the executed equivalent share
volume for the 12-month period from April 2024 through March 2025. 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, the executed equivalent share volume
for 2023 was 3,868,940,345,680.6, and the executed equivalent share
volume for 2024 was 4,295,884,600,069.41. Accordingly, the projected
total executed equivalent share volume for the six-month period for CAT
Fee 2025-2 is projected to be 2,290,143,840,323.14 executed equivalent
shares.\101\
---------------------------------------------------------------------------
\101\ This projection was calculated by multiplying
4,580,287,680,646.28 executed equivalent shares by one-half.
---------------------------------------------------------------------------
The projected total executed equivalent share volume of all
transactions in Eligible Securities for the six-month recovery period
for CAT Fee 2025-2 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.\102\
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\102\ Section 11.3(a)(iii)(B) of the CAT NMS Plan.
---------------------------------------------------------------------------
(E) Fee Rate 2025-2
Fee Rate 2025-2 would be calculated by dividing the Budgeted CAT
Costs 2025-2 by the reasonably projected total executed equivalent
share volume of all transactions in Eligible Securities for the six-
month recovery period for CAT Fee 2025-2, as described in detail
above.\103\ Specifically, Fee Rate 2025-2 would be calculated by
dividing $60,726,412 by 2,290,143,840,323.14 executed equivalent
shares. As a result, Fee Rate 2025-2 would be $0.00002651641828376661
per executed equivalent share. Fee Rate 2025-2 is provided in this
filing in accordance with the requirement in the CAT NMS Plan to
provide the Fee Rate in a fee filing for a CAT Fee.\104\
---------------------------------------------------------------------------
\103\ In approving the CAT Funding Model, the Commission stated
that ``[t]he manner in which the Fee Rate for Prospective CAT Costs
will be calculated (i.e., by dividing the CAT costs reasonably
budgeted for the upcoming year by the reasonably projected total
executed equivalent share volume of all transactions in Eligible
Securities for the year) is reasonable.'' CAT Funding Model Approval
Order at 62651.
\104\ See Section 11.3(a)(iii)(B)(A) of the CAT NMS Plan.
---------------------------------------------------------------------------
(3) Monthly Fees
CEBBs and CEBSs would be required to pay fees for CAT Fee 2025-2 on
a monthly basis for six months, from August 2025 until January 2026. A
CEBB's or CEBS's fee for each month would be calculated based on the
transactions in Eligible Securities executed by the CEBB or CEBS from
the prior month.\105\ Proposed paragraph (a)(5)(A) of the fee schedule
would state that each CAT Executing Broker would receive its first
invoice for CAT Fee
[[Page 30386]]
2025-2 in August 2025, and would receive an invoice for CAT Fee 2025-2
each month thereafter until January 2026. Proposed paragraph (a)(5)(B)
of the fee schedule would state that ``Consolidated Audited Trail, LLC
shall provide each CAT Executing Broker with an invoice for CAT Fee
2025-2 on a monthly basis.'' In addition, paragraph (b)(1) of the fee
schedule states that each CEBB and CEBS is required to pay its CAT fees
``each month.''
---------------------------------------------------------------------------
\105\ See proposed paragraph (a)(5)(B) of the fee schedule.
---------------------------------------------------------------------------
(4) Consolidated Audit Trail Funding Fees
To implement CAT Fee 2025-2, the Exchange proposes to add a new
paragraph to the ``Consolidated Audit Trail Funding Fees'' section of
the Exchange's fee schedule, to include the proposed paragraphs
described below.
(A) Fee Schedule for CAT Fee 2025-2
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
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.\106\
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\106\ Section 11.3(a)(iii)(A) of the CAT NMS Plan.
Accordingly, based on the factors discussed above, the Exchange
proposes to add paragraph (a)(5) to the Consolidated Audit Trail
Funding Fees section of its fee schedule. Proposed paragraph (a)(5)
would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for
CAT Fee 2025-2 in August 2025, which shall set forth the CAT Fee 2025-2
fees calculated based on transactions in July 2025, and shall receive
an invoice for CAT Fee 2025-2 for each month thereafter until January
2026.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing
Broker with an invoice for CAT Fee 2025-2 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 $0.000009 per executed
equivalent share.
(C) Notwithstanding the last invoice date of January 2026 for CAT
Fee 2025-2 in paragraph 5(A), CAT Fee 2025-2 shall continue in effect
after January 2026, with each CAT Executing Broker receiving an invoice
for CAT Fee 2025-2 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 2025-2 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice
for CAT Fee 2025-2 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.'' \107\ Accordingly, proposed paragraph (a)(5)(B)
of the fee schedule would set forth a fee rate of $0.000009 per
executed equivalent share. This fee rate is calculated by multiplying
Fee Rate 2025-2 of $0.00002651641828376661 by one-third, and rounding
the result to six decimal places.\108\ The Operating Committee
determined to use six decimal places to balance the accuracy of the
calculation with the potential systems and other impracticalities of
using additional decimal places in the calculation.
---------------------------------------------------------------------------
\107\ CAT Funding Model Approval Order at 62658, n.658.
\108\ Dividing $0.00002651641828376661 by three equals
$0.000008838806094588872. Rounding $0.000008838806094588872 to six
decimal places equals $0.000009.
---------------------------------------------------------------------------
The proposed language in paragraph (a)(5)(A) of the fee schedule
would describe when CAT Executing Brokers would receive their first
monthly invoice for CAT Fee 2025-2. Specifically, CAT Executing Brokers
would receive their first monthly invoice for CAT Fee 2025-2 in August
2025 and the fees set forth in that invoice would be calculated based
on transactions executed in July 2025. 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)(5)(A) of the fee schedule also would
describe the monthly cadence of the invoices for CAT Fee 2025-2.
Specifically, after the first invoices are provided to CAT Executing
Brokers in August 2025, invoices will be sent to CAT Executing Brokers
each month thereafter until January 2026.
Proposed paragraph (a)(5)(B) of the fee schedule would describe the
invoices for CAT Fee 2025-2. Proposed paragraph (a)(5)(B) of the fee
schedule would state that ``Consolidated Audit Trail, LLC shall provide
each CAT Executing Broker with an invoice for CAT Fee 2025-2 on a
monthly basis.'' Proposed paragraph (a)(5)(B) of the fee schedule also
would describe the fees to be set forth in the invoices for CAT Fee
2025-2. 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 $0.000009 per executed equivalent share.''
Since CAT Fee 2025-2 is a monthly fee based on actual transaction
volume from the prior month, CAT Fee 2025-2 may collect more or less
than two-thirds of the Budgeted CAT Costs 2025-2. To the extent that
CAT Fee 2025-2 collects more than two-thirds of the Budgeted CAT Costs
2025-2, 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
2025-2 collects less than two-thirds of the Budgeted CAT Costs 2025-2,
the budget for the CAT in the ensuing months will reflect such
shortfall.
Furthermore, proposed paragraph (a)(5)(C) of the fee schedule would
describe how long CAT Fee 2025-2 would remain in effect. It would state
that ``[n]otwithstanding the last invoice date of January 2026 for CAT
Fee 2025-2 in paragraph 5(A), CAT Fee 2025-2 shall continue in effect
after January 2026, with each CAT Executing Broker receiving an invoice
for CAT Fee 2025-2 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 2025-2 will no longer be in effect.''
Finally, proposed paragraph (a)(5)(D) of the fee schedule would set
forth the
[[Page 30387]]
requirement for the CAT Executing Brokers to pay the invoices for CAT
Fee 2025-2. It would state that ``[e]ach CAT Executing Broker shall be
required to pay each invoice for CAT Fee 2025-2 in accordance with
paragraph (b).''
(B) Manner of Payment
Paragraph (b)(1) of the ``Consolidated Audit Trail Funding Fees''
section of the fee schedule describes the manner of payment of Industry
Member CAT fees. It states that ``[e]ach CAT Executing Broker shall pay
its CAT fees as required pursuant to paragraph (a) each month to the
Consolidated Audit Trail, LLC in the manner prescribed by the
Consolidated Audit Trail, LLC.'' The CAT NMS Plan requires the
Operating Committee to establish a system for the collection of CAT
fees.\109\ The Plan Processor has established a billing system for CAT
fees.\110\ Accordingly, CAT Executing Brokers would be required to pay
CAT Fee 2025-2 in accordance with such system.
---------------------------------------------------------------------------
\109\ Section 11.4 of the CAT NMS Plan.
\110\ The billing process and system are described in CAT Alert
2023-02 as well as the CAT FAQs related to the billing of CAT fees,
the Industry Member CAT Reporter Portal User Guide, the FCAT
Industry Member Onboarding Guide, the FCAT Connectivity Supplement
for Industry Members and the CAT Billing Webinars (dated Sept. 28,
2023 and Nov. 7, 2023), each available on the CAT website.
---------------------------------------------------------------------------
(C) Failure To Pay 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.\111\
---------------------------------------------------------------------------
\111\ Section 11.4 of the CAT NMS Plan.
---------------------------------------------------------------------------
Paragraph (b)(2) of the fee schedule states that:
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 2025-2.
(5) CAT Fee Details
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.\112\
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\112\ Section 11.3(a)(iv)(A) of the CAT NMS Plan.
Such information would provide CEBBs and CEBSs with the ability to
understand the details regarding the calculation of their CAT Fee.\113\
CAT LLC will provide CAT Executing Brokers with these details regarding
the calculation of their CAT Fees on their monthly invoice for the CAT
Fees.
---------------------------------------------------------------------------
\113\ In approving the CAT Funding Model, the Commission stated
that, ``[i]n the Commission's view, providing CAT Execut[ing]
Brokers information regarding the calculation of their CAT Fees will
aid in transparency and permit CAT Execut[ing] Brokers to confirm
the accuracy of their invoices for CAT Fees.'' CAT Funding Model
Approval Order at 62667.
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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.'' \114\ Such aggregate
statistics will be available on the CAT website.
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\114\ Section 11.3(a)(iv)(B) of the CAT NMS Plan. In approving
the CAT Funding Model, the Commission stated that ``[t]he
publication of the aggregate executed equivalent share volume and
aggregate fee is appropriate because it would allow Participants and
CAT Executing Brokers a high-level validation of executed volume and
fees.'' CAT Funding Model Approval Order at 62667.
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Furthermore, CAT LLC will make publicly available on the CAT
website the total amount invoiced each month that CAT Fee 2025-2 is in
effect as well as the total amount invoiced for CAT Fee 2025-2 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 2025-2.
(6) Financial Accountability Milestones
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.'' \115\ Under Section 1.1 of the CAT NMS Plan, a
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,\116\ the Financial Accountability Milestone
related to Period 4 was satisfied on July 15, 2024. In addition, the
satisfaction of the Financial Accountability Milestone related to
Period 4 was described in detail in the fee filing for the first
Prospective CAT Fee, CAT Fee 2024-1.\117\
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\115\ Section 11.3(a)(iii)(C) of the CAT NMS Plan.
\116\ Q2 & Q3 2024 Quarterly Progress Report (July 29, 2024).
\117\ See Securities Exchange Act Release No. 100831 (August 27,
2024), 89 FR 71570 (September 3, 2024) (SR-CBOE-2024-037) (``Fee
Filing for CAT Fee 2024-1'').
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(7) Relationship to CAT Fee 2025-1
CAT LLC intends for CAT Fee 2025-2 to replace CAT Fee 2025-1 (which
has a fee rate of $0.000022).\118\ Accordingly, as long as CAT Fee
2025-2 is in effect, CAT Fee 2025-1 would not be charged to CEBBs,
CEBSs and Participants. Specifically, subject to CAT Fee 2025-2 being
in effect, CAT LLC intends to send the last invoice for CAT Fee 2025-1
in July 2025 based on June 2025 transactions and, correspondingly, to
send the first invoice for CAT Fee 2025-2 in August 2025 based on July
2025 transactions.
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\118\ Note that CAT Fee 2025-2 is separate from and will be in
addition to any Historical CAT Assessment to Industry Members.
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(8) Participant Invoices
While CAT Fees charged to Industry Members become effective in
accordance with the requirements of Section 19(b) of the Exchange
Act,\119\ CAT fees charged to Participants are implemented via an
approval of the CAT fees by the Operating Committee in accordance with
the requirements of the CAT NMS Plan.\120\ On May 28, 2025, the
Operating Committee approved the Participant fee related to CAT Fee
2025-2. Specifically, pursuant to the requirements of CAT NMS
Plan,\121\ each
[[Page 30388]]
Participant would be required to pay a CAT fee calculated using the fee
rate of $0.000009 per executed equivalent share, which is the same fee
rate that applies to CEBBs and CEBSs. Like CEBBs and CEBSs, each
Participant would be required to pay such CAT fees on a monthly basis
for six months, from September 2025 until February 2026, and each
Participant's fee for each month would be calculated based on the
transactions in Eligible Securities executed on the applicable exchange
(for the Participant exchanges) or otherwise than on an exchange (for
FINRA) in the prior month. Accordingly, each Participant will receive
its first invoice in August 2025, and would receive an invoice each
month thereafter until January 2026. Like with the CAT Fee 2025-2
applicable to CEBBs and CEBSs as described in proposed paragraph
(a)(5)(C) of the fee schedule, notwithstanding the last invoice date of
January 2026, Participants will continue to receive invoices for this
fee each month until a new subsequent CAT Fee is in effect with regard
to Industry Members. Furthermore, Section 11.4 of the CAT NMS Plan
states that each Participant is required to pay such invoices as
required by Section 3.7(b) of the CAT NMS Plan. Section 3.7(b) states,
in part, that
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\119\ Section 11.3(a)(i)(A)(I) of the CAT NMS Plan.
\120\ CAT Funding Model Approval Order at 62659.
\121\ See Section 11.3(a)(ii) and Appendix B of the CAT NMS
Plan.
[e]ach Participant shall pay all fees or other amounts required to
be paid under this Agreement within thirty (30) days after receipt
of an invoice or other notice indicating payment is due (unless a
longer payment period is otherwise indicated) (the ``Payment
Date''). The Participant shall pay interest on the outstanding
balance from the Payment Date until such fee or amount is paid at a
per annum rate equal to the lesser of: (i) Prime Rate plus 300 basis
points; or (ii) the maximum rate permitted by applicable law.
2. Statutory Basis
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,\122\ which requires, among other things, that the Exchange's rules
must be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest, and not designed
to permit unfair discrimination between customers, issuers, brokers and
dealers. The Exchange also believes that the proposed rule change is
consistent with the provisions of Section 6(b)(4) of the Act,\123\
because it provides for the equitable allocation of reasonable dues,
fees and other charges among members and issuers and other persons
using its facilities. The Exchange further believes that the proposed
rule change is consistent with Section 6(b)(8) of the Act,\124\ which
requires that the Exchange's rules not impose any burden on competition
that is not necessary or appropriate in furtherance of the purpose of
the Exchange Act. These provisions also require that the Exchange be
``so organized and [have] the capacity to be able to carry out the
purposes'' of the Act and ``to comply, and . . . to enforce compliance
by its members and persons associated with its members,'' with the
provisions of the Exchange Act.\125\ Accordingly, a reasonable reading
of the Act indicates that it intended that regulatory funding be
sufficient to permit an exchange to fulfill its statutory
responsibility under the Act, and contemplated that such funding would
be achieved through equitable assessments on the members, issuers, and
other users of an exchange's facilities.
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\122\ 15 U.S.C. 78f(b)(6).
\123\ 15 U.S.C. 78f(b)(4).
\124\ 15 U.S.C. 78f(b)(8).
\125\ See 15 U.S.C. 78f(b)(1).
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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.'' \126\ To the extent that
this proposal implements the Plan and applies specific requirements to
Industry Members, the Exchange believes that this proposal furthers the
objectives of the Plan, as identified by the SEC, and is therefore
consistent with the Act.
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\126\ CAT NMS Plan Approval Order at 84697.
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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 2025-2 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 2025-2 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.
(1) Implementation of CAT Funding Model in CAT NMS Plan
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.'' \127\ Similarly, in
approving the CAT Funding Model, the SEC concluded that the CAT Funding
Model met this standard.\128\ As this proposal implements the Plan and
the CAT Funding Model described therein, and applies specific
requirements to Industry Members in compliance with the Plan, the
Exchange believes that this
[[Page 30389]]
proposal furthers the objectives of the Plan, as identified by the SEC,
and is therefore consistent with the Exchange Act.
---------------------------------------------------------------------------
\127\ Id.
\128\ CAT Funding Model Approval Order at 62686.
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(2) Calculation of Fee Rate for CAT Fee 2025-2 Is Reasonable
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.\129\ In each respect, as
discussed above, CAT Fee 2025-2 is calculated, and would be applied, in
accordance with the requirements applicable to CAT Fees as set forth in
the CAT NMS Plan. Furthermore, as discussed below, the Exchange
believes that each of the figures for the variables in the SEC-approved
formula for calculating the fee rate for CAT Fee 2025-2 is reasonable
and consistent with the Exchange Act. Calculation of Fee Rate 2025-2
for CAT Fee 2025-2 requires the figures for Budgeted CAT Costs 2025-2,
the executed equivalent share volume for the prior twelve months, the
determination of the CAT Fee 2025-2 Period, and the projection of the
executed equivalent share volume for the CAT Fee 2025-2 Period. Each of
these variables is reasonable and satisfies the Exchange Act, as
discussed throughout this filing.
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\129\ Id. at 62662-63.
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(A) Budgeted CAT Costs 2025-2
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 2025-2 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 2025-2 Period is ``reasonable and appropriate.''
Each of the costs included in CAT Fee 2025-2 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.
(i) Technology: Cloud Hosting Services
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.\130\ CAT LLC determined that the
budgeted costs related to cloud hosting services described in this
filing are reasonable and should be included as a part of Budgeted CAT
Costs 2025-2. As described above, the cloud hosting services costs
reflect, among other things, the breadth of the CAT cloud activities,
data volumes far in excess of the original volume estimates, the need
for specialized cloud services given the volume and unique nature of
the CAT, the processing time requirements of the Plan, and regular
efforts to seek to minimize costs where permissible under the Plan. CAT
LLC determined that use of cloud hosting services is necessary for
implementation of the CAT, particularly given the substantial data
volumes associated with the CAT, and that the fees for cloud hosting
services negotiated by FCAT were reasonable, taking into consideration
a variety of factors, including the expected volume of data and the
breadth of services provided and market rates for similar
services.\131\ Indeed, the actual costs of the CAT are far in excess of
the original estimated costs of the CAT due to various factors,
including the higher volumes and greater complexity of the CAT than
anticipated when Rule 613 was originally adopted.
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\130\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\131\ For a discussion of the amount and type of cloud hosting
services fees, see Section 3(a)(2)(C)(i) above.
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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
\132\ and that annual operating costs for the CAT would range from
$36.5 million to $55 million.\133\ In contrast to the 2016 projections,
the actual daily Q1 2025 data volumes averaged 752 billion events per
day.
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\132\ Appendix D-4 of the CAT NMS Plan at n.262.
\133\ CAT NMS Plan Approval Order at 84801.
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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 to reduce costs, stringent CAT NMS Plan requirements do
not allow for any material flexibility in cloud architecture design
choices, processing timelines (e.g., the use of non-peak processing
windows), or lower-cost storage tiers. As a result, the required CAT
processing timelines contribute to the cloud hosting costs of the CAT.
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.
[[Page 30390]]
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.\134\
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\134\ See Securities Exchange Act Release No. 97151 (Mar. 15,
2023), 88 FR 17086, 17117 (Mar. 21, 2023) (describing key cost
discipline mechanisms for the CAT).
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(ii) Technology: Operating Fees
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.\135\ CAT LLC determined that the budgeted costs
related to operating fees described in this filing are reasonable and
should be included as a part of Budgeted CAT Costs 2025-2.
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\135\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
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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 (e.g., management of the FINRA CAT
Helpdesk, FAQs, website and webinars) and program management. CAT LLC
determined that the selection of FCAT as the Plan Processor was
reasonable and appropriate given its expertise with securities
regulatory reporting, after a process of considering other potential
candidates.\136\ CAT LLC also determined that the fixed price contract,
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, was reasonable and appropriate, taking into consideration a
variety of factors, including the breadth of services provided and
market rates for similar types of activity.\137\ The services to be
performed by FCAT for CAT Fee 2025-2 Period and the budgeted costs
related to such services are described above.\138\
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\136\ See Section 3(a)(2)(C)(ii) above.
\137\ Id.
\138\ Id.
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The operating costs also include costs related to the receipt of
market data. CAT LLC anticipates receiving certain market data from
Algoseek during the CAT Fee 2025-2 Period. CAT LLC anticipates that
Algoseek will provide data as set forth in 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.\139\
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\139\ Id.
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(iii) Technology: CAIS Operating Fees
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.\140\ CAT LLC determined that the budgeted costs
related to CAIS operating fees described in this filing are reasonable
and should be included as a part of the Budgeted CAT Costs 2025-1. The
CAIS operating fees would include the fees paid to the Plan Processor
to operate and maintain CAIS and to perform the business operations
related to the system, including compliance, security, testing,
training, communications with the industry (e.g., management of the
FINRA CAT Helpdesk, FAQs, website and webinars) and program management.
CAT LLC determined that the fees for FCAT's CAIS-related services,
negotiated 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, are reasonable
and appropriate.\141\ The services to be performed by FCAT for the CAT
Fee 2025-2 Period and the budgeted costs for such services are
described above.\142\
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\140\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\141\ See Section 3(a)(2)(C)(iii) above.
\142\ Id.
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(iv) Technology: Change Request 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.\143\ CAT LLC determined that the budgeted costs
related to change request fees described in this filing are reasonable
and should be included as a part of the Budgeted CAT Costs 2025-2. It
is common practice to utilize a change request process to address
evolving needs in technology projects. This is particularly true for a
project like CAT that is the first of its kind, both in substance and
in scale. The substance and costs of each of the change requests are
evaluated by the Operating Committee and approved in accordance with
the requirements for Operating Committee meetings. In each case, CAT
LLC forecasts that the change requests will be necessary to implement
the CAT. As described above,\144\ CAT LLC has included a reasonable
placeholder budget amount for potential change requests that may arise
during 2025. As noted above, the total budgeted costs for change
requests during the CAT Fee 2025-2 Period represent a small percentage
of the Budgeted CAT Costs 2025-2--that is, less than 1% of Budgeted CAT
Costs 2025-2.
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\143\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\144\ See Section 3(a)(2)(C)(iv) above.
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(v) Capitalized Developed Technology Costs
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.\145\ In general, capitalized
developed technology costs would include costs related to, for example,
certain development costs, costs related to certain modifications,
upgrades and other changes to the CAT, CAIS implementation fees and
license fees. The amount and type of budgeted capitalized developed
technology costs for the CAT Fee 2025-2 Period, which relate to the
CAIS software license fee and technology changes to be implemented by
FCAT, are described in more detail above.\146\ Specifically, CAT LLC
determined that it was reasonable not to include any capitalized
developed technology costs in the Budgeted CAT Costs 2025-2.
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\145\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\146\ See Section 3(a)(2)(C)(v) above.
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(vi) Legal
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.\147\ CAT LLC determined that the budgeted legal costs
described in this filing are reasonable and should be included as a
part of the Budgeted CAT Costs 2025-2. Given the unique nature of the
CAT, the number of parties involved with the CAT (including, for
example, the SEC, Participants, Industry Members, and vendors) and the
many regulatory, contractual and other issues associated with the CAT,
the scope of the necessary legal services is substantial. CAT LLC
determined that the scope of the proposed legal services is necessary
to implement and maintain the CAT and that the legal rates reflect the
specialized services necessary for such a project. CAT LLC determined
to hire and continue to use each law firm based on a variety of
factors, including their relevant expertise and fees. In each case,
[[Page 30391]]
CAT LLC determined that the fee rates were in line with market rates
for specialized legal expertise. In addition, CAT LLC determined that
the budgeted costs for the legal projects were appropriate given the
breadth of the services provided. The services to be performed by each
law firm for the CAT Fee 2025-2 Period and the budgeted costs related
to such services are described above.\148\
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\147\ Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan.
\148\ See Section 3(a)(2)(C)(vi) above.
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(vii) Consulting
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted consulting costs as a part of CAT
Fees.\149\ CAT LLC determined that the budgeted consulting costs
described in this filing are reasonable and should be included as a
part of Budgeted CAT Costs 2025-2. Because there are no CAT employees
\150\ and because of the significant number of issues associated with
the CAT, the consultants are budgeted to provide assistance in the
management of various CAT matters and the processes related to such
matters.\151\ CAT LLC determined the budgeted consulting costs were
appropriate, as the consulting services were to be provided at
reasonable market rates that were comparable to the rates charged by
other consulting firms for similar work. Moreover, the total budgeted
costs for such consulting services were appropriate in light of the
breadth of services provided by Deloitte. The services budgeted to be
performed by Deloitte and the budgeted costs related to such services
are described above.\152\
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\149\ Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan.
\150\ As stated in the filing of the proposed CAT NMS Plan,
``[i]t is the intent of the Participants that the Company have no
employees.'' Securities Exchange Act Release No. 77724 (Apr. 27,
2016), 81 FR 30614, 30621 (May 17, 2016).
\151\ CAT LLC uses certain third parties to perform tasks that
may be performed by administrators for other NMS Plans. See, e.g.,
CTA Plan and CQ Plan.
\152\ Section 3(a)(2)(C)(vii) above.
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(viii) Insurance
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted insurance costs as a part of CAT
Fees.\153\ CAT LLC determined that the budgeted insurance costs
described in this filing are reasonable and should be included as a
part of the Budgeted CAT Costs 2025-2. CAT LLC determined that it is
common practice to have directors' and officers' liability insurance,
and errors and omissions liability insurance. CAT LLC further
determined that it was important to have cyber security insurance given
the nature of the CAT, and such a decision is consistent with the CAT
NMS Plan, which states that the cyber incident response plan may
include ``[i]nsurance against security breaches.'' \154\ As discussed
above,\155\ CAT LLC determined that the budgeted insurance costs were
appropriate given its prior experience with this market and an analysis
of the alternative insurance offerings. Based on this analysis, CAT LLC
determined that the selected insurance policies provided appropriate
coverage at reasonable market rates.\156\
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\153\ Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan.
\154\ Appendix D-14 of the CAT NMS Plan.
\155\ See Section 3(a)(2)(C)(viii) above.
\156\ Id.
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(ix) Professional and Administration
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.\157\ CAT LLC determined that the budgeted
professional and administration costs described in this filing are
reasonable and should be included as a part of Budgeted CAT Costs 2025-
2. Because there are no CAT employees, all required accounting,
financial, tax, cash management and treasury functions for CAT LLC have
been outsourced at market rates. In addition, the required annual
financial statement audit of CAT LLC is included in professional and
administration costs, which costs are also at market rates. The
services performed by Anchin and Grant Thornton and the costs related
to such services are described above.\158\
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\157\ Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan.
\158\ See Section 3(a)(2)(C)(ix) above.
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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.\159\
---------------------------------------------------------------------------
\159\ Id.
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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.\160\
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\160\ Id.
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(x) Public Relations Costs
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.\161\ However, as described above,\162\ CAT LLC determined not to
include any public relations costs in Budgeted CAT Costs 2025-2. CAT
LLC determined that it was reasonable not include any public relations
costs in the Budgeted CAT Costs 2025-2.
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\161\ Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan.
\162\ See Section 3(a)(2)(C)(x) above.
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(xi) Reserve
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted reserve costs as a part of CAT
Fees.\163\ CAT LLC determined that the reserve in the amount of 25% of
the Updated 2025 CAT Budget (other than the reserve) complies with the
requirements of the CAT NMS Plan related to a reserve, is a reasonable
amount, and, therefore, should be included as a part of the Updated
2025 CAT Budget.
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\163\ Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan.
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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.'' \164\ In making this statement, the Commission noted the
following:
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\164\ CAT Funding Model Approval Order at 62657.
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
[[Page 30392]]
has sufficient resources to cover costs should there be
unanticipated costs or costs that are higher than expected.\165\
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\165\ Id.
The SEC also recognized that a reserve would help address the
difficulty in predicting certain variable CAT costs, like trading
volume.\166\ The SEC also recognized that CAT fees will be collected
approximately three months after trading activity on which a CAT fee is
based, or 25% of the year, and that the reserve would be available to
address funding needs related to this three-month delay.\167\ The
inclusion of the proposed reserve in the Updated 2025 CAT Budget would
provide each of these benefits to the CAT. The reserve is discussed
further above.\168\
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\166\ Id.
\167\ Id.
\168\ See Section 3(a)(2)(C)(xi) above.
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As discussed further below,\169\ however, a surplus reserve balance
in excess of the budgeted 25% reserve has been collected through the
first quarter of 2025 and has been budgeted to be collected during the
second quarter of 2025. Accordingly, the Updated 2025 CAT Budget
indicates that this surplus would be used to offset a portion of CAT
costs for the third and fourth quarters of 2025, thereby reducing the
fee rate for CAT Fee 2025-2 ($0.000009 per executed equivalent share)
as compared to CAT Fee 2025-1 ($0.000022 per executed equivalent
share), and that no additional reserve is budgeted to be collected
during the third and fourth quarters of 2025.
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\169\ See Section 3(b)(2)(B) below.
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(B) Reconciliation of Budget to the Collected Fees
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.'' \170\ As discussed above,\171\ the Updated 2025 CAT
Budget states that CAT LLC had accrued $70,942,596 for the reserve as
of the beginning of 2025, and an additional $28,846,075 during the
first quarter of 2025, from the collection of CAT Fees 2024-1 and 2025-
1 and the related Participant CAT Fees. In addition, the Updated 2025
CAT Budget anticipates the collection of an additional $11,821,477
during the second quarter of 2025 via CAT Fee 2025-1 and the related
Participant CAT Fee. Accordingly, the Updated 2025 CAT Budget estimates
that CAT LLC would maintain a 25% reserve amount of $57,083,638 and
collect a surplus reserve amount through June 2025 of $54,526,412 over
the 25% reserve amount of $57,083,638.\172\ Such surplus reserve
balance of $54,526,412 would be used to offset a portion of CAT costs
for the third and fourth quarters of 2025, thereby reducing the fee
rate for CAT Fee 2025-2 ($0.000009 per executed equivalent share) as
compared to CAT Fee 2025-1 ($0.000022 per executed equivalent share).
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\170\ Section 11.3(a)(iii)(B)(C) of the CAT NMS Plan.
\171\ See Section 3(a)(2)(C)(xi) above.
\172\ This calculation is ($70,942,596 + $28,846,075 +
$11,821,477)-$57,083,638 = $54,526,412.
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(C) Total Executed Equivalent Share Volume for the Prior 12 Months
The total executed equivalent share volume of transactions in
Eligible Securities for the period from April 2024 through March 2025
was 4,580,287,680,646.28 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.\173\
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\173\ See Section 3(a)(2)(D) above.
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(D) Projected Executed Equivalent Share Volume for the CAT Fee 2025-2
Period
CAT LLC has determined that the projected total executed equivalent
share volume for the six months of CAT Fee 2025-2 Period by multiplying
by one-half the executed equivalent share volume for the prior twelve
months: one-half times 4,580,287,680,646.28 executed equivalent
shares.\174\ CAT LLC determined that such an approach was reasonable as
the CAT's annual executed equivalent share volume has remained
relatively constant in recent years. 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, the executed
equivalent share volume for 2023 was 3,868,940,345,680.6, and the
executed equivalent share volume for 2024 was 4,295,884,600,069.41.
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\174\ Id.
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(E) Actual Fee Rate for CAT Fee 2025-2
(i) Decimal Places
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.\175\ Accordingly, proposed
paragraph (a)(5)(B) of the fee schedule would set forth a fee rate of
$0.000009 per executed equivalent share. This fee rate is calculated by
multiplying Fee Rate 2025-2 by one-third and rounding the result to six
decimal places. CAT LLC determined that the use of six decimal places
is reasonable as it balances the accuracy of the calculation with the
potential systems and other impracticalities of using additional
decimal places in the calculation.\176\
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\175\ CAT Funding Model Approval Order at 62658, n.658.
\176\ See Section 3(a)(5)(A) above.
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(ii) Reasonable Fee Level
The Exchange believes that charging CAT Fee 2025-2 with a fee rate
of $0.000009 per executed equivalent share is reasonable because it
provides for a revenue stream for the Company that is aligned with the
Budgeted CAT Costs 2025-2. Moreover, the Exchange believes that the
level of the fee rate is reasonable, as it is less than CAT Fee 2025-1
and is comparable to other transaction-based fees. Indeed, CAT Fee
2025-2 is significantly lower than fees previously assessed pursuant to
Section 31 (e.g., $0.0009 per share to $0.0004 per share),\177\ and, as
a result, the magnitude of CAT Fee 2025-2 is small, and therefore will
mitigate any potential adverse economic effects or inefficiencies.\178\
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\177\ CAT Funding Model Approval Order at 62663, 62682. In
explaining the comparison of Section 31 fees to CAT fees in the CAT
Funding Model Approval Order, the SEC noted that ``Section 31 fees
are expressed per dollar volume traded. Translating this to a per
share range involves identifying reasonable high and low trade
sizes. The lower end of this range comes from the 25th percentile in
$ trade size of 1,200 and share trade size of 71 from the first
quarter of 2021. The higher end of this range comes from the 75th
percentile in $ trade size of 5,200 and share trade size of 300 from
the first quarter of 2021. Section 31 fees have ranged from $5.10
per $Million to $23.10 per $Million from Oct. 1, 2016 to Mar. 1,
2023.'' Id. at 62682., n.1100. In 2024, Section 31 fees were raised
further to $27.80 per million dollars.
\178\ Id.
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(3) CAT Fee 2025-2 Provides for An Equitable Allocation of Fees
CAT Fee 2025-2 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.\179\ In approving the
CAT Funding Model, the SEC stated that ``[t]he Participants have
sufficiently demonstrated that the proposed
[[Page 30393]]
allocation of fees is reasonable.'' \180\ Accordingly, the CAT Funding
Model sets forth the requirements for allocating fees related to
Budgeted CAT Costs among Participants and Industry Members, and the fee
filings for CAT Fees must comply with those requirements.
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\179\ See Section 11.3(a) of the CAT NMS Plan.
\180\ CAT Funding Model Approval Order at 62629.
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CAT Fee 2025-2 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 2025-2 complies with the formula set forth in
Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2025-2 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 the Budgeted CAT Costs 2025-2 through a fee
implemented via the CAT NMS Plan, which would have the same fee rate as
CAT Fee 2025-2.
In addition, as discussed above, each of the inputs into the
calculation of CAT Fee 2025-2--the Budgeted CAT Costs 2025-2, the count
for the executed equivalent share volume for the prior 12 months, and
the projected executed equivalent share volume for the CAT Fee 2025-2
Period--are reasonable. Moreover, these inputs lead to a reasonable fee
rate for CAT Fee 2025-2 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.
(4) CAT Fee 2025-2 Is Not Unfairly Discriminatory
CAT Fee 2025-2 is not an unfairly discriminatory fee. The SEC
approved the CAT Funding Model, finding that each aspect of the CAT
Funding Model satisfies 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 2025-2 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 2025-2 and
the resulting fee rate for CAT Fee 2025-2 is reasonable. Therefore, CAT
Fee 2025-2 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 6(b)(8) of the Act \181\ requires that the Exchange's rules
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purpose of the Exchange Act. The
Exchange does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange notes that CAT Fee
2025-2 implements provisions of the CAT NMS Plan that were approved by
the Commission and is designed to assist the Exchange in meeting its
regulatory obligations pursuant to the Plan.
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\181\ 15 U.S.C. 78f(b)(8).
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In addition, all Participants (including exchanges and FINRA) are
proposing to introduce CAT Fee 2025-2 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.\182\
The SEC also 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. Based on this analysis, the
SEC approved the CAT Funding Model as compliant with the Exchange Act.
CAT Fee 2025-2 is calculated and implemented in accordance with the CAT
Funding Model as approved by the SEC.
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\182\ CAT Funding Model Approval Order at 62676-86.
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As discussed above, each of the inputs into the calculation of CAT
Fee 2025-2 is reasonable and the resulting fee rate for CAT Fee 2025-2
calculated in accordance with the CAT Funding Model is reasonable.
Therefore, CAT Fee 2025-2 would not impose any burden on competition
that is not necessary or appropriate in furtherance of the purpose of
the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \183\ and paragraph (f)(2) of Rule 19b-4
thereunder.\184\ 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 change should be
approved or disapproved.
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\183\ 15 U.S.C. 78s(b)(3)(A).
\184\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 30394]]
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CBOE-2025-044 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-CBOE-2025-044. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CBOE-2025-044 and should be
submitted on or before July 30, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\185\
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\185\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-12711 Filed 7-8-25; 8:45 am]
BILLING CODE 8011-01-P