Rural Business-Cooperative Service
Economic Development Administration
Foreign-Trade Zones Board
International Trade Administration
National Oceanic and Atmospheric Administration
Federal Energy Regulatory Commission
Southeastern Power Administration
Centers for Disease Control and Prevention
Centers for Medicare & Medicaid Services
Children and Families Administration
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Coast Guard
Fish and Wildlife Service
Geological Survey
Indian Affairs Bureau
Ocean Energy Management Bureau
Occupational Safety and Health Administration
Wage and Hour Division
Federal Aviation Administration
Federal Highway Administration
Federal Railroad Administration
Foreign Assets Control Office
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
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Federal Aviation Administration (FAA), DOT.
Final rule.
This action amends the Class D and Class E airspace and revokes Class E airspace at Fort Knox, KY. This action is the result of a biennial airspace review conducted due to the decommissioning of the Godman non-directional beacon (NDB). The geographic coordinates of Godman AAF (Army Air Field), Fort Knox, KY, are also being updated to coincide with the FAA's aeronautical database. This action brings the airspace into compliance with FAA orders and supports instrument flight rule (IFR) procedures and operations.
Effective 0901 UTC, September 3, 2026. The Director of the Federal Register approves this incorporation by reference action under 1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11 and publication of conforming amendments.
A copy of the notice of proposed rulemaking (NPRM), all comments received, this final rule, and all background material may be viewed online at
FAA Order JO 7400.11K, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Jeffrey Claypool, Federal Aviation Administration, Operations Support Group, Central Service Center, 10101 Hillwood Parkway, Fort Worth, TX 76177; telephone (817) 222-5711.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends the Class D and Class E airspace and revokes Class E airspace at the affected airport to support IFR operations.
The FAA published an NPRM for Docket No. FAA-2026-3074 in the
Class D and E airspace designations are published in paragraphs 5000, 6002, 6004, and 6005 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document amends the current version of that order, FAA Order JO 7400.11K, dated August 4, 2025, and effective September 15, 2025. These amendments will be published in the next update to FAA Order JO 7400.11. FAA Order JO 7400.11K, which lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points, is publicly available as listed in the
This action amends 14 CFR part 71 by modifying the Class D airspace, Class E surface airspace, and Class E airspace extending upward from 700 ft. above the surface, and revokes the Class E airspace designated as an extension to Class D and Class E surface areas at Fort Knox, KY, due to a biennial airspace review due to the decommissioning of the Godman NDB.
For the Godman AAF, Fort Knox, KY, Class D airspace, this action: (1) increases the radius from 3.9 miles to 4.6 miles; (2) updates the geographic coordinates of the airport to coincide with the FAA's aeronautical database; and (3) removes the unnecessary language, “(previously called Airport/Facility Directory)” from the airspace legal description.
For the Godman AAF Class E surface area, this action: (1) increases the radius from 3.9 miles to 4.6 miles; (2) updates the geographic coordinates of the airport to coincide with the FAA's aeronautical database; and (3) removes the unnecessary language, “(previously called Airport/Facility Directory)” from the airspace legal description.
For the Godman AAF Class E airspace designated as an extension to Class D and Class E surface areas, this action revokes the airspace as it is no longer required.
For the Godman AAF Class E airspace extending upward from 700 ft. above the surface, this action: (1) increases the radius from 6.3-miles to 7 miles; (2) removes the Godman NDB and associated extension from the airspace legal description as the NDB has been decommissioned and the extension is no longer required; and (3) updates the geographic coordinates of the airport to coincide with the FAA's aeronautical database.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are
The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1G, “FAA National Environmental Policy Act Implementing Procedures,” Paragraph B-2.5(a). This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
That airspace extending upward from the surface to and including 3,300 feet MSL within a 4.6-mile radius of Godman AAF. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Airmen. The effective dates and times will thereafter be continuously published in the Chart Supplement.
Within a 4.6-mile radius of Godman AAF. This Class E airspace area is effective during the specific dates and times established in advance by a Notice to Airmen. The effective dates and times will thereafter be continuously published in the Chart Supplement.
That airspace extending upward from 700 feet above the surface within a 7-mile radius of Godman AAF.
Federal Aviation Administration (FAA), DOT.
Final rule.
This action establishes Class E airspace at Griffith Ranch Airport, Winnie, TX. This action supports new instrument procedures and instrument flight rule (IFR) operations.
Effective 0901 UTC, October 29, 2026. The Director of the Federal Register approves this incorporation by reference action under 1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11 and publication of conforming amendments.
A copy of the notice of proposed rulemaking (NPRM), all comments received, this final rule, and all background material may be viewed online at
FAA Order JO 7400.11K, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at
Raul Garza Jr., Federal Aviation Administration, Operations Support Group, Central Service Center, 10101 Hillwood Parkway, Fort Worth, TX 76177; telephone (817) 222-5874.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes Class E airspace extending upward from 700 feet above the surface at Griffith Ranch Airport, Winnie, TX, to support IFR operations at this airport.
The FAA published an NPRM for Docket No. FAA-2025-1238 in the
Class E airspace designations are published in paragraph 6005 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document amends the current version of that order, FAA Order JO 7400.11K, dated August 4, 2025, and effective September 15, 2025. These amendments will be published in the next update to FAA Order JO 7400.11. FAA Order JO 7400.11K, which lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points, is publicly available as listed in the
This action modifies 14 CFR part 71 by establishing Class E airspace extending upward from 700 feet above the surface within a 6.6-mile radius of Griffith Ranch Airport, Winnie, TX. This action is the result of instrument procedures being developed for this airport to support IFR operations.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore: (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Order 2100.6B, “Rulemaking and Guidance Procedure” (March 10, 2025); and (3) is expected to result in, at most, de minimis costs from compliance with applicable operating requirements or minor flight rerouting for operators choosing to navigate around the controlled airspace. Since these amendments are routine and the expected impact to operators is de minimis, the FAA certifies that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1G, “FAA National Environmental Policy Act Implementing Procedures,” paragraph B-2.5(a), which categorically excludes from further environmental impact review rulemaking actions that designate or modify classes of airspace areas, airways, routes, and reporting points (see 14 CFR part 71, Designation of Class A, B, C, D, and E Airspace Areas; Air Traffic Service Routes; and Reporting Points); and paragraph B-2.5(k), which categorically excludes from further environmental impact review the publication of existing air traffic control procedures that do not essentially change existing tracks, create new tracks, change altitude, or change concentration of aircraft on these tracks. As such, this action is not expected to result in any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:
49 U.S.C. 106(f), 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.
That airspace extending upward from 700 feet above the surface within a 6.6-mile radius of the Griffith Ranch Airport.
Wage and Hour Division, Department of Labor.
Final rule; technical amendment.
This document implements the judgments of federal courts vacating the Department of Labor's (Department) 2024 final rule revising regulations issued under the Fair Labor Standards Act (FLSA or Act) implementing the exemptions from minimum wage and overtime pay requirements for executive, administrative, professional, outside sales, and computer employees. Through this technical amendment, the Department is removing from the Code of Federal Regulations (CFR) the regulatory text from the now-vacated 2024 rule and republishing in its place the regulatory text as it existed prior to the effective date of that rule.
This rule is effective May 15, 2026.
Daniel Navarrete, Director of Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210, telephone: (202) 693-0406 (this is not a toll-free number). Alternative formats are available upon request by calling 1-866-487-9243. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services.
The FLSA generally requires covered employers to pay employees at least the federal minimum wage for all hours worked and overtime at a rate of not less than one and one-half times the employee's regular rate of pay for all hours worked over 40 in a workweek.
Pursuant to its explicit rulemaking authority, the Department has long maintained regulations that generally require each of the following three tests to be met for an employee to be exempt: (1) the employee's job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the duties test); (2) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test); and (3) the amount of salary paid must meet a minimum specified amount (the salary level
On September 27, 2019, the Department published a final rule to increase the part 541 earnings thresholds from those set in the Department's 2004 rule.
Four years later, on April 26, 2024, the Department published a final rule to again raise the part 541 earnings thresholds (2024 rule).
Four lawsuits challenged the 2024 rule: one filed by the State of Texas and one by a group of 13 business plaintiffs in the U.S. District Court for the Eastern District of Texas (these were subsequently consolidated into one case); one commenced by a business plaintiff, Flint Avenue, LLC, in the U.S. District Court for the Northern District of Texas; and one initiated by the Association of Christian Schools International, initially filed in the U.S. District Court for the Middle District of Tennessee and subsequently transferred to the U.S. District Court for the District of Columbia.
Accordingly, to implement these judicial decisions, this final rule amends the Department's part 541 regulations to reinstate the regulatory text promulgated in the 2019 final rule, as it appeared in the CFR immediately prior to the effective date of the 2024 rule. Put simply, this action is a technical correction accounting for changes in the law that have already occurred.
Section 553(b)(B) of the Administrative Procedure Act (APA) provides that an agency is not required to publish a notice of proposed rulemaking in the
Section 553(d) of the APA provides that substantive rules should take effect not less than 30 days after the date they are published in the
The Office of Information and Regulatory Affairs has determined that this technical amendment is not significant for purposes of Executive Orders 12866 and 13563. Additionally, no analysis is required under the Regulatory Flexibility Act because, for the reasons discussed above, the Department is not required to engage in notice and comment under the APA.
The Congressional Review Act (CRA), 5 U.S.C. 801
Labor, Minimum wages, Overtime pay, Salaries, Teachers, Wages.
For the reasons stated in the preamble, the Wage and Hour Division, Department of Labor, amends 29 CFR part 541 as follows:
29 U.S.C. 213; Pub. L. 101-583, 104 Stat. 2871; Reorganization Plan No. 6 of 1950 (3 CFR, 1945-53 Comp., p. 1004); Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR 77527 (Dec. 24, 2014).
(a) * * *
(1) Compensated on a salary basis pursuant to § 541.600 at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal government, or $380 per week if employed in American Samoa by employers other than the Federal government), exclusive of board, lodging or other facilities;
(a) * * *
(1) Compensated on a salary or fee basis pursuant to § 541.600 at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal government, or $380 per week if employed in American Samoa by employers other than the Federal government), exclusive of board, lodging or other facilities;
(a) * * *
(1) Compensated on a salary or fee basis at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal government, or $380 per week if employed in American Samoa by employers other than the Federal government), exclusive of board, lodging, or other facilities; or on a salary basis which is at least equal to the entrance salary for teachers in the educational establishment by which employed; and
(a) * * *
(1) Compensated on a salary or fee basis pursuant to § 541.600 at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal government, or $380 per week if employed in American Samoa by employers other than the Federal government), exclusive of board, lodging or other facilities; and
(b) The section 13(a)(1) exemption applies to any computer employee who is compensated on a salary or fee basis at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal government, or $380 per week if employed in American Samoa by employers other than the Federal government), exclusive of board, lodging, or other facilities. * * *
(a) To qualify as an exempt executive, administrative or professional employee under section 13(a)(1) of the Act, an employee must be compensated on a salary basis at a rate of not less than $684 per week (or $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal Government, or $380 per week if employed in American Samoa by employers other than the Federal Government), exclusive of board, lodging or other facilities. Administrative and professional employees may also be paid on a fee basis, as defined in § 541.605.
(b) The required amount of compensation per week may be translated into equivalent amounts for periods longer than one week. For example, the $684-per-week requirement will be met if the employee is compensated biweekly on a salary basis of not less than $1,368, semimonthly on a salary basis of not less than $1,482, or monthly on a salary basis of not less than $2,964. However, the shortest period of payment that will meet this compensation requirement is one week.
(c) In the case of academic administrative employees, the compensation requirement also may be met by compensation on a salary basis at a rate at least equal to the entrance salary for teachers in the educational establishment by which the employee is employed, as provided in § 541.204(a)(1).
(d) In the case of computer employees, the compensation requirement also may be met by compensation on an hourly basis at a rate not less than $27.63 an hour, as provided in § 541.400(b).
(e) In the case of professional employees, the compensation requirements in this section shall not apply to employees engaged as teachers (
(a)(1) Beginning on January 1, 2020, an employee with total annual compensation of at least $107,432 is deemed exempt under section 13(a)(1) of the Act if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee as identified in subparts B, C or D of this part.
(2) Where the annual period covers periods both prior to and after January 1, 2020, the amount of total annual compensation due will be determined on a proportional basis.
(b)(1) “Total annual compensation” must include at least $684 per week paid on a salary or fee basis as set forth in §§ 541.602 and 541.605, except that § 541.602(a)(3) shall not apply to highly compensated employees. Total annual compensation may also include commissions, nondiscretionary bonuses and other nondiscretionary compensation earned during a 52-week period. Total annual compensation does not include board, lodging and other facilities as defined in § 541.606, and does not include payments for medical insurance, payments for life insurance, contributions to retirement plans and the cost of other fringe benefits.
(2) If an employee's total annual compensation does not total at least the amount specified in the applicable subsection of paragraph (a) by the last pay period of the 52-week period, the employer may, during the last pay period or within one month after the end of the 52-week period, make one final payment sufficient to achieve the required level. For example, for a 52-week period beginning January 1, 2020, an employee may earn $90,000 in base salary, and the employer may anticipate based upon past sales that the employee also will earn $17,432 in commissions. However, due to poor sales in the final quarter of the year, the employee actually only earns $12,000 in commissions. In this situation, the employer may within one month after the end of the year make a payment of at least $5,432 to the employee. Any such final payment made after the end of the 52-week period may count only toward the prior year's total annual compensation and not toward the total annual compensation in the year it was paid. If the employer fails to make such a payment, the employee does not qualify as a highly compensated employee, but may still qualify as exempt under subparts B, C, or D of this part.
(a) * * *
(3) Up to ten percent of the salary amount required by § 541.600(a) may be satisfied by the payment of nondiscretionary bonuses, incentives and commissions, that are paid annually or more frequently. * * *
(i) If by the last pay period of the 52-week period the sum of the employee's weekly salary plus nondiscretionary bonus, incentive, and commission payments received is less than 52 times the weekly salary amount required by § 541.600(a), the employer may make one final payment sufficient to achieve the required level no later than the next pay period after the end of the year. * * *
(a) An employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis. Thus, for example, an exempt employee guaranteed at least $684 each week paid on a salary basis may also receive additional compensation of a one percent commission on sales. An exempt employee also may receive a percentage of the sales or profits of the employer if the employment arrangement also includes a guarantee of at least $684 each week paid on a salary basis. Similarly, the exemption is not lost if an exempt employee who is guaranteed at least $684 each week paid on a salary basis also receives additional compensation based on hours worked for work beyond the normal workweek. Such additional compensation may be paid on any basis (
(b) * * * Thus, for example, an exempt employee guaranteed compensation of at least $725 for any week in which the employee performs any work, and who normally works four
(b) To determine whether the fee payment meets the minimum amount of salary required for exemption under these regulations, the amount paid to the employee will be tested by determining the time worked on the job and whether the fee payment is at a rate that would amount to at least the minimum salary per week, as required by §§ 541.600(a) and 541.602(a), if the employee worked 40 hours. Thus, an artist paid $350 for a picture that took 20 hours to complete meets the $684 minimum salary requirement for exemption since earnings at this rate would yield the artist $700 if 40 hours were worked.
Coast Guard, DHS.
Notification of enforcement of regulation.
The Coast Guard will enforce a special local regulation for the Miami Beach Air and Sea Show from May 22, 2026, through May 24, 2026, to provide for the safety of life on navigable waterways during this event. Our regulation for marine events within the Seventh Coast Guard District identifies the regulated area for this event in Miami Beach, FL. During the enforcement periods, the operator, no person or vessel may enter, transit through, anchor in, or remain within the regulated area unless authorized by the Coast Guard Patrol Commander or a designated representative.
The regulations in 33 CFR 100.702 will be enforced for the Miami Beach Air and Sea Show listed in item No. 2 in Table 1 to § 100.702, daily from 10 a.m. until 5 p.m., on May 22, 2026, through May 24, 2026.
If you have questions about this notification of enforcement, call or email MST2 Jodi Stoiber, Sector Miami Waterways Management Division, U.S. Coast Guard; telephone 305-535-4317, email
The Coast Guard will enforce a special local regulation in 33 CFR 100.702 for the Miami Beach Air and Sea Show regulated area listed in item No. 2 in Table 1 to § 100.702, daily from 10 a.m. until 5 p.m., on May 22, 2026, through May 24, 2026. This action is being taken to provide for the safety of life on navigable waterways during the event. Our regulation for Marine Events within the Captain of the Port Miami, § 100.702, Table 1 to § 100.702, item No. 2, specifies the location of the Miami Beach Air and Sea Show which encompasses a portion of the Atlantic Ocean east of Miami Beach. Under the provisions of § 100.702(c), only event sponsor, designated participants, and official patrol vessels are allowed to enter the regulated area, unless otherwise authorized by the COTP Miami or Designated Representative.
Under the provisions of § 100.702(c), spectator vessels may safely transit outside the regulated area, but may not anchor, block, loiter in, impede the transit of festival participants or official patrol vessels or enter the regulated area without approval from the Coast Guard Patrol Commander or a designated representative. The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation. In addition to this notice of enforcement in the
Postal Service.
Final rule.
The Postal Service is amending
Catherine Knox (202) 268-5636, or Garry Rodriguez at (202) 268-7281.
This final rule describes new prices and product features for competitive products, by class of mail, established by the Governors of the United States Postal Service. New prices are available under Docket Number CP2026-8 on the Postal Regulatory Commission (PRC) website at
The Postal Service will revise
• Priority Mail Express®.
• Priority Mail®.
• USPS Ground Advantage®.
• Parcel Select®.
• Extra Services.
• Return Services.
• Mailer Services.
• Recipient Services.
• Other.
Competitive product prices and changes are identified by product as follows:
Priority Mail Express retail and commercial prices will remain the same.
Priority Mail retail and commercial prices will remain the same.
The Postal Service is increasing the current maximum dimension of 18 inches to 22 inches for all Priority Mail Cubic priced pieces.
USPS Ground Advantage retail prices will remain the same.
The Postal Service is revising the USPS Ground Advantage—Commercial ounce price points (4, 8, 12, and 15.999) to reflect the same price for each ounce price point within a zone, similar to Parcel Select Destination Entry ounce price points.
The Postal Service is increasing the current maximum dimension of 18 inches to 22 inches for all USPS Ground Advantage Cubic priced pieces.
The Postal Service is reducing the USPS Ground Advantage Cubic Soft Pack pricing tiers from the current ten tiers to five tiers. The USPS Ground Advantage Cubic Soft Pack pricing tier measurements will now be consistent with the Priority Mail Cubic Soft Pack pricing tier measurements.
Parcel Select Destination Entry and USPS Connect® Local prices will remain the same.
Adult Signature Required and Adult Signature Restricted Delivery service prices will remail the same.
There are no mailing standard changes to USPS Returns Service.
The Pickup on Demand® service fee will remain the same.
The USPS Tracking Plus® service prices will remain the same.
The USPS Label Delivery Service
The DDP Service price will remain the same.
The competitive Post Office Box
Premium Forwarding Service® (PFS®) prices will remain the same.
The USPS Package Intercept® fee will remain the same.
The Postal Service is revising the pricing for Priority Mail Express, Priority Mail, and USPS Ground Advantage pieces redirected to a new address or redirected to a Post Office as Hold For Pickup. Currently, Priority Mail Express, Priority Mail, and USPS Ground Advantage pieces redirected to a new address or redirected to a Post Office as Hold For Pickup are relabeled and charged the commercial Priority Mail price. These products will now be relabeled and charged the original commercial product price (
Address Enhancement Service competitive product prices will remain the same.
The Postal Service is introducing the Addresses API that validates and corrects address information to improve package and mail delivery service using address data from the City State, ZIP + 4, Five-Digit ZIP, eLOT, DSF, and LACS
The Parcel Select forward and return to sender fee will increase from $3.80 to $6.00.
The Parcel Select address correction service (ACS) with Shipper Paid Forwarding/Return fee will increase from $3.20 to $5.40.
The Package Quality Noncompliance Fee will remain the same.
Nonstandard Fees will remain the same.
The Dimension Noncompliance Fee will remain the same.
The Postal Service is revising the DIM factor (divisor) and the piece dimensions rounding calculation for retail and commercial Priority Mail Express, Priority Mail, and USPS Ground Advantage, and Parcel Select, for consistency with industry standards.
The Postal Service is changing the DIM factor to 139 to determine the dimensional weight in pounds.
In addition, the Postal Service is revising the rounding requirement for DIM piece dimensions to rounding “up” the length, width, and height measurements to the nearest whole inch.
The Postal Service is implementing a Hazmat Handling Fee. This fee will be assessed on all pieces containing hazardous matter entered at retail and commercial Priority Mail Express, Priority Mail, and USPS Ground Advantage, and Parcel Select prices. The fee will also be assessed on USPS Returns pieces. The Hazmat Handling Fee is nonrefundable once the piece is entered in the network.
The Hazmat Handling Fee may be assessed in addition to the Package Quality Noncompliance Fee or new Hazmat Noncompliance Fee.
The Postal Service will also update Publication 52, Hazardous, Restricted, and Perishable, Matter, to provide information on the Hazmat Handling Fee requirement.
The Postal Service is implementing a new package compliance category, “Hazmat Quality.” This new category will only apply to applicable commercial priced products and will consist of 8 hazmat validations. This will involve migrating four existing validations from the Barcode Quality compliance category and integrating four new validations to create the new Hazmat Quality compliance category. The eight validations are as follows:
The “Hazmat Quality” compliance category will have a 100 percent compliance quality threshold. Pieces that do not meet the 100 percent compliance quality threshold will be subject to the new “Hazmat Noncompliance Fee.” A mailpiece will only be subject to the “Package Quality Noncompliance Fee” or the “Hazmat Noncompliance Fee,” whichever is higher.
The Postal Service will also update Publication 199, Intelligent Mail Package Barcode (IMpb) Implementation Guide for Confirmation Services and Electronic Payment Systems, to provide information on the Hazmat Noncompliance Fee requirements.
The Postal Service provides additional resources to assist customers with this price change for competitive products. These tools include price lists, downloadable price files, and
The Postal Service adopts the described changes to
Administrative practice and procedure, Postal Service.
Accordingly, the Postal Service amends
5 U.S.C. 552(a); 13 U.S.C. 301-307; 18 U.S.C. 1692-1737; 39 U.S.C. 101, 401-404, 414, 416, 3001-3018, 3201-3220, 3401-3406, 3621, 3622, 3626, 3629, 3631-3633, 3641, 3681-3685, and 5001.
Follow these steps to determine the dimensional weight for a rectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
[Revise the text of item c to read as follows:]
c. If the result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Follow these steps to determine the dimensional weight for a nonrectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
d. If the final result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Priority Mail Express pieces containing hazardous matter are subject to the nonrefundable Hazmat Handling Fee (see Notice 123—Price List). For additional information on the Hazmat Handling Fee see Publication 52,
Follow these steps to determine the dimensional weight for a rectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
c. If the result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Follow these steps to determine the dimensional weight for a nonrectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
d. If the final result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Priority Mail pieces containing hazardous matter are subject to the nonrefundable Hazmat Handling Fee (see Notice 123—Price List). For additional information on the Hazmat Handling Fee see Publication 52,
Follow these steps to determine the dimensional weight for a rectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
c. If the result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Follow these steps to determine the dimensional weight for a nonrectangular parcel:
[Revise the last sentence of item a to read as follows:]
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
[Revise the text of item d to read as follows:]
d. If the final result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
[Add new 1.10 to read as follows:]
USPS Ground Advantage—Retail pieces containing hazardous matter are subject to the nonrefundable Hazmat Handling Fee (see Notice 123—Price List). For additional information on the Hazmat Handling Fee see Publication 52,
[Revise the text of 2.1.6 to read as follows:]
All mailers who enter commercial parcels into the Postal Service network must meet the established thresholds for compliance quality outlined in Exhibit 2.1.6 to avoid paying a fee. Failure to meet any compliance-quality threshold in Exhibit 2.1.6 will result in the Postal Service charging the mailer the Package Quality Noncompliance Fee or the Hazmat Noncompliance fee, whichever is higher.
See Publication 199 for a list of validations for each compliance category (AQ, MQ, BQ, HQ).
Follow these steps to determine the dimensional weight for a rectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
c. If the result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Follow these steps to determine the dimensional weight for a nonrectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
d. If the final result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Priority Mail Express pieces, including Priority Mail Express Return pieces, containing hazardous matter are subject to the nonrefundable Hazmat Handling Fee (see Notice 123—Price List). This fee may be assessed in addition to the Package Quality Noncompliance Fee or Hazmat Noncompliance Fee under 204.2.1.6, when applicable. For additional information on the Hazmat Handling Fee see Publication 52,
* * * Each cubic mailpiece, including soft packs and padded envelopes under 1.3.4 must measure .50 cubic foot or less, weigh 20 pounds or less, and the longest dimension may not exceed 22 inches. * * *
Follow these steps to determine the dimensional weight for a rectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
c. If the result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Follow these steps to determine the dimensional weight for a nonrectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
d. If the final result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Priority Mail pieces, including Priority Mail Return pieces, containing hazardous matter are subject to the nonrefundable Hazmat Handling Fee (see Notice 123—Price List). This fee may be assessed in addition to the Package Quality Noncompliance Fee or Hazmat Noncompliance Fee under 204.2.1.6, when applicable. For additional information on the Hazmat Handling Fee see Publication 52,
Follow these steps to determine the dimensional weight for a rectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
c. If the result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Follow these steps to determine the dimensional weight for a nonrectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
d. If the final result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
Parcel Select Destination Entry and USPS Connect Local pieces containing hazardous matter are subject to the nonrefundable Hazmat Handling Fee (see Notice 123—Price List). This fee may be assessed in addition to the Package Quality Noncompliance Fee or Hazmat Noncompliance Fee under 204.2.1.6, when applicable. For additional information on the Hazmat Handling Fee see Publication 52,
* * * Each cubic mailpiece, including soft packs and padded envelopes under 1.3.4, must measure 1 cubic foot or less, weigh 20 pounds or less, and the longest dimension must not exceed 22 inches. * * *
Follow these steps to determine the dimensional weight for a rectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
c. If the result exceeds 1,728 cubic inches, divide the result by 139 and
Follow these steps to determine the dimensional weight for a nonrectangular parcel:
a. * * * Round up (see 604.7.0) each measurement to the nearest whole inch.
d. If the final result exceeds 1,728 cubic inches, divide the result by 139 and round up (see 604.7.0) to the next whole number to determine the dimensional weight in pounds.
USPS Ground advantage—Commercial pieces, including USPS Ground Advantage Return pieces, containing hazardous matter are subject to the nonrefundable Hazmat Handling Fee (see Notice 123—Price List). This fee may be assessed in addition to the Package Quality Noncompliance Fee or Hazmat Noncompliance Fee under 204.2.1.6, when applicable. For additional information on the Hazmat Handling Fee see Publication 52,
Except under 5.1.3, Package Intercept service is available for the following mailpieces with a tracking barcode (excluding COD Hold For Pickup mailpieces), addressed to, from, or between domestic destinations (608.2.0) that do not require a customs declarations label:
The customer must pay a nonrefundable per-piece fee after USPS successfully intercepts the mailpiece. Payment of postage and additional fees is as follows:
a. Intercepted Priority Mail Express, Priority Mail, and USPS Ground Advantage pieces, including oversized-priced pieces (
b. Intercepted Priority Mail Express, Priority Mail, and USPS Ground Advantage pieces including oversized-priced pieces (
c. Except for Parcel Select-oversized-priced pieces under 5.2.1d, intercepted Parcel Select, Bound Printed Matter, Media Mail and Library Mail pieces that are redirected to the sender, to a new delivery address or a Post Office as Hold For Pickup (3.0), are relabeled and handled as a new Priority Mail piece. Along with any applicable extra-services fees, the customer is charged Priority Mail commercial prices for the new Priority Mail piece based on the location where intercepted to the new destination and according to the piece's dimensions, weight, and zone, or the customer is charged the flat-rate price, if applicable.
AMS API is a core set of compiled address-matching software instructions available, for a set fee, to developers to incorporate into their software so that address lists can be updated with address data from the following databases, which are integrated into the AMS-API: City State, ZIP + 4, Five-Digit ZIP, eLOT, DPV, and LACS
a. Installing the AMS-API on multiple computers for its own use.
b. Reselling its address-matching software.
Addresses API validates and corrects address information to improve package and mail delivery service using address data from the City State, ZIP + 4, Five-Digit ZIP, eLOT, DSF, and LACS
Refunds are not made for the following:
k. For the Hazmat Handling fee once the piece is entered in the network.
Federal Communications Commission.
Final rule.
In this document, the Federal Communications Commission (Commission or FCC) adopts measures to strengthen national security and encourage reciprocity in testing and certification. The FCC creates a fast-track priority review process for devices subject to Pre-Approval Guidance (PAG) for applications tested in Trusted Test Labs. Also, updates post-market surveillance and enforcement procedures, and establishes confidential reporting channels for industry participants to raise concerns about violations or national security threats. Lastly, directs development of a consolidated list of prohibited entities to streamline applicant screening and aligns ownership reporting timelines for publicly traded companies with U.S. Securities and Exchange Commission requirements.
This final rule is effective June 15, 2026, except the amendments to §§ 2.949(b)(5) and (6) and (d) (amendatory instruction 2), 2.951(a)(10) and (11) and (c) (amendatory instruction 4), and 2.962(d)(9) (amendatory instruction 6) which are delayed. The Federal Communications Commission will publish a document in the
Katherine Nevitt of the Office of Engineering and Technology, at 301-317-0062 or
This is a summary of the Commission's
In this document, the Commission continues its efforts to strengthen the integrity and security of the Equipment Authorization Program. Building on the foundation established in the
The Commission adopts measures to strengthen national security and incentivize domestic testing and certification, including the creation of a fast-track priority review process for applications tested in Trusted Test Labs,
Further, this document directs revisions to post-market surveillance procedures, strengthens enforcement mechanisms, and establishes confidential reporting channels for industry participants to raise concerns about violations or national security threats. To streamline compliance, the Commission directs the creation of a consolidated human-readable and, to the extent feasible given limited resources, machine-readable list of prohibited entities to assist TCBs in screening applicants efficiently. Additionally, the Commission grants Garmin's Petition for Reconsideration to align ownership reporting requirements for publicly traded companies with Securities and Exchange Commission (SEC) timelines.
Through all these actions, the Commission seeks to promote a robust domestic testing ecosystem, safeguard U.S. communications networks, and uphold the integrity of the equipment authorization process.
In this
The Commission directs OET to revise post-market surveillance procedures, including sampling rates, escalation methods, and transparency when noncompliance is found. The Commission will also take a more active role in oversight and enforcement, reinforcing penalties for false certifications and fraudulent test reports. The Commission establishes a secure portal for industry participants to report suspected violations or national security concerns and create a centralized, machine-readable list of prohibited entities to help TCBs screen applicants efficiently. Finally, the Commission grants a Petition for Reconsideration filed by Garmin that modifies the ownership reporting rules for publicly traded companies to align with SEC timelines.
The Commission clarifies that its current rules allow for many of these proposals, such as greater disclosure of the locations of foreign employees and testing locations of test labs and TCBs, a more active role by the Commission in post-market surveillance, stronger enforcement, and better data sharing practices.
The Commission finds it in the public interest to offer a priority fast-track review of equipment authorization applications subject to the Pre-Approval Guidance (PAG) process under 47 CFR 2.964 that use Trusted Test Labs (
The Commission also finds it in the public interest to streamline requirements for testing and certification by Trusted Test Labs. The Commission's recent actions to de-recognize test labs based on national security risk has reduced the supply of testing and has highlighted the risk in relying on foreign test labs. The Commission finds that incentivizing domestic testing is a proactive step that will shift the framework from reactive exclusion to prevention, ultimately serving to strengthen the Commission's equipment authorization program by promoting reliance on trustworthy labs that do not present national security concerns that will be easily subject to FCC enforcement actions. This expanded domestic testing capacity will strengthen the overall resilience of the equipment authorization program.
The Commission further finds it in the public interest to allow Trusted Test Labs to utilize the priority fast-track review process. The Commission finds that permitting Trusted Test Labs to participate in the fast-track review process upholds the United States' commitments in its MRAs and trade agreements and incentivizes additional economies to pursue similar agreements with the U.S. for reciprocal treatment. These reciprocal agreements ensure a maximum level of integrity.
The Commission agrees with the overwhelming support from commenters and finds it in the public interest to incentivize device-makers to use Trusted Test Labs, or test labs located in the U.S. or in the territory of an economy with which the U.S. has negotiated reciprocal treatment through an MRA or trade agreement. The Commission agrees with the record support that one effective means of doing this is by offering a priority fast-track process for applications subject to the PAG process, where equipment is tested by a qualifying entity. In 2024, 3.6% of devices receiving FCC IDs were tested by labs in the U.S., and 12.5% were tested by labs in MRA countries; collectively, over 16% were tested by Trusted Test Labs. The Commission believes that prioritizing the participation of Trusted Test Labs in the Commission's equipment authorization program will help promote the integrity of the Commission's equipment authorization procedures while simultaneously helping protect its nation's supply chain against unacceptable risks. As the National Security Division (NSD) of the Department of Justice (DOJ) has previously advised us in this proceeding, allowing foreign adversaries to infiltrate the equipment authorization program creates a risk that they could exploit it on a broad scale—potentially misappropriating sensitive intellectual property and business intelligence from U.S. companies to advance their own national interests.
The Commission agrees with the Cetecom comment supporting domestic testing to ensure sensitive technologies are evaluated in secure, controlled environments and to reduce the risk of IP theft and foreign surveillance. The Commission also agrees with the many comments supporting testing in allied and MRA countries. The Commission finds that these risks, particularly IP theft, are especially heightened for the types of technologies appearing in the PAG list. Test labs have privileged and early access to confidential information about new products given their role in the supply chain, and the risk of IP theft and foreign surveillance is especially pronounced for new technologies on the PAG list.
The Commission also notes the commitments made by the United States in it's a MRAs and Free Trade Agreements (FTAs). Certain MRAs to which the U.S. is a Party include a mutual commitment to accept test reports of recognized conformity assessment bodies of the other Party on terms no less favorable than those accorded to test reports produced by conformity assessment bodies of the importing Party. Similarly, many U.S. FTAs and Agreements on Reciprocal Trade (ARTs) include a mutual commitment to accord to conformity assessment bodies located in the territory of the other Party treatment no less favorable than the Party accords to conformity assessment bodies located in its own territory. The Commission finds that it is appropriate and in the public interest to allow test labs located in the territory of economies with which the
While all FCC grants for certification of RF equipment are processed through TCBs, certain equipment authorization approvals related to new and evolving technologies require direct oversight by the Commission through the PAG process. For products that contain new and evolving technologies covered by the PAG process, it is particularly important that those responsible for testing them be subject to U.S. law so that they may be compelled to respond in a timely manner to FCC requests. The Commission has previously raised concerns that foreign actors in the Commission's equipment authorization program have been able to evade U.S. law when products they are responsible for have harmed American consumers. U.S. actors in the Commission's equipment authorization program, including U.S. test labs and TCBs, are subject to U.S. laws and can legally be compelled to respond to FCC inquiries in a timely manner. Actors based in Reciprocal Economies are similarly bound by the laws of the reciprocal international agreements. In contrast, foreign actors from non-Reciprocal Economies have abused the protections of the Hague Service Convention to evade accountability for repeated violations in the Commission's equipment authorization program.
The PAG process and associated PAG list address the compliance requirements for these technologies and must be followed by all TCBs before finalizing the equipment authorization approval for any devices identified in the PAG List. Currently, the Commission's rules require TCBs to comply with the following for PAG list equipment: (1) perform an initial review of the application and determine the issues that require guidance from the Commission; (2) complete the review of the application in accordance with the Commission's guidance; (3) provide any test samples of the equipment requested by the Commission; (4) electronically submit the application and all exhibits to the Commission along with a request to grant the application; and (5) supply any additional information or equipment testing required by the Commission to comply with its rules.
The Commission revises § 2.964 of its rules to prioritize approval for PAG list equipment authorization applications, where the equipment is tested in the U.S. or in the territory of an economy with which the U.S. has negotiated reciprocal treatment through an MRA or trade agreement (Trusted Test Labs). First, the Commission directs OET to create a fast-track PAG list option for TCBs utilizing Trusted Test Labs in its PAG list approval process. The Commission also directs OET to update the PAG list to provide a separate streamlined list of categories for which pre-approval guidance is required for applications that use domestic testing provided by Trusted Test Labs. This streamlined list will aid in the removal of associated lag time with the PAG review and approval process. Finally, the Commission directs OET to publish, and update as necessary, a list of economies with which the United States has an MRA or comparable trade agreement. The Commission believes these actions will create the appropriate incentive to utilize Trusted Test Labs that creates a faster pipeline in getting newer equipment to the market. The Commission also believes Trusted Test Labs do not carry the same national security and trustworthiness risk that certain foreign test labs do, and the Commission therefore places enhanced trust in their ability to receive and handle sensitive and proprietary equipment authorization information as reflected in a shorter period for Commission staff to review their test results. to receive and handle sensitive and proprietary equipment authorization information as reflected in a shorter period for Commission staff to review their test results.
Creating a fast-track PAG option for TCBs using Trusted Test Labs will also assist with accelerating the expansion of testing capacity in the United States and Reciprocal Economies. This is all the more important, given that in the last several months, the Commission has ceased to recognize 21 labs. Even as the Commission protects the integrity of the equipment authorization process by not recognizing untrustworthy labs, the Commission believes it is in the public interest to facilitate more testing in the United States and Reciprocal Economies, which will increase trust in the process trust in the process. The Commission also agrees with the Heritage Foundation that supporting greater domestic testing capacity will boost the resilience of the equipment authorization program by ensuring the U.S. has reliable, secure testing capacity at home.
The Commission envisions that this fast-track option will create two distinct lines for the PAG approval process: one for Trusted Test Labs that will receive a shorter, faster queue and one for all other test labs. In addition, there will be two distinct PAG list tracks, the general PAG list and the Trusted Test Lab streamlined PAG list with fewer equipment categories. The Commission directs OET to release a public notice determining the specific equipment categories to be removed on the Trusted Test Lab PAG list that will enable this fast-track approval process.
Unsurprisingly, the current queue for such vigorous PAG list review and approval can take several months. In 2025, the OET Laboratory Division reviewed and processed 1,202 PAG list items. The Commission directs the OET Lab Division to make publicly available data metrics for the timelines associated with PAG list review and approval. The Commission believes this transparency will serve the public interest in several ways. First, the metrics for PAG processing will provide data to improve administrative processes, which allow interactions with the Commission to be more accessible and efficient. Second, these metrics will provide a measure of the time-savings the fast-track PAG processing option provides in the PAG approval process. The Commission anticipates that the time-savings will translate to faster marketing of new types of equipment and cost savings for bringing such innovations to market, benefiting the American public.
The Commission also amends its rules to provide that test labs and TCBs must disclose the number and location of all employees that are engaged in FCC-recognized testing and/or certification at designation and renewal.
In the
The Commission further clarifies that knowing where a TCB's or test lab's employees are located and where they carry out their testing activities is necessary to assess a test lab or TCB's impartiality. As explained by FDD, certain foreign laws, including national security laws, may coerce corporate cooperation with state intelligence objectives such that they cannot credibly demonstrate operational independence from a foreign government. While a foreign government's ability to coerce an FCC-recognized test lab's cooperation is strongest when that test lab is either an arm of the government or owned by the government, the foreign government can also exercise influence when it has jurisdiction over the employees and testing. For these reasons, the Commission clarifies that disclosure of this information is required to ensure the integrity of the Commission's equipment authorization program. The Commission therefore updates its rules accordingly.
To eliminate any privacy concerns, the Commission notes that it will not require the personal address of employees or their personally identifiable information, unless required as part of an investigation into the truthfulness of such disclosures. Instead, the Commission requires the business address where the employee conducts testing or reviews certification applications for a TCB. The record shows broad support for the adoption of this requirement, and the Commission believes this measured approach balances U.S. national security concerns and unnecessary granularity.
The Commission disagrees with LGAI Technological Center that the increase in regulatory burden implementing this requirement does not provide sufficient regulatory benefit. To the contrary, as the Commission has previously noted, “[i]t is obvious and unarguable that no governmental interest is more compelling than the security of the Nation.” The TCBs are charged with ensuring that all equipment authorization approvals it issues are not affected by the improper influence of a foreign government, which promotes U.S. national security while test labs have access to sensitive and innovative equipment prior to its availability in the commercial marketplace. The Commission similarly disagrees with the contention of China's State Administration for Market Regulation (SAMR) that requiring country locations of TCB and test lab employees is inconsistent with the TBT Agreement. The referenced provisions in the TBT Agreement do not apply to requirements for conformity assessment bodies to receive accreditation.
Under current Commission rules, a TCB must perform appropriate post-market surveillance activities in accordance with ISO/IEC 17065. While the standard provides a general framework for surveillance, OET provides greater specificity on post-market surveillance procedures for TCBs. The post-market surveillance procedures are published in an OET document known as “KDB 610077,” which provides specific benchmarks such as the number and types of samples that a TCB must test and includes sample templates and checklists to help TCBs streamline their surveillance reporting.
The Commission agrees with comments supporting the Commission taking a more active role in managing the post-market surveillance program. An effective surveillance program allows the public to trust that their FCC-certified electronics in the real world are consistent with those submitted for certification testing in the lab. The Commission's current post-market surveillance procedures were last published in April 2022. The Commission believes these surveillance procedures require revisions to consider the rapidly evolving national security threat landscape and the new risks to the Commission's equipment authorization program explained over the last four years in the Commission's
The Commission directs OET to include in the revised surveillance procedures questions about the sampling rate, such as whether TCBs are required to sample five percent of their certification grants in the same calendar year. Such questions are a valid concern, as TCBs often cannot predict how many certification grants they will issue by year-end and are left uncertain in December if they will meet their sampling quotas for the year. The Commission directs OET to include in the surveillance procedures methods for TCBs to elevate concerns, such as when grantees are uncooperative in providing required samples for surveillance testing or when they believe other TCBs have deficient surveillance procedures. The Commission also directs OET to provide greater transparency when surveillance discovers noncompliance by making significant instances of noncompliance public. Such transparency would be consistent with the surveillance practices of other agencies that rely on ISO/IEC 17025-accredited test labs, such as the Consumer Product Safety Commission.
The Commission sought comment on reasonable practices TCBs could
The Commission agrees with commenters supporting stronger enforcement of existing rules. The Commission notes that stronger enforcement of the equipment authorization regime is exactly what the Commission intended when it created the TCB system. Back in 1998, the Commission recognized that “the integrity of the TCB program must be based on the Commission's ability to enforce its rules effectively.” The Commission anticipated that the TCB program would reduce Commission resources devoted to processing applications and stated the Commission's intent to “redirect resources toward enforcement of the rules.”
Commenters have urged the Commission to hold manufacturers accountable for inaccuracies in their equipment authorization applications. The Commission clarifies that current Commission rules already hold applicants, including manufacturers, liable for the types of misconduct referenced in these commenters. Section 2.911(d) of the Commission's rules require applicants to provide “a written and signed certification . . . that all statements it makes in its request for equipment authorization are true and correct to the best of its knowledge and belief.” Submitting false information in an equipment authorization violates the Commission's rules requiring truthful and accurate statements to the Commission. When an applicant submits written materials, a violation may occur even absent an intent to deceive; a factually inaccurate statement in an equipment authorization application may violate § 1.17(a)(2) of the Commission's rules if it is provided without a reasonable basis. The Commission takes very seriously the duty of candor that all applicants, including manufacturers, owe when they apply for equipment authorizations. In 2024, the Commission proposed the statutory maximum civil penalties against a Chinese doorbell camera manufacturer for submitting false certifications under § 2.911(d) in its equipment authorization application. The Commission further notes that violations of the Communications Act or the Commission's also can result in seizure of equipment through
The Commission also received comments that the Commission should hold test labs accountable for deficient test results. The Commission agrees that such behavior may violate the impartiality provisions of IEC/ISO 17025, a requirement for FCC test lab recognition. The Commission clarifies that its rules provide that test labs that submit false test results may also be in violation of the requirement in § 1.17 of the Commission's rules requiring truthful and accurate statements. The Commission further clarify that a TCB that willfully or repeatedly submits fraudulent or unreliable test results may likewise be in violation of the impartiality provisions of IEC/ISO 17065, and by extension, the requirements for FCC recognition of TCBs.
The Commission sought comment on any other measures the Commission might take to strengthen the integrity of the post-market surveillance process.
The Commission agrees with these comments and directs OET to create a confidential channel for professionals, industry participants, and other key stakeholders in the Commission's equipment authorization program to report suspected violations and national security concerns. The Commission agrees with the DOJ NSD comment that market dynamics and commercial relationships may dissuade participants from reporting concerns. Industry participants may be especially deterred from reporting publicly if their concerns involve a nation-state actor with the capability to retaliate.
Current Commission rules incorporate numerous sources in the definition of “prohibited entity.” Moreover, current Commission rules incorporate numerous sources in this definition, including the FCC Covered List and other lists promulgated by the Departments of Commerce, Homeland Security, and Treasury, as well as multiple statutes naming entities. In response to the
The Commission agrees with these commenters. The Commission finds that organizing and sharing more information with TCBs will help them screen prohibited entities more efficiently. Creating a consolidated list will promote the integrity of the Commission's equipment authorization program. The Commission also finds such a list would streamline and alleviate unnecessary administrative compliance burden on the Commission's TCBs, all of whom are based in the United States or allied MRA nations. The Commission's TCBs are valuable partners in its shared mission of ensuring the safety and security of Americans' electronic devices—and its national security. The Commission directs OET to create a single consolidated list of prohibited entities under § 2.902 of its rules and to share it with TCBs in human and, to the extent feasible given limited resources, machine-readable format. The Commission also directs OET to update that list on a timely basis.
Garmin International, Inc. submitted a Petition for Reconsideration on September 8, 2025, requesting that the Commission reconsider the ownership reporting requirement adopted in the Commission's
The Commission grants Garmin's Petition and amends §§ 2.949(d)(9), 2.951(c), and 2.962(d) of its rules as applied to U.S. publicly traded companies so that the 30-day notice deadlines set forth in these rules are
Although the benefits of enhanced national security and the strengthening of the equipment authorization process can be substantial, the Commission does not attempt to quantify them here. The Commission finds that the cost savings to applicants already eligible for the fast track PAG process alone, outweigh the costs associated with the adopted rules. In 2025, OET reviewed approximately 3,369 PAG applications, including 579 submitted through U.S.-based test labs and TCBs. Assuming the fast-track PAG process affects 10% of domestic PAG applications and reduces time spent by technical staff in filing the application and responding to Commission inquiries by 32 hours per expedited PAG applications, the Commission estimates that the adopted rule will result in approximately $218,000 in annual cost savings to applicants using U.S.-based test labs and an additional $552,000 in annual cost savings to applicants using Trusted Test Labs outside the United States. This estimate is highly conservative, as it does not account for the substantial benefits of reducing the time that it takes to bring products to market. This estimate is also likely too low because it assumes the volume of domestic PAG applications remains unchanged following the adoption of this rule. If applicants increase PAG submissions through Trusted Test Labs as a result of the expedited process for domestic applications, the benefits would exceed the Commission's current estimate.
The Commission finds that adopting the rules to revise post-market surveillance procedures, strengthen enforcement mechanisms, establish confidential reporting channels, and create a machine-readable list of prohibited entities will provide greater regulatory clarify, deter violations, and prevent equipment posing unacceptable risks from entering U.S. markets. In addition, granting Garmin's Petition for Reconsideration aligns the Commission's ownership reporting requirements with SEC timelines and minimize burdens on publicly traded companies.
The costs imposed by these rules—such as reporting employee locations and implementing enhanced post-market surveillance—are modest and primarily administrative. These measures are essential to assess impartiality and compliance with Commission rules, and they align with existing ISO standards that TCBs and test labs already follow. The Commission finds that the cost of complying with the updated post-market surveillance guidance under OET directives is negligible because TCBs already incur these compliance costs whenever updates are issued. The Commission does not provide a separate estimate of the cost for applicants to shift applications from non-U.S. based test labs and TCBs to U.S.-based facilities because such decisions are entirely voluntary and would only occur when applicants determine that the benefits of doing so outweigh the associated costs. The Commission finds that the fast-track PAG process will yield annual benefits of approximately $770,000, which exceeds the estimated annual reporting cost of approximately $16,000, not to mention additional unquantified benefits such as enhanced national security and a strengthened equipment authorization process.
Administrative practice and procedures, Communications equipment, Reporting and recordkeeping requirements, Telecommunications.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 2 as follows:
47 U.S.C. 154, 302a, 303, and 336, unless otherwise noted.
(b) * * *
(5) Certification to the Commission that the laboratory accreditation body is not owned by, controlled by, or subject to the direction of a prohibited entity pursuant to § 2.902.
(6) Documentation to the Commission identifying any entity that has equity or voting interests of 5% or greater in the laboratory accreditation body.
(d) Each recognized laboratory accreditation body must provide to the Commission, in accordance with § 2.950 and no later than 30 days after any relevant change to the required information takes effect, or in the case of U.S. publicly traded companies, after having actual knowledge of any relevant change:
(1) Certification to the Commission that the laboratory accreditation body is not owned by, controlled by, or subject to the direction of a prohibited entity pursuant to § 2.902.
(2) Documentation to the Commission identifying any entity that has equity or voting interests of 5% or greater in the laboratory accreditation body.
(a) * * *
(12) The number and location of all employees or agents that are engaged in FCC-recognized testing and/or certification, including those based outside the United States.
(a) * * *
(10) Certification to the Commission that the laboratory is not owned by, controlled by, or subject to the direction of a prohibited entity pursuant to § 2.902.
(11) Documentation to the Commission identifying any entity that has equity or voting interests of 5% or greater in the laboratory.
(c) Each recognized laboratory must provide to the Commission, in accordance with § 2.950 and no later than 30 days after any relevant change to the required information takes effect, or in the case of U.S. publicly traded companies, after having actual knowledge of any relevant change:
(1) Certification to the Commission that the laboratory is not owned by, controlled by, or subject to the direction of a prohibited entity pursuant to § 2.902.
(2) Documentation to the Commission identifying any entity that has equity or voting interests of 5% or greater in the laboratory.
(a) * * *
(8) Demonstrates impartiality and compliance with Commission rules by disclosing the number and location of all employees or agents that are engaged in FCC-recognized testing and/or certification, including those based outside the United States.
(d) * * *
(9) Provide to the Commission, in accordance with § 2.950 and no later than 30 days after any relevant change to the required information takes effect, or in the case of U.S. publicly traded companies, after having actual knowledge of any relevant change:
(i) Certification to the Commission that the TCB is not owned by, controlled by, or subject to the direction of a prohibited entity pursuant to § 2.902; and
(ii) Documentation to the Commission identifying any entity that has equity or voting interests of 5% or greater in the TCB.
(a) The Commission will publish a “Pre-approval Guidance (PAG) List” identifying the categories of equipment or types of testing for which Telecommunication Certification Bodies (TCBs) must request guidance from the Commission before approving equipment on the list. The PAG list will prioritize for approval equipment tested in Trusted Test Labs,
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Final rule.
In response to petitions for rulemaking, FRA is issuing this final rule to amend its regulation on Training, Qualification, and Oversight for Safety-Related Railroad Employees (Training Rule) to codify agency guidance and clarify existing requirements.
This regulation is effective July 14, 2026.
For access to the docket to read background documents or comments received, go to
Mike Long, Director, Office of Outreach, Office of Railroad Safety, FRA,
On November 7, 2014, in response to a mandate in section 401(a) of the Rail Safety Improvement Act of 2008 (RSIA),
On June 27, 2019 and July 31, 2019, FRA received joint petitions for rulemaking filed by the American Short Line and Regional Railroad Association (ASLRRA) and the National Railroad Construction and Maintenance Association, Inc. (NRC) (together, “the Associations”) requesting additional delays to the implementation dates and other changes to the 2014 Final Rule; these petitions were docketed in DOT's Docket Management System as FRA-2019-0050. On January 2, 2020, FRA responded to the Associations' petitions for rulemaking by issuing a final rule further delaying the regulation's implementation dates for all contractors and for those Class II and III railroads that are not intercity or commuter passenger railroads with 400,000 total employee work hours annually or more.
With respect to the Associations' remaining requests in the petitions for rulemaking, FRA's January 2, 2020 final rule stated that FRA was considering addressing these requests in a separate rulemaking.
FRA estimates the final rule will provide cost savings of $1.1 million based on a one-year relief period to small entities for annual refresher training requirements. FRA also expects that this final rule will provide the railroad industry and FRA with several qualitative benefits. These benefits are discussed in Section V (Regulatory and Statutory Requirements) and include: (1) providing clarity to the regulated community, thereby facilitating compliance with the regulatory requirements; and (2) making it easier for FRA to administer the requirements of part 243.
In the 2014 Final Rule, FRA stated its intention to issue a compliance guide with a primary emphasis on assisting small entities, but which could also be used by any employer.
On May 25, 2016, FRA responded to comments and posted its first version of the final compliance guide.
This final rule addresses two of the overarching concerns expressed in the Associations' petitions for rulemaking: (1) that FRA provide sufficient certainty
FRA received eight written comments in response to the NPRM, including a joint comment submitted by the Associations. The other commenters were the American Public Transportation Association (APTA); American Society of Safety Professionals (ASSP); the Brotherhood of Maintenance of Way Employes Division of the International Brotherhood of Teamsters (BMWED); the Brotherhood of Railroad Signalmen (BRS); the Metropolitan Transportation Authority (MTA); and several individuals. One comment from an individual was not germane to the rulemaking
Most of the comments are discussed in this section and apply generally to the final rule as a whole. Some of these general comments are also discussed in the Section-by-Section Analysis to assist with clarity. The remaining comments that relate to specific provisions are discussed in the relevant Section-by-Section analysis. The order in which the comments are discussed, whether by issue or by commenter, is not intended to reflect the significance of the comment raised or the standing of the commenter.
Several commenters supported the changes proposed in the NPRM. Specifically, the Associations expressed support for the proposed changes that would amend part 243 consistent with current FRA guidance to small entities. Similarly, BRS noted full support for the proposed changes, citing the importance of all safety-related employees being properly trained and qualified. BRS also encouraged FRA to end the delay in implementation of this rule. BMWED expressed general support for the proposed changes, especially those changes that: lead to consistent training requirements, require railroad workers to participate in the development of new technology for the industry, and ensure that workers are trained in new technology. The Texas A&M Students also expressed general support for the proposed changes and provided specific recommendations to ease the burden on employers.
The Associations and the Texas A&M Students raised concerns about the administrative and paperwork burden associated with refresher training. For instance, the Associations expressed general concern that companies would incur administrative burdens in performing, tracking, and scheduling refresher training, and recommended ways in which the burden could be reduced. The Associations' comment requested that FRA allow railroads to provide a methodology in their part 243 submissions for assessing whether an employee needs refresher training, as opposed to the rule's current requirement to provide refresher training for all employees at least every three calendar years. The Associations assert that this change would allow Class II and III railroads to use existing operational testing programs, under a different FRA regulation,
Meanwhile, the Texas A&M Students commented that they are concerned about any increase in the administrative and paperwork burden for management, especially for smaller contractors, even while they expressed a conclusion that “these burdens are not significant enough to prevent the FRA from making these changes.”
BMWED expressed support for the proposed revisions to the definition of refresher training that emphasized improving the skills and knowledge of existing employees and deleting the “to remain qualified” language in the existing rule that it alleges could be used by employers to diminish an employee's labor or employment law rights.
FRA agrees with some of the broad concerns raised by the Associations about the refresher training burden and the final rule addresses aspects of those concerns. For instance, FRA agrees with the Associations' comment that some employees may not need refresher training on longstanding requirements that are complied with regularly and that can be confirmed through testing. Therefore, FRA will include a test out option. However, the existing operational efficiency testing, conducted under a different FRA rule, is too narrow to fully substitute for refresher training because it does not require training on new equipment and technology, topics which could be included in refresher training. Further, the existing operational efficiency testing programs may focus on certain knowledge or skills but not necessarily cover the critical duties assigned to an employee. Also, the type of testing a person receives during or at the conclusion of formal training, such as initial or refresher training required under part 243, must be part of a structured and defined curriculum that may be significantly different from the type of testing that occurs during existing operational efficiency testing. For these reasons, the test out option in this final rule will require that such testing be designed to determine that an
Including the test out option is a change from FRA's position in the 2022 NPRM at § 243.201(e)(3)(ii), which would have prohibited an employee from testing out of refresher training.
Regarding the comments on the administrative and paperwork burden, this final rule does not impose any new refresher training requirements. The final rule instead makes clarifying revisions related to the existing refresher training requirements, which would not increase the costs of compliance with the regulation and the costs associated with refresher training were previously addressed for the 2014 Final Rule.
Because the comments regarding the proposed revised definition of “refresher training” were positive and FRA did not find further clarification necessary, the final rule amends the definition as proposed. The revised definition explains the purpose of refresher training and distinguishes it from initial training—issues that were addressed in the proposed rule.
APTA and MTA raised concerns that FRA's proposal to remove the implementation dates from § 243.201 would create ambiguity regarding whether initial and on-the-job (OJT) training requirements apply to employees whose designation was declared by the implementation date. APTA and MTA asked FRA to clarify, in the preamble or regulatory text, that this proposal would not impact the initial qualification for an employee whose designation was declared by the applicable implementation date and that any such initial qualification designations remain in effect.
The 2014 Final Rule established specified implementation dates in § 243.201(a)(1) and (2) by which employers were required to designate existing employees who would not be required to complete initial training per the employer training program submitted under § 243.101.
Further, to provide additional regulatory relief for small entities, the final rule is delaying the refresher training implementation deadline by one year to December 31, 2026, in § 243.201(e)(2).
Comments from BMWED and ASSP suggested that FRA expand the purpose and scope section in part 243 to address certain issues. For instance, BMWED quoted the preamble of the 2012 NPRM, which clarified that “FRA does not regulate employment issues and will leave those issues to be settled in accordance with any applicable collective bargaining agreement or employment and labor law,”
ASSP requested clarification on how part 243 “transcends” with the requirements administered by the U.S. Occupational Safety and Health Administration (OSHA). In addition, ASSP commented that because some railroads “seem to be lacking in hazmat knowledge” FRA ought to consider including some form of hazardous materials training under part 243 and specifically suggested including the requirements of 49 CFR part 174, which covers the transportation of hazardous materials by rail.
In response to BMWED's comment, FRA reiterates that part 243 does not impact aspects of the employment relationship defined by collective bargaining agreements or employment and labor law. Accordingly, FRA declines to add regulatory text as a clarification because it is unnecessary.
ASSP's comment on the interaction between part 243 and OSHA requirements is beyond the scope of this rulemaking, which is limited to codifying FRA guidance and clarifying existing part 243 requirements in response to petitions for rulemaking. However, in response to ASSP's comment, FRA clarifies here that part
ASSP's comment regarding hazardous materials training is beyond the scope of the NPRM. The purpose of this rulemaking is to codify FRA guidance and clarify existing part 243 requirements in response to petitions for rulemaking. The NPRM did not propose any changes to part 243 involving the application of that part to hazardous materials training. Further, FRA has declined to regulate the training of hazardous materials employees through part 243 because that training is already sufficiently covered by DOT regulations promulgated by the Pipeline and Hazardous Materials Safety Administration (PHMSA).
ASSP's comment stated that FRA should use national consensus standards in the regulatory process and specifically suggested that part 243 include by reference two American National Standards Institute (ANSI standards): ANSI/ASSP Z490.1-2016 Criteria for Accepted Practices in Safety, Health and Environmental Training and ANSI/ASSP Z10.0-2019 Occupational Health and Safety Management Systems.
ASSP's comment requesting FRA to consider incorporating by reference ANSI standards is beyond the scope of the NPRM. Further, the ANSI standards that ASSP identifies fall outside of the scope of part 243 because they establish criteria and management tools related to occupational health, safety, and environmental training programs. As required by statute, part 243 covers training regarding Federal railroad safety laws, regulations, and orders, as well as those railroad rules and procedures promulgated to implement those Federal requirements.
This section describes the regulatory revisions made in this final rule. Where FRA is adopting the NPRM proposals exactly as proposed, FRA is not repeating the full section-by-section analysis for each relevant provision. Instead, FRA refers readers to the complete section-by-section analysis for those regulatory provisions in the NPRM's preamble.
Section 243.1 sets forth the purpose and scope of part 243. As proposed in the NPRM, the final rule is adding new paragraphs (f) and (g) to this section to incorporate existing guidance related to railroad bridge engineers and non-railroad employees who perform elective audits or assessments. Paragraph (f) codifies guidance in the compliance guide, which explains that part 243 does not apply when the training required under FRA's regulations is obtained through earning a college degree or certification from an accredited training organization or learning institution.
Because FRA did not receive any comments regarding the proposed changes to § 243.1, the final rule adopts the language as proposed.
Section 243.3 provides that part 243 applies to all railroads, contractors of railroads, and training organizations or learning institutions that train safety-related railroad employees (subject to specified exceptions
As proposed in the NPRM, to clarify that this process conforms with the requirements of part 243, FRA is adding paragraph (c) to § 243.3 explaining how a parent or holding company may comply with the requirements of this part on behalf of one or more subsidiaries. FRA's decision to accept programs filed by parent or holding companies on behalf of their subsidiaries is based on the recognition that companies that are legally related may share company rules or operating practices that make it possible to share a training program. FRA's revisions to this section are intended to ensure that all companies covered by a submission are legally bound by and accept the submission, and that subsidiaries may opt out of a parent or holding company's submission, in whole or in part.
Because FRA did not receive any comments regarding the proposed changes to § 243.3, the final rule adopts the language as proposed.
As proposed in the NPRM, to codify existing guidance and respond to questions from industry, FRA is revising two definitions and adding one new definition to this section. Specifically, FRA is revising the existing definitions of the terms “designated instructor” and “refresher training,” and adding a new
First, as proposed in the NPRM, FRA is revising the definition of “designated instructor” to specify that a “designated instructor” is not required to be an employee of the employer and to explain that employers must ensure that employees and non-employees used as designated instructors have the necessary knowledge, skills, and abilities to provide sound coaching, mentoring, and guidance to new learners. As also proposed in the NPRM, FRA is adding a definition of “training organizations or learning institutions” to clarify which businesses that provide training to employers are “training organizations or learning institutions.” Because FRA did not receive any comments regarding either the revised “designated instructor” definition or the new “training organizations or learning institutions” definition, the final rule is adopting both as proposed.
Second, FRA is adopting the proposed revised definition of “refresher training.” The definition explains that the purpose of refresher training is to improve the job performance of existing employees by acquainting them with any changed standards, any relevant problematic issues, or new skills, methods, and processes, and also to ensure no important skills or knowledge have been lost due to lack of use. As explained in the NPRM, this explanation is intended to distinguish refresher training from initial training, which is targeted to employees who generally are new to the subject matter. The final rule clarifies that training programs or plans required elsewhere in this chapter but identified by a term other than refresher training are considered refresher training for purposes of this part, and not only subpart A, as the proposed rule could be construed.
Section III of this preamble discusses comments FRA received in response to the proposed revised definition of “refresher training” and explains FRA's rationale for adopting the revisions as proposed.
As proposed in the NPRM, the final rule revises paragraphs (a) and (b) to remove certain implementation dates. Specifically, this final rule removes the implementation dates in paragraph (a) for the requirement that an employer submit, adopt, and comply with a training program for its safety-related railroad employees. These implementation dates are no longer needed because the specified deadlines have passed. The finalized paragraph (a) therefore applies to each employer conducting operations subject to part 243. Similarly, paragraph (b) is also amended to remove an implementation date that has passed for employers commencing operations after January 1, 2020. As finalized, the rule will apply any time an employer commences operations.
FRA is also revising paragraphs (c), (e), and (f) as proposed in the NPRM. The revisions to paragraph (c) clarify that employers may create training programs based on applicable CFR parts, United States Code sections, or citations to orders. The revisions to paragraphs (e) and (f) clarify contractor responsibility to provide information to railroads and the types of documents contractors and railroads must retain under part 243.
Because FRA did not receive any comments regarding the proposed changes to § 243.101, the final rule is adopting the language as proposed.
Although not proposed in the NPRM, FRA is making a minor clarifying change to the language of paragraph (d)(1). Specifically, FRA is replacing the language “If a training program has OJT. . .” with the language “When a training program is required to include OJT . . .” to avoid creating an incorrect implication that OJT is not required. As specified in revised § 243.101(c)(5) and explained in the NPRM, OJT is required when tasks require neuromuscular coordination to learn, unless FRA approves alternative, formal training that addresses the need to practice safety-related tasks with the ability to objectively measure task completion proficiency.
As proposed in the NPRM, FRA is adopting four revisions to § 243.103. These revisions provide clarity regarding the training components that must be identified in an employer's program and the information an employer must submit to FRA.
Because FRA did not receive any comments regarding the proposed changes to § 243.103, the final rule adopts the language as proposed.
As proposed in the NPRM, FRA is revising § 243.105, which permits the optional development of model programs that can be adopted by multiple employers. As proposed, the final rule removes paragraph (a)(3) to remove an outdated compliance date, revises paragraph (b), and adds paragraph (c) to add information to the regulatory text that was previously issued as guidance regarding model programs. Because FRA did not receive any comments regarding the proposed changes to § 243.105, the final rule adopts the language as proposed.
As proposed in the NPRM, FRA is revising paragraph (a), removing and reserving paragraph (b), and removing paragraph (c). These changes reduce regulatory burdens associated with submitting training programs by eliminating the need for employers to submit information that is unnecessary for FRA's review and approval of training programs. Because FRA did not receive any comments regarding the proposed changes to § 243.107, the final rule adopts the revisions as proposed except for a change to paragraph (a)(4) from the proposal to clarify that the employer is required to state in the submission certain information about its training practices when it uses any combination “of the practices described in” paragraphs (a)(1) through (3) of this section.
As proposed in the NPRM, FRA is revising this section to clarify that refresher training programs must be submitted to FRA for review and approval in the same manner as an employer's initial training program. Because FRA did not receive any comments regarding the proposed changes to § 243.109, the final rule adopts the language as proposed.
As proposed in the NPRM, FRA is adopting several revisions to this section to remove unnecessary requirements and eliminate regulatory ambiguity regarding programs filed by training organizations or learning institutions. Because FRA did not receive any comments regarding the proposed changes to this section, the final rule adopts the revisions as proposed.
As proposed in the NPRM, FRA is revising this section to clarify that when FRA refers to electronic program or informational filings submission requirements, FRA means submission through FRA's part 243 web portal. As proposed in the NPRM, FRA is also revising this section to eliminate the written program submission option for an employer with fewer than 400,000 total employee work hours annually and to clarify that to submit a training program through the part 243 web portal, a submitter will need to register for access to the portal. Because FRA did not receive any comments regarding the proposed changes to § 243.113, the final rule adopts the revisions as proposed.
As proposed in the NPRM, FRA is making several revisions and additions to paragraphs (a)(1) and (2), including the removal of outdated implementation dates for designating existing employees as qualified to perform safety-related service. As adopted, paragraph (a)(1) reiterates the existing requirement that each employer must only permit employees appropriately trained and qualified to perform safety-related service. Paragraph (a)(2) addresses the Associations' petitions by permitting an employer to limit a safety-related railroad employee's training to only the relevant Federal requirements that apply to the safety-related tasks that the employer authorizes the employee to perform, in addition to any knowledge-based training that is required. Because FRA did not receive any comments regarding the proposed changes to § 243.201(a)(1) and (2), the final rule adopts the revisions as proposed.
Regarding paragraph (a)(3), the NPRM proposed to move the requirement for designating existing employees by occupational category or subcategory from current paragraph (a)(1) to a new paragraph (a)(3)(i). FRA is adopting the NPRM's language in new paragraph (a)(3)(i) as proposed.
As proposed in the NPRM, FRA is also adding paragraph (a)(3)(ii) to address an issue, similar to the one addressed in § 243.101(c), concerning employers that prefer to categorize their employees by CFR parts or other legal requirements, rather than by occupational category or subcategory. For those employers who do not designate employees by occupational category or subcategory, paragraph (a)(3)(ii) requires that the employer must retain a record for each employee identifying the list of Federal railroad safety laws, regulations, and orders that cover the work the person is designated as qualified to perform.
As proposed in the NPRM, the requirements for designating safety-related railroad employees who were not required to be designated as qualified by the applicable implementation dates in former paragraphs (a)(1) and (2) are now in paragraphs (b) (for existing employees of an employer commencing operations) and (c) (for newly hired employees). These paragraphs are being adopted as proposed in the NPRM and are applicable any time an employer commences operations or hires a new employee.
In this final rule, FRA is also revising paragraphs (c), (d), and (e), and adding a new paragraph (f). Specifically, FRA is revising paragraph (c)(2) to allow an employee, who is not yet qualified, to perform tasks during OJT under the direct, onsite observation of a qualified person and in accordance with certain conditions for the qualified person, before the employee has completed all of the formal training, including classroom training and OJT. FRA is adopting paragraph (c)(2) as proposed, except for making a minor clarifying change to language of the first sentence by replacing the language “If the training curriculum includes OJT. . .” with the language “When the training program is required to include OJT. . .” to avoid creating an incorrect implication that OJT is not required. As specified in revised § 243.101(c)(5) and explained in the NPRM, OJT is required when tasks require neuromuscular coordination to learn, unless FRA approves alternative, formal training that addresses the need to practice safety-related tasks with the ability to objectively measure task completion proficiency.
FRA is also amending paragraph (d), which addresses how an employer can avoid training an employee who was previously trained or qualified by an entity other than the current employer, to make it consistent with other sections of part 243 amended through this rulemaking.
In addition, in conjunction with the revised definition of “refresher training” and to clarify the minimum requirements for refresher training, FRA is making several revisions to the requirements in paragraph (e). FRA is revising the language in paragraphs (e)(1) and (e)(2), regarding implementation dates, to emphasize that refresher training is typically required within three calendar years from a prior training event while continuing to recognize that there is also an exception for employers who were conducting operations as of these beginning implementation dates.
Further, FRA is extending the refresher training implementation deadline for small entities, covered under paragraph (e)(2), by one year in response to the Associations' comment requesting further consideration and to reflect FRA's observation that these small entities could generally use an additional year to develop and implement refresher training.
FRA has revised proposed paragraph (e)(3) to clarify what an employer must include in refresher training. Those refresher training requirements are now contained in paragraphs (e)(3) through
In paragraph (e)(3) of the NPRM, FRA proposed that an employer must develop refresher training to address railroad-wide or industry-wide safety concerns that address an individual employee's weakness—a point of reference that may be unknown or difficult to figure out. In its place, paragraph (e)(4) of this final rule requires that each employer shall ensure that refresher training for employees charged with the inspection of track or railroad equipment address identifying defective conditions and how to initiate immediate remedial action to correct critical safety defects that are known to contribute to derailments, accidents, incidents, or injuries. This requirement mirrors the requirement in the RSIA of 2008.
Paragraph (e)(5), which tracks proposed paragraph (e)(3)(iii)(C), requires that each employer's refresher training, at a minimum, includes safety-related tasks that address skill gaps that the employer identified in the workforce through efficiency testing, periodic oversight, annual reviews, accident/incident data, FRA inspection data, or other performance measuring metrics. FRA expects that each employer will look to these sources of data to identify skill gaps and the safety-related tasks to cover in refresher training.
As explained in the Background under the heading “
Paragraph (e)(6) also defines certain limitations and requirements for the test out option. For instance, if an employee fails such a test on the first attempt, the employer must provide the refresher training to the employee instead of another opportunity to test out. The reason for a single test out attempt is that a failure is indicative that the employee would benefit from refresher training as compared to an employee that tests out and has therefore demonstrated that they already possess the knowledge or skills necessary to do the safety-related work in the occupational category or subcategory tested without refresher training.
Paragraph (e)(6)(i) requires an employer to design the test out option to determine whether an employee has the critical knowledge and skills to continue to be designated to perform safety-related service in that occupational category or subcategory, whether by craft, class, task, or other suitable terminology. Thus, each employer offering a test out option will need to determine the critical knowledge and skills for the occupational categories and subcategories created under § 243.101(c). Most likely, the critical knowledge and skills for an occupational category or subcategory is identifiable from initial training programs. Paragraph (e)(6)(ii) requires the test out option to meet the equivalent standards required for such assessment testing under formal training in that occupational category or subcategory. Thus, FRA expects the test offered for the test out option will often be identical or the equivalent to a test offered during or at the conclusion of initial training for the occupational category or subcategory, albeit that the method of delivery may be different. For instance, although initial training might have been completed in a classroom with a combination of knowledge tests and task-based observational tests, an assessment test offered for the test out option is not required to be offered in a classroom; instead, any other formal training delivery methods such as computer-based, correspondence, on-the-job, simulator, or laboratory training, may be offered. Given that refresher training will be necessary for experienced employees who do not need initial training, it is expected that most employers will opt to provide an assessment test for the test out option in the normal, railroad work environment which would produce the least disruption to the regular work routine. Paragraph (e)(6)(iii) requires an employer, offering a test out option, to keep records of the relevant information from each test as a record under § 243.203.
Paragraph (f) of this final rule requires an employer to consider ways to provide remedial training and retesting of any employee who fails to successfully pass any training or testing. Paragraph (f) also makes clear that a failure of any test or training does not bar the person from successfully completing the training or testing later. The requirement in paragraph (f) does not apply to the single test out option in paragraph (e)(6) of this section; instead, the consequence of failing that single test out option requires the employee to complete the refresher training for that occupational category or subcategory.
As proposed in the NPRM, FRA is revising paragraph (b)(2) of this section to clarify that an employer that designates its employees by “other suitable terminology,”
Because FRA did not receive any comments regarding the proposed changes to § 243.203, the final rule adopts the revisions as proposed.
As proposed in the NPRM, FRA is adopting two general changes to § 243.205. The first general change amends paragraphs (a), (c), (e)(1), (g), and (i) to allow periodic oversight to be limited to tests “or” inspections, rather than require both tests “and”
The second general change FRA proposed was intended to reflect guidance providing employers with some discretion in the administration of oversight. For instance, as proposed, FRA is revising § 243.205(h) to provide railroads and contractors the flexibility to decide which entity will be responsible for conducting periodic oversight. This revision allows the regulated entities to decide which entity is in the best position to conduct the oversight and to make any necessary arrangements to comply with the periodic oversight requirements. The final rule is adopting the revisions as proposed with only an addition in the title of the paragraph and in the paragraphs to emphasize that any alternative to the regulatory requirements must be made by written agreement (
Because FRA did not receive any comments regarding the proposed changes to § 243.205, aside from the changes discussed herein, the final rule adopts the revisions as proposed.
Each of the revisions adopted in this final rule and described above are consistent with the guidance FRA published on April 20, 2023, titled
Executive Order (E.O.) 12866 (“Regulatory Planning and Review”),
E.O. 12866 and DOT Order 2100.6B also require that FRA submit “significant regulatory actions” to the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President's Office of Management and Budget (OMB) for review. This final rule is a not significant regulatory action pursuant to E.O. 12866; it also has not designated this rule as a “major rule” as defined by the Congressional Review Act (5 U.S.C. 801
FRA is issuing this final rule to address issues raised in the Associations' petitions for rulemaking, provide clarity to current requirements, and remove requirements that are no longer necessary. For example, FRA is removing certain requirements from § 243.111 because FRA found some of the information required to be submitted by training organizations and learning institutions unnecessary. FRA is also removing implementation dates that have passed. Overall, the changes codify existing regulatory guidance that FRA has issued or clarify and streamline the existing regulatory requirements.
The final rule provides regulatory clarity and promotes regulatory compliance by the regulated industry through, among other things: (1) clarifying that FRA will accept a training program that categorizes employees by legal requirement references rather than occupational categories; (2) eliminating certain submissions such as similar training programs or plans; (3) requiring that each employer under § 243.103(a)(2)(v) exclude the course duration of OJT for an employer's estimate of the anticipated course duration for all formal training combined; (4) clarifying the use of model programs without requiring an entity to refer to guidance or asking FRA for assistance; (5) amending requirements for training program submissions and the introductory information required in § 243.107 due to FRA's part 243 web portal; (6) revising § 243.109 to clarify refresher training program submission requirements; (7) requiring each training organization and learning institution provide less information in its submission than required currently by § 243.111; (8) revising the refresher training requirements and options, clarifying what employers need to include to complete minimum acceptable refresher training; and (9) allowing each railroad and contractor the flexibility to decide which entity will be responsible for conducting periodic oversight.
This final rule will delay refresher training requirements for small entities by one year. FRA assumes approximately 3,500 safety-critical employees
FRA expects the final rule will result in several, non-quantifiable benefits for the regulated industry and FRA, such as: permitting training programs that categorize employees by referencing the applicable part of the CFR, a statute, or an order, rather than occupational categories associated by craft; clarifying that an employer need not submit courseware unless FRA requests that additional documentation is needed to conduct an adequate review; and clarifying what employers need to include to complete minimum acceptable refresher training, as well as allow for tests or inspections, instead of requiring both. FRA expects these clarifications will provide employers an easier means of complying with this regulation, as well as save time understanding what needs to be submitted and preparing submissions to FRA. By codifying existing regulatory guidance, FRA expects that the railroads will have greater regulatory certainty for future submissions while complying with training program requirements. FRA estimates that there will be no costs associated with this final rule.
E.O. 14192 (90 FR 9065, Jan. 31, 2025), Unleashing Prosperity Through Deregulation, requires that for “each new [E.O. 14192 regulatory action] issued, at least ten prior regulations be identified for elimination.”
An E.O. 14192 deregulatory action is defined as “an action that has been finalized and has total costs less than zero.” This final rule is considered an E.O. 14192 deregulatory action. FRA estimates this rule generates a cost savings of $1.1 million, based on the one-year refresher training extension granted to small entities.
The Regulatory Flexibility Act (RFA) of 1980
This final rule directly affects all railroads, of which there are approximately 784. FRA estimates that approximately 94 percent of these railroads are small entities. This final rule also affects approximately 300 contractors of railroads and approximately 109 training organizations or learning institutions, most of which, by definition, are considered small entities.
The requirements of this final rule will apply to employers of safety-related railroad employees, whether the employers are railroads, contractors, or subcontractors. Although a substantial number of small entities will be subject to this rule, the final rule will codify agency guidance, reduce submissions to FRA, and clarify existing requirements.
In accordance with the Paperwork Reduction Act of 1995,
The table below shows the sections in part 243 that contain the new and currently approved information collection requirements that will apply when this final rule becomes effective, and the estimated time to fulfill each requirement as follows:
All
OMB is required to decide concerning the collection of information requirements contained in this final rule between 30 and 60 days after publication of this document in the
E.O. 13132, “Federalism,”
FRA has analyzed this final rule under the principles and criteria contained in E.O. 13132. FRA has determined that this final rule has no federalism implications, other than the possible preemption of State laws under 49 U.S.C. 20106. Therefore, the consultation and funding requirements
The Trade Agreements Act of 1979
FRA has evaluated this final rule consistent with the National Environmental Policy Act of 1969 (NEPA).
Pursuant to section 106 of the National Historic Preservation Act and its implementing regulations, FRA has determined this rulemaking has no potential to affect historic properties.
This final rule will not result in the expenditure, in the aggregate, of $100,000,000 or more, adjusted for inflation, in any one year by State, local, or Indian Tribal governments, or the private sector. Thus, consistent with section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 2 U.S.C. 1532), FRA is not required to prepare a written statement detailing the effect of such an expenditure.
E.O. 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” requires Federal agencies to prepare a Statement of Energy Effects for any “significant energy action.”
FRA has evaluated this rule in accordance with the principles and criteria contained in E.O. 13175, Consultation and Coordination with Indian Tribal Governments (65 FR 67249, Nov. 6, 2000). The rule would not have a substantial direct effect on one or more Indian Tribes, would not impose substantial direct compliance costs on Indian Tribal governments, and would not preempt Tribal laws. Therefore, the funding and consultation requirements of E.O. 13175 do not apply, and a Tribal summary impact statement is not required.
Administrative practice and procedure, Penalties, Railroad employees, Railroad safety, Reporting and recordkeeping requirements.
For the reasons discussed in the preamble, FRA is amending part 243 of chapter II, subtitle B of title 49 of the Code of Federal Regulations as follows:
49 U.S.C. 20103, 20107, 20131-20155, 20162, 20301-20306, 20701-20702, 21301-21304, 21311; 28 U.S.C. 2461 note; and 49 CFR 1.89.
(f) The requirements in this part do not require an employer to adopt and comply with a training program when the training required for a qualified person is obtained through earning a college degree or certification from an accredited training organization or learning institution. For example, the requirements in this part do not require the training program of an engineering firm that conducts bridge inspections to include training of railroad bridge engineers on the subjects taught as part of a professional engineering curriculum covered by 49 CFR 237.51(b).
(g) The requirements in this part do not require an employer to train contractors who are hired to perform elective audits or assessments that are not required by Federal railroad safety laws, regulations, or orders.
(c)(1) A parent or holding company may comply with the requirements of this part on behalf of one or more subsidiaries if the arrangement is specified and submitted with the relevant training program(s) under subpart B of this part.
(i) The arrangement may be used to fulfill all or a portion of a subsidiary's responsibility for compliance with this part.
(ii) A parent or holding company that submits a training program on behalf of one or more subsidiaries must initially and continually maintain in its submission a list of the legal name of each subsidiary. The submission must reflect which courses each subsidiary is adopting if a subsidiary is not adopting the parent or holding company's training program in its entirety. The submission must reflect whether each subsidiary is adopting all of a parent or holding company's training programs or identify which courses each subsidiary is adopting.
(2) A subsidiary must not duplicate a training program submission a parent or holding company has made on its behalf.
(3) A subsidiary must file a training program submission, in accordance with the requirements of subpart B of this part, if a parent or holding company does not submit one or more training programs on behalf of the subsidiary that is intended to fulfill all of the subsidiary's responsibilities under this part.
(4) A subsidiary must comply with a parent or holding company's training program submission that is filed on behalf of the parent or holding company's subsidiaries unless the
(a) Each employer conducting operations subject to this part shall submit, adopt, and comply with a training program for its safety-related railroad employees.
(b) Each employer that has not yet commenced operations subject to this part shall submit a training program for its safety-related railroad employees before commencing operations. Upon commencing operations, the employer shall adopt and comply with the training program.
(c) In the program required by this part, the employer shall:
(1) Classify its safety-related railroad employees in occupational categories or subcategories by craft, class, task, or other suitable terminology. Other suitable terminology for classifying safety-related railroad employees may include references to the applicable part of the Code of Federal Regulations, section of the United States Code, or citation to an order as described in paragraph (c)(2) of this section;
(2) Define the occupational categories or subcategories of safety-related railroad employees. The definition of each category or subcategory shall include a list of the Federal railroad safety laws, regulations, and orders that the employee is required to comply with, based on the employee's assignments and duties, broken down at a minimum to the applicable part of the Code of Federal Regulations, section of the United States Code, or citation to an order. The listing of the Federal requirements shall contain the descriptive title of each law, regulation, or order. An employer that classifies its safety-related railroad employees by direct reference to the applicable part of the Code of Federal Regulations, section of the United States Code, or citation to an order as permitted in paragraph (c)(1) of this section, is not required to define the occupational categories or subcategories of its safety-related railroad employees;
(3) Create tables or utilize other suitable formats which summarize the information required in paragraphs (c)(1) and (2) of this section, separated by major railroad departments (
(4) Develop procedures to design and develop key learning points for any task-based or knowledge-based training; and
(5) Determine how training shall be structured, developed, and delivered, including an appropriate combination of classroom, simulator, computer-based, correspondence, OJT, or other formal training. The curriculum shall be designed to impart knowledge of, and ability to comply with, applicable Federal railroad safety laws, regulations, and orders, as well as any relevant railroad rules and procedures promulgated to implement those applicable Federal railroad safety laws, regulations, and orders. OJT is required when tasks require neuromuscular coordination to learn, unless FRA approves alternative, formal training that addresses the need to practice safety-related tasks, with the ability to objectively measure task completion proficiency.
(d) On-the-job (OJT) training requirements:
(1) When a training program is required to have OJT, the OJT portion of the training program shall consist of the following three key components:
(i) A brief statement describing the tasks and related steps the employee learning the job shall be able to perform;
(ii) A statement of the conditions (prerequisites, tools, equipment, documentation, briefings, demonstrations, and practice) necessary for learning transfer; and
(iii) A statement of the standards by which proficiency is measured through a combination of task/step accuracy, completeness, and repetition.
(2) Prior to beginning the initial safety-related tasks associated with OJT exercises, employers shall make any relevant information or materials, such as operating rules, safety rules, or other rules available to employees involved for referencing.
(3) The tasks and related steps associated with OJT exercises for a particular category or subcategory of employee shall be maintained together in one manual, checklist, or similar document. This reference shall be made available to all employees involved in those OJT exercises.
(e) Contractor's responsibility to validate approved program to a railroad: A contractor is being utilized by a railroad when any of the contractor's employees conduct safety-related duties on behalf of the railroad and the railroad does not otherwise qualify those employees of the contractor that are allowed to perform those duties. A contractor that chooses to train its own safety-related railroad employees shall provide each railroad that utilizes it with a document proving or stating that:
(1) The contractor's training program was approved by FRA; or
(2) The contractor is not required to submit the similar training program or plan as required in § 243.103(b) but is maintaining the similar training program or plan, pursuant to other regulatory requirements contained elsewhere in this chapter.
(f) Railroad's responsibility to retain contractor's validation of program: A railroad that chooses to utilize contractor employees to perform safety-related duties and relies on contractor-provided training as the basis for those employees' qualification to perform those duties shall retain a document from the contractor declaring or proving that the contractor's program was approved by FRA, or that the contractor is not required to submit the similar training program or plan as required in § 243.103(b) but is maintaining the similar training program or plan, pursuant to other regulatory requirements contained elsewhere in this chapter. A copy of the document required in paragraph (e) of this section satisfies this requirement.
(a) * * *
(1) A unique name and identifier for each formal initial and refresher training course of study;
(2) * * *
(v) The anticipated course duration for all formal training combined, excluding the course duration of OJT;
(b) An employer that is required to adopt and comply with similar training programs or plans, pursuant to other regulatory requirements contained elsewhere in this chapter, is not required to submit those similar training programs or plans in accordance with this part. When any such similar program or plan, pursuant to other regulatory requirements contained elsewhere in this chapter, includes OJT but does not include the OJT components specified in paragraph (a)(3) of this section and in § 243.101(d), the employer shall supplement its program to include the OJT components in accordance with this part. In addition, when any such similar program or plan, pursuant to other regulatory requirements contained elsewhere in this chapter, is amended for any reason, the employer shall amend its program without submission to FRA under § 243.109.
(d) FRA may require modifications to any programs, including those programs referenced in paragraph (b) of this section, if it determines essential program components, such as OJT, or arranged practice and feedback, are missing or inadequate. Unless requested by FRA, an employer is not required to submit courseware (
(b)(1) An employer that chooses to use a model program approved by FRA is not required to submit the entire program to FRA. Instead, the employer must submit only the unique identifier associated with the program, and all other information that is specific to that employer or deviates from the model program.
(2) An employer that chooses to adopt a model program at FRA's part 243 web portal (
(3) An employer that chooses to adopt and implement a model program must contact the model program developer and obtain the associated course/training materials necessary for training safety-related railroad employees. FRA does not prohibit a model program developer from charging an employer a fee for the right to use a model training program it developed or requiring that each employer obtain its explicit authorization before the employer adopts one of its model programs.
(4) An employer that submits, adopts, and implements an FRA-approved model program, consistent with the operations of that employer, will be considered in compliance with the employer program requirements of § 243.101.
(c)(1) Once a model program is approved by FRA, the developer must consider when it is necessary to make revisions in accordance with § 243.109. A developer that revises its model program is required to provide notice of the FRA-approved changes to its authorized users. A model program developer is required to provide notice of any model program revisions by engaging in any form of communication that positively affirms the developer provided notice to employers likely to be impacted by the changes to the program, including posting the information at the organization's website, writing letters to the employers, and including information in periodic newsletters. Such notice must be at least as effective as the notice the developer provided to employers when it developed the model program. For example, if the developer makes its model program available to anyone with access to the developer's website, then posting a notice of any revisions to the program on its website will be sufficient. In contrast, if a model program developer requires explicit authorization to use its model programs, the developer must provide adequate notice to those entities that it has specifically authorized in a manner consistent with its authorization practices.
(2) Once notified, an employer that is adopting and complying with a model program must:
(i) Adopt and comply with the revisions to the model program made by the developer; or
(ii) Submit information explaining how the employer's training program will deviate from the model program in accordance with § 243.109.
(a) An employer who provides training of safety-related railroad employees shall submit its training program to FRA for review and approval. For an employer using FRA's part 243 web portal, the web portal will prompt the employer to provide the required information in this section. Each employer shall state in its submission whether, at the time of filing, it:
(1) Primarily conducts the training program of its own safety-related railroad employees, utilizing its own resources;
(2) Conducts any training for other than its own safety-related railroad employees;
(3) Implements any training programs conducted by some other entity on its behalf but adopted by that employer;
(4) Uses any combination of the practices described in paragraphs (a)(1) through (3) of this section.
(b) [Reserved]
(a)
(2) An employer's initial program, as required by § 243.101(a) or (b), or an employer's refresher program, as required by § 243.201(e), must be submitted to the Associate Administrator and is considered approved and may be implemented immediately upon submission. Following submission, the Associate Administrator will review the program and inform the employer as to whether the program conforms to this part. If the Associate Administrator determines that all or part of the program does not conform, the Associate Administrator will inform the employer of the specific deficiencies. The deficient portions of the non-conforming program may remain in effect until approval of the revised program, unless FRA provides notification otherwise. An employer shall resubmit the portion of its program, as revised to address specific deficiencies, within 90 days after the date of any notice of deficiencies from the Associate Administrator. A failure to resubmit the program with the necessary revisions shall be considered a failure to implement a program under this part. The Associate Administrator may extend this 90-day period upon written request.
(a) A training organization or learning institution that provides training services for safety-related railroad employees, including providing such training services to independent students who enroll with such training organization or learning institution and who will rely on the training services provided to qualify to become safety-related railroad employees, must submit its program to FRA for review and approval unless:
(1) The program is approved as a model program under § 243.105 or an employer program under § 243.101; and
(2) The training organization or learning institution submits an informational filing to its previously approved program containing the information required in paragraph (c) of this section.
(c) * * *
(3) The training organization or learning institution's primary telephone number and point of contact; and
(4) A listing of the training organization or learning institution's designated instructors.
(e) Previously approved programs require an informational filing when modified. The training organization or learning institution shall review its previously approved training program and modify it accordingly when new safety-related Federal railroad laws, regulations, or orders are issued, or new safety-related technologies, procedures, or equipment are introduced into the workplace and result in new knowledge requirements, safety-related tasks, or in modifications of existing safety-related duties. A training organization or learning institution that modifies its training program for these described reasons shall submit an informational filing to the Associate Administrator not later than 30 days after the end of the calendar year in which the modification occurred, unless FRA advises otherwise. Programs modified in accordance with this paragraph are considered approved upon modification and may be implemented immediately. Any program deficiencies noted by the Associate Administrator shall be addressed as specified in this section. A training organization or learning institution may transfer an approved program to another training organization or learning institution, or an employer, and that transfer will require the acquiring entity to file an informational filing unless the acquiring entity is making substantial additions or revisions to the previously approved program, which will require FRA review under paragraph (f) of this section. The filing shall contain a summary description of sufficient detail so that FRA can associate the changes with the training organization's or learning institution's previously approved program, and shall include:
(a) Each employer, training organization, or learning institution to which this part applies is required to file by electronic means at FRA's part 243 web portal any program submissions required under this part in accordance with the requirements of this section. FRA's part 243 web portal will prompt users to submit all required training program information. Each organization, business, or association that develops an optional model program in accordance with § 243.105 is required to file by electronic means at FRA's part 243 web portal the program in accordance with the requirements of this section.
(b) Before any person's first program submission electronically at FRA's part 243 web portal, the person must register for access at the portal,
(1) The name of the employer, organization, learning institution, business, or association;
(2) The names of two individuals, including job titles, who will be the person's points of contact and will be the only individuals allowed access to FRA's secure document submission site;
(3) The mailing addresses for the person's points of contact;
(4) The person's system or main headquarters address located in the United States;
(5) The email addresses for the person's points of contact; and
(6) The daytime telephone numbers for the person's points of contact.
(c) A person that electronically submits an initial program,
(a)(1) Each employer must permit only employees appropriately trained and qualified to perform safety-related service.
(2) In addition to any required knowledge-based training, an employer may limit a safety-related railroad employee's training to only the relevant Federal requirements that apply to the safety-related tasks that the employer authorizes the employee to perform.
(3) The requirements in paragraph (a) do not impact the initial designation of the existing safety-related railroad employees who were designated by September 1, 2020 (for each Class I railroad, and each intercity or commuter passenger railroad conducting operations subject to this part with 400,000 total employee work hours annually or more in operation as of January 1, 2020) or January 1, 2022 (for each employer conducting operations subject to this part not covered by the September 1, 2020 implementation date). Each employer conducting operations subject to this part shall either:
(i) Declare the designation of each of its existing safety-related railroad employees by occupational category or subcategory, and only permit designated employees to perform safety-related service in that occupational category or subcategory; or
(ii) For an employer that does not designate employees by occupational category or subcategory, retain a record for each employee identifying the list of Federal railroad safety laws, regulations, and orders that cover the work the employee is designated as qualified to perform.
(b) An employer commencing operations shall declare the designation of each of its existing safety-related railroad employees by occupational category or subcategory before beginning operations, and only permit designated employees to perform safety-related service in that category or subcategory. Any person designated shall have met the requirements for newly hired employees or those assigned new safety-related duties in accordance with paragraph (c) of this section.
(c) Newly hired employees or those assigned new safety-related duty. The following requirements apply to qualifying a safety-related railroad employee who, subsequent to the employer's designation in accordance with paragraphs (a) and (b) of this section, is newly hired or is to engage in a safety-related task not associated with the employee's previous training.
(1) Prior to an employee becoming a qualified member of an occupational category or subcategory, the employer shall require a safety-related railroad employee who is newly hired or is to engage in safety-related duties not associated with the employee's previous training to successfully complete the formal training curriculum for that category or subcategory of safety-related railroad employee. Successful completion of the formal training curriculum includes passing any required examinations covering the skills and knowledge the employee will need to possess in order to perform the safety-related duties necessary to be a member of the occupational category or subcategory.
(2) When the training program is required to include OJT, the employee shall demonstrate, to the satisfaction of a designated instructor, OJT proficiency by successfully completing the safety-related tasks necessary to become a qualified member of the occupational category or subcategory. However, as part of the OJT process and before completing any of the formal training, including classroom training and OJT, and passing the field evaluation, a person may perform such tasks under the direct onsite observation of any qualified person, provided the qualified person has been advised of the circumstances and is capable of intervening if an unsafe act or non-compliance with Federal railroad safety laws, regulations, or orders is observed. An employee designated to provide formal training to other employees, and who is not a designated instructor, shall be qualified on the safety-related topics or tasks in accordance with the employer's training program and the requirements of this part.
(d) Employees previously trained or qualified, but not by the current employer: If an employee has received relevant training or qualification for a particular occupational category or subcategory through participation in an FRA-required training program completed by an entity other than the employee's current employer, that training shall satisfy the requirements of this part:
(1) Provided that:
(i) A current record of training is obtained from that other entity; or
(ii) When a current record of training is unavailable from that other entity, an employer performs testing to ensure the employee has the knowledge necessary to be a member of that category or subcategory of safety-related railroad employee. Testing shall include an oral or written examination and demonstrating the ability to inspect, identify, and initiate corrective action necessary for compliance with Federal railroad safety laws, regulations, or orders, as well as any relevant railroad rules and procedures promulgated to implement those Federal railroad safety laws, regulations, or orders. A designated instructor must make the final determination as to whether the employee has the knowledge, skills, and abilities to become a member of an occupational category; and
(2) When the employee, in the previous 180 days, has either not performed the safety-related duties or not received initial or periodic training for an occupational category or subcategory, the employer shall perform testing to ensure the employee has retained the knowledge necessary to remain a member of that occupational category or subcategory. In the situation where an employee's records are unavailable and the employee is subject to testing under paragraph (d)(1)(ii) of this section, no additional testing is required.
(e) Refresher training requirements and options:
(1) Each Class I railroad, and each intercity or commuter passenger railroad conducting operations subject to this part with 400,000 total employee work hours annually or more, shall deliver refresher training at an interval not to exceed three calendar years from the date of an employee's last training event, except where refresher training is specifically required more frequently in accordance with this chapter. If the last training event occurs, or occurred, before FRA's approval of the employer's training program, the employer shall provide refresher training either within three calendar years from that prior training event or, for each such employer conducting operations as of January 1, 2022, no later than December 31, 2024.
(2) Each employer conducting operations subject to this part not covered by paragraph (e)(1) of this section shall deliver refresher training at
(3) Each employer shall ensure that refresher training includes formal training if the employee did not previously receive formal training on the application of any specific Federal railroad safety law, regulation, or order the employee is required to comply with, as well as any relevant railroad rules and procedures promulgated to implement those specific Federal railroad safety laws, regulations, and orders.
(4) Each employer shall ensure that refresher training for employees charged with the inspection of track or railroad equipment address identifying defective conditions and how to initiate immediate remedial action to correct critical safety defects that are known to contribute to derailments, accidents, incidents, or injuries.
(5) Each employer shall ensure that refresher training includes safety-related tasks that address skill gaps that the employer identified in the workforce through efficiency testing, periodic oversight, annual reviews, accident/incident data, FRA inspection data, or other performance measuring metrics.
(6) Except for refresher training required by paragraph (e)(3) of this section, an employer may offer each employee a single test out option for any occupational category or subcategory that, if passed, will be considered an acceptable substitute for refresher training. If the employee does not pass this single test on the first attempt, the employer may not offer the employee additional attempts to test out for the occupational category or subcategory tested and the employer must provide refresher training to the employee in compliance with paragraph (e) of this section. Each test out option must:
(i) Be designed to determine whether an employee has the critical knowledge and skills to continue to be designated to perform safety-related service in that occupational category or subcategory, whether by craft, class, task, or other suitable terminology;
(ii) Meet the equivalent standards required for such assessment testing under formal training in that occupational category or subcategory; and
(iii) Be recorded under § 243.203 of this part.
(f) Except for the single test out option in paragraph (e)(6) of this section, an employer must consider ways to provide remedial training and retesting of any employee who fails to successfully pass any training or testing. Under this part, a failure of any test or training does not bar the person from successfully completing the training or testing at a later date.
(b) * * *
(2) Occupational category or subcategory designations, or other suitable designations, for which the employee is deemed qualified;
(6) The employee's OJT performance, which shall include the unique name or identifier of the OJT program component in accordance with § 243.103, the date the OJT program component was successfully completed, and the identification of the designated instructor(s) determining that the employee successfully completed all OJT training necessary to be considered qualified to perform the safety-related tasks identified with the occupational categories or subcategories, or other suitable terminology, for which the employee is designated in accordance with the program required by this part;
(c)
(a)
(c)
(e) * * *
(1) When oversight test or inspection sessions are scheduled specifically to determine if safety-related employees are in compliance with Federal railroad safety laws, regulations, and orders particular to FRA-regulated personal and work group safety; or
(g)
(h)
(2) Notwithstanding the requirements of this section that assign specific periodic oversight responsibilities to a railroad or a contractor, a railroad and a contractor may agree to a different periodic oversight responsibility arrangement in writing.
(i)
Issued in Washington, DC.
Office of the Secretary, U.S. Department of Agriculture.
Request for information.
The U.S. Department of Agriculture (USDA) proffers this Request for Information (RFI) to solicit the public's input on regulatory considerations related to the review of modified organisms subject to the Plant Protection Act. The information provided will help identify factors for potential risk-based deregulation and could inform future rulemaking; input might also offer non-regulatory solutions.
We will consider all comments that we receive on or before June 15, 2026.
USDA invites public comments on this RFI and encourages stakeholders, including farmers, industry representatives, and state and local governments, to provide input. You may submit comments, identified by docket number USDA-2026-0133, in the Federal eRulemaking Portal:
Michael Poe, Office of the General Counsel, USDA, 1400 Independence Avenue SW, Washington, DC 20250-1400, (202) 769-8247.
Along with the Environmental Protection Agency (EPA) and the Food and Drug Administration (FDA), the United States Department of Agriculture's (USDA's) Animal and Plant Health Inspection Service (APHIS) and the Food Safety and Inspection Service (FSIS) traditionally exercise oversight of certain organisms modified or developed using genetic engineering and the foods derived from them. In 1986, the Office of Science and Technology Policy (OSTP) published the Coordinated Framework for the Regulation of Biotechnology (Coordinated Framework). The Coordinated Framework explains the regulatory roles for EPA, FDA, and the USDA,
Under the Plant Protection Act of 2000, as amended (7 U.S.C. 7701-7772, 7781-7786, referred to below as the PPA or the Act), the Secretary of Agriculture has authority to carry out operations or measures to detect, control, eradicate, suppress, prevent, or retard the spread of plant pests. Section 411(a) of the Act (7 U.S.C. 7711(a)) provides that “no person shall import, enter, export, or move in interstate commerce any plant pest, unless the importation, entry, exportation, or movement is authorized under general or specific permit and in accordance with such regulations as the Secretary may issue to prevent the introduction of plant pests into the United States or the dissemination of plant pests within the United States.”
In addition, section 412(a) of the Act (7 U.S.C. 7712(a)) provides that “[t]he Secretary may prohibit or restrict the importation, entry, exportation, or movement in interstate commerce of . . . any biological control organism . . . if the Secretary determines that the prohibition or restriction is necessary to prevent the introduction into the United States or the dissemination of a plant pest or noxious weed within the United States.”
The regulations at 7 CFR part 340 have historically governed the introduction (importation, interstate movement, or release into the environment) of certain genetically engineered (GE) organisms. APHIS first issued these regulations in 1987 under the authority of the Federal Plant Pest Act of 1957 and the Plant Quarantine Act of 1912; these two acts were later subsumed into the PPA in 2000 along with other provisions. Since 1987 and prior to 2020, APHIS amended the regulations six times, in 1988, 1990, 1993, 1994, 1997, and 2005. These various amendments instituted several exemptions, among other reforms. The amendments included exempting certain microorganisms and Arabidopsis from the requirement for permits, instituting a notification process and petition procedure, and specifying that plants engineered to produce industrial compounds are not eligible for the notification process. On May 18, 2020, APHIS issued a final rule that marked the first comprehensive revision of the regulations since they were established in 1987, revising 7 CFR part 340 in its entirety (85 FR 29790-29838, Docket No. APHIS-2018-0034, referred to below as the SECURE rule). The rule updated APHIS's regulatory framework and focused regulatory efforts on the properties of the GE organism itself rather than on the method used to produce it. Different parts of the SECURE rule became effective on different dates; the final rule's latest effective date was October 1, 2021. On December 2, 2024, the United States District Court for the Northern District of California subsequently issued an order prospectively vacating these regulations; the Court held that APHIS had violated the Administrative Procedure Act in issuing the May 2020 final rule.
The regulations in part 330 govern the movement of plant pests, biological control organisms, and associated articles, such as soil. 7 CFR part 330 aims to prevent the dissemination of plant pests into the United States, or interstate, by regulating the importation and movement in interstate commerce of plant pests, biological control organisms, soil, and associated articles. In 2020, when APHIS revised the regulations in part 340, it also revised § 330.200 to indicate that genetically engineered plant pests and biological control organisms were exempt from regulation under 7 CFR Part 330 and were regulated under 7 CFR Part 340. However, the court's vacatur in December 2024, also vacated these revisions.
Under the current regulations, APHIS oversees the importation, interstate movement, and environmental release of certain GE organisms. A GE organism is considered a regulated article if the donor organism, recipient organism, vector, or vector agent is a plant pest or if the Administrator has reason to believe the GE organism is a plant pest. Persons that wish to move or release a regulated article must obtain authorization through a permit or notification. Upon issuance of a permit, APHIS specifies conditions that prevent the organism's dissemination and establishment in the environment. A notification, on the other hand, is a streamlined alternative to a permit for GE organisms that fall within certain criteria and are subject to pre-defined performance standards. In addition to issuing permits and acknowledging notifications, APHIS responds to petitions that request nonregulated status under these regulations. Notably, the burden rests with the developer of a GE organism to petition the agency and show that its GE organism does not pose a plant pest risk. Such a petition for nonregulated status, if successful, allows for movement and environmental release of a GE organism without the regulatory requirements of notifications or permits.
Executive Order 13874, “Executive Order on Modernizing the Regulatory Framework for Agricultural Biotechnology Products” (June 11, 2019), directs the Federal Government to adopt regulatory approaches for the products of agricultural biotechnology that are proportionate to the risks such products pose, and that avoid arbitrary or unjustifiable distinctions across like products developed through different technologies. Among other things, Executive Order 13874 states that regulatory decisions should be science- and evidence-based, taking economic factors into account as appropriate and consistent with applicable law; that regulatory reviews should be conducted in a timely and efficient manner; and that biotechnology regulations should be transparent, predictable, and consistent.
APHIS's decades of experience in evaluating GE plants and microorganisms for plant pest risk have not revealed a materially different or distinct set of risks associated with GE plants and microorganisms when compared to conventional plants and microorganisms. Further, APHIS's regulations do not take clear notice of substantial advances in biotechnology since the late 1980s. APHIS, therefore, wishes to explore alternative frameworks for regulation of GE organisms under the plant pest provisions of the PPA, to ensure that regulation and oversight are proportionate to risk, that biotechnology developers in the United States have a predictable regulatory pathway to commercialization and, importantly, to ensure APHIS operates within its statutory authority.
Based on this background information, we solicit public comments regarding the following questions:
1. Are there material differences in plant pest risk between conventional and genetically engineered organisms (plants, microorganisms, or insects)? What is the basis,
2. Describe your experiences of regulation under the SECURE rule. Were there areas that could have been improved? Were there obstacles to performing field trials? What about obstacles advancing from field trials to commercialization? What were the costs incurred complying with and/or navigating the regulatory requirements of the SECURE rule? What areas of the SECURE rule worked well?
3. Describe your experiences of regulation under the current 7 CFR part 340. Are there areas that could be improved? Are there obstacles to performing field trials? What about obstacles advancing from field trials to commercialization? What are the costs incurred complying with and/or navigating the regulatory requirements of 7 CFR part 340?
4. Could APHIS effectively address plant pest risks of modified organisms by regulating them under 7 CFR part 330 instead of 7 CFR part 340? What should APHIS consider when determining whether 7 CFR part 330 could replace regulation of modified organisms under 7 CFR part 340? For example, what might be the trade implications of a new regulatory framework for modified organisms under the Plant Protection Act?
5. What would the benefits and challenges of regulating modified organisms under 7 CFR part 330? What changes, if any, would need to be made to 7 CFR part 330 for effective regulation?
6. Describe key elements of a regulatory framework, including oversight of field trials, that would enable a scientifically sound assessment of a modified organism's plant pest risk.
7. Did the SECURE rule—and does the current 7 CFR part 340—impose disproportionate burdens on smaller entities developing regulated plants or microorganisms?
8. Are there any other specific issues or topics APHIS should consider in developing a regulatory framework for assessing the plant pest risk of modified organisms, or possible pathways to commercialization for modified organisms?
We welcome all comments on the above questions.
7 U.S.C. 7701-7772 and 7781-7786; 31 U.S.C. 9701; 7 CFR 2.22, 2.80, and 371.3.
In Proposed Rule Document 2026-08550, appearing on pages 23628-23766 in the issue of Friday, May 1, 2026, make the following corrections:
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for certain Diamond Aircraft Industries Inc. (DAI) Model DA20-C1 airplanes. This proposed AD was prompted by a report of a certain emergency locator transmitter (ELT) not activating due to a missing jumper wire. This proposed AD would require a continuity inspection of the D-sub connector of the Artex ELT 1000 and, if necessary, corrective actions. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this NPRM by June 29, 2026.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For Diamond Aircraft Industries material identified in this proposed AD, contact DAI, 1560 Crumlin Sideroad, London, Ontario, Canada, N5V 1S2; phone: (519) 457-4041, fax: (519) 457-4045; email:
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 1100 Main, Kansas City, MO 64105. For information on the availability of this material at the FAA, call (817) 222-5110.
William Reisenauer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (516) 228-7301; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments using a method listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to William Reisenauer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.
Transport Canada, which is the aviation authority for Canada, has issued Transport Canada AD CF-2026-03, dated January 21, 2026 (referred to as the MCAI), to correct an unsafe condition on all DAI Model DA20-C1 airplanes having an Artex ELT 1000 installed. The MCAI states that DAI received a report of an occurrence where the Artex ELT 1000 installed in a DA20-C1 airplane did not perform as intended. Further investigation by the manufacturer revealed that some Artex ELT 1000 units might not have a jumper wire between the D-sub pins 5 and 12, which could prevent the ELT beacon from being activated by the internal G-Switch and the aural alert buzzer from being activated in the event of an accident. The FAA is proposing this AD to detect and address the missing jumper wire on the Artex ELT 1000.
You may examine the MCAI in the AD docket at
The FAA reviewed DAI Mandatory Service Bulletin No. DAC1-25-05 Rev. 1, dated July 19, 2024. This material specifies procedures for performing a continuity inspection on the D-sub connector of the Artex ELT 1000 and, if necessary, installing the jumper wire into the D-sub connector.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI and material referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
This proposed AD would require accomplishing the actions specified in the material already described, except as discussed under “Differences Between this Proposed AD and the Referenced Material.”
Although step 14 of the Accomplishment/Instructions of DAI Mandatory Service Bulletin DAC1-25-05, Rev. 1, dated July 19, 2024, requires completing and sending an execution report to the manufacturer, this proposed AD does not require that action.
The FAA estimates that this AD, if adopted as proposed, would affect 365 airplanes of U.S. registry.
The FAA estimates the following costs to comply with this proposed AD:
The FAA estimates the following costs to do any repairs that would be required based on the results of the proposed inspection. The agency has no way of determining the number of airplanes that might need these repairs:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by June 29, 2026.
None.
This AD applies to all Diamond Aircraft Industries Inc. Model DA20-C1 airplanes, certificated in any category, that have an Artex emergency locator transmitter (ELT) 1000 installed.
Joint Aircraft System Component (JASC) Code 2562, Emergency Locator Beacon.
This AD was prompted by a report of a certain ELT not activating due to a missing jumper wire. The FAA is issuing this AD to detect and address a missing jumper wire on the Artex ELT 1000. The unsafe condition, if not addressed, could result in the ELT beacon and aural alert buzzer not activating in the event of an accident.
Comply with this AD within the compliance times specified, unless already done.
Within 3 months after the effective date of this AD, perform a continuity inspection of the D-sub connector and accomplish all required corrective actions in accordance with the Accomplishment/Instructions, Paragraph I.9, of Diamond Aircraft Industries Mandatory Service Bulletin No. DAC1-25-05, Rev. 1, dated July 19, 2024.
Although step 14 of the Accomplishment/Instructions of Diamond Aircraft Industries Mandatory Service Bulletin No. DAC1-25-05, Rev. 1, dated July 19, 2024, requires completing and sending an execution report to the manufacturer, this AD does not include that requirement.
The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the International Validation Branch, send it to the attention of the person identified in paragraph (j) of this AD and email to:
For more information about this AD, contact William Reisenauer, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (516) 228-7301; email:
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Diamond Aircraft Industries Mandatory Service Bulletin No. DAC1-25-05, Rev. 1, dated July 19, 2024.
(ii) [Reserved]
(3) For Diamond Aircraft Industries material identified in this AD, contact Diamond Aircraft Industries Inc., 1560 Crumlin Sideroad, London, Ontario, Canada, N5V 1S2; phone: (519) 457-4041, fax: (519) 457-4045; email:
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 1100 Main, Kansas City, MO 64105. For information on the availability of this material at the FAA, call (817) 222-5110.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for certain Airbus Helicopters Model AS350B, AS350BA, AS350B1, AS350B2, AS350B3, AS350D, EC130B4, and EC130T2 helicopters. This proposed AD was prompted by reports of an incorrectly installed engine flange on the main gear box (MGB) engine coupling. This proposed AD would require inspecting the MGB engine coupling for correct installation and, depending on the results, corrective actions. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this NPRM by June 29, 2026.
You may send comments, using the procedures found in 14 CFR
•
•
•
•
• For European Union Aviation Safety Agency (EASA) material identified in this proposed AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 10101 Hillwood Parkway, Fort Worth, TX 76177. For information on the availability of this material at the FAA, call (817) 222-5110.
Aryanna Sanchez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (520) 990-9321; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments using a method listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM.
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent Aryanna Sanchez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.
EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2023-0127, dated June 27, 2023 (EASA AD 2023-0127) (also referred to as the MCAI), to correct an unsafe condition on Airbus Helicopters Model AS 350 B, AS 350 BA, AS 350 BB, AS 350 B1, AS 350 B2, and AS 350 B3 helicopters, manufactured before May 15, 2023; Model AS 350 D helicopters (except helicopters equipped with a Lycoming engine) manufactured before May 15, 2023; and Model EC 130 B4 and EC 130 T2 helicopters manufactured before February 13, 2023. The MCAI states that on the final assembly line, the engine flange on the MGB engine coupling may have been installed inverted.
The FAA is proposing this AD to detect and correct the inverted installation of the engine flange on the MGB engine coupling. This condition, if not detected and corrected, could result in the loss of power transmission to the MGB and the main rotor and lead to loss of control of the helicopter.
You may examine the MCAI in the AD docket at
The FAA reviewed EASA AD 2023-0127, which specifies procedures for a one-time inspection of the MGB engine coupling for correct installation. Depending on the results, EASA AD 2023-0127 specifies installing a correctly assembled engine flange or a new engine flange. EASA AD 2023-0127 also specifies reporting the inspection results to the manufacturer. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in
These products have been approved by the civil aviation authority (CAA) of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
This proposed AD would require accomplishing the actions specified in EASA AD 2023-0127, described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this proposed AD. See “Differences Between this Proposed AD and the MCAI” for a discussion of the general differences included in this proposed AD.
The MCAI applies to Airbus Helicopters Model AS 350 BB helicopter, whereas this proposed AD does not because that model does not have an FAA type certificate.
In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some CAA ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with
The FAA estimates that this AD, if adopted as proposed, would affect 4,102 helicopters of U.S. registry.
The FAA estimates the following costs to comply with this proposed AD:
The FAA estimates the following costs to do any corrective actions that would be required based on the results of the proposed inspection. The agency has no way of determining the number of helicopters that might need this corrective action:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by June 29, 2026.
None.
This AD applies to all Airbus Helicopters, certificated in any category, identified in paragraphs (c)(1) through (3) of this AD.
(1) Model AS350B, AS350BA, AS350B1, AS350B2, and AS350B3 helicopters, with a helicopter manufacture date before May 15, 2023.
(2) Model AS350D helicopters, with a helicopter manufacture date before May 15, 2023, except helicopters equipped with a Lycoming engine.
(3) Model EC130B4 and EC130T2 helicopters, with a helicopter manufacture date before February 13, 2023.
Joint Aircraft System Component (JASC) Code 6300, Main rotor drive.
This AD was prompted by reports of an incorrectly installed engine flange on the main gear box (MGB) engine coupling. The FAA is issuing this AD to detect and correct the inverted installation of the engine flange on the MGB engine coupling. The unsafe condition, if not detected and corrected, could result in the loss of power transmission
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraphs (h) and (i) of this AD: Comply with all required actions and compliance times specified in, and in accordance with European Union Aviation Safety Agency AD 2023-0127, dated June 27, 2023 (EASA AD 2023-0127).
(1) Where EASA AD 2023-0127 refers to its effective date, this AD requires using the effective date of this AD.
(2) Where EASA AD 2023-0127 refers to flight hours, this AD requires using hours time-in-service.
(3) Where the material referenced in EASA AD 2023-0127 specifies discarding certain parts, this AD requires removing those parts from service.
(4) This AD does not adopt the “Remarks” section of EASA AD 2023-0127.
Although EASA AD 2023-0127 specifies to submit certain information to the manufacturer, this AD does not require that action.
(1) The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or responsible Flight Standards District Office, as appropriate. If sending information directly to the manager of the International Validation Branch, send it to the attention of the person identified in paragraph (k) of this AD and email to
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
For more information about this AD, contact Aryanna Sanchez, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (520) 990-9321; email:
(1) The Director of the Federal Register approved the incorporation by reference of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2023-0127, dated June 27, 2023.
(ii) [Reserved]
(3) For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 10101 Hillwood Parkway, Fort Worth, TX 76177. For information on the availability of this material at the FAA, call (817) 222-5110.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
The FAA proposes to adopt a new airworthiness directive (AD) for all Stemme GmbH (Stemme) Model Stemme S 12 gliders. This proposed AD was prompted by reports of fuel leaking around certain copper sealing rings within the fuel system. This proposed AD would require repetitive visual checks of the fuel system for fuel leakage, and replacement of the affected copper sealing ring. This proposed AD would also prohibit the installation of affected parts. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA must receive comments on this NPRM by June 29, 2026.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For Stemme material identified in this proposed AD, contact Stemme, Flugplatzstrasse F2 Nr. 6-7, Strausberg, Germany 15344; phone: +49 (0) 3341 3612; email:
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 1100 Main, Kansas City, MO 64105. For information on the availability of this material at the FAA, call (817) 222-5110.
George Weir, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (817) 222-4045; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments using a method listed under
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to
CBI is commercial or financial information that is both customarily and
The European Union Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2025-0155, dated July 21, 2025 (referred to as the MCAI), to correct an unsafe condition on Stemme Model Stemme S 12 gliders. The MCAI states that occurrences of fuel leaks at multiple locations within the fuel system have been reported. To address the unsafe condition, Stemme published service material to provide replacement instructions for affected copper sealing rings, and a parts installation restriction. This condition, if not addressed, could result in an in-flight fire.
All of the affected airplanes were produced and delivered with the affected copper sealing rings installed.
You may examine the MCAI in the AD docket at
The FAA reviewed Stemme Service Bulletin (SB) P062-980082 Revision 01, dated July 15, 2025. This material specifies procedures for replacement of affected copper sealing rings within the fuel pump set assembly and drainer complete assembly.
This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI and material referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
This proposed AD would require repetitive visual checks of the fuel system for fuel leakage (staining, wetness, dripping, etc.) and replacement of the affected copper sealing rings if leakage is detected. This proposed AD would also prohibit the installation of affected parts.
The owner/operator (pilot) holding at least a private pilot certificate may perform the visual check and must enter compliance with the applicable paragraph of this AD into the glider maintenance records in accordance with 14 CFR 43.9(a) and 91.417(a)(2)(v). The pilot may perform this action because it only involves visually checking affected locations for fuel leakage. This action could be performed equally well by a pilot or a mechanic. This is an exception to the FAA's standard maintenance regulations.
The FAA estimates that this AD, if adopted as proposed, would affect 31 gliders of U.S. registry.
The FAA estimates the following costs to comply with this proposed AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by June 29, 2026.
None.
This AD applies to all Stemme GmbH Model Stemme S 12 gliders, certificated in any category.
Joint Aircraft System Component (JASC) Code 2800, Aircraft Fuel System.
This AD was prompted by reports of fuel leaking around certain copper sealing rings within the fuel system. The FAA is issuing this AD to prevent fuel leakage in the fuel system. The unsafe condition, if not addressed, could result in an in-flight fire.
Comply with this AD within the compliance times specified, unless already done.
For the purpose of this AD, the definitions in paragraphs (g)(1) through (4) of this AD apply.
(1) An “affected location” is any of the following:
(i) The copper sealing ring within the fuel pump set assembly having part number (P/N) 128201, between the screw-in adapter having P/N 831099 and the fuel distributor having P/N 128229, and between the screw-in adapter having P/N 831099 and the fuel distributor having P/N 128228. The fuel pump set assembly P/N 128201 is located at the front left area of the middle fuselage and may be accessed from below when the main landing gear is extended. (Location defined in Stemme Service Bulletin (SB) P062-980082 Revision 01, dated July 15, 2025, Page 1 of 3, Action 2 and Figure 1)
(ii) The copper sealing ring within the drainer complete having P/N 128207, between the screw-in adapter having P/N 831099 and the drainer attachment having P/N 128271. The drainer complete P/N 128207 is located at the main landing gear bay and may be accessed from below when the main landing gear is extended. (Location defined in Stemme SB P062-980082 Revision 01, dated July 15, 2025, Page 2 of 3, Action 3 and Page 3 of 3 Figure 2)
(2) An “affected part” is a copper sealing ring having P/N D7603-12016-CU.
(3) “Group 1 gliders” are gliders that have an affected part installed.
(4) “Group 2 gliders” are gliders that do not have an affected part installed.
(1) For Group 1 gliders, before further flight after the effective date of this AD and thereafter before each flight until the replacement required by paragraph (h)(2) is accomplished, perform a visual check using a light source of the affected locations for indications of fuel leakage (staining, wetness, dripping, etc). The owner/operator (pilot) holding at least a private pilot certificate may perform the visual check and must enter compliance with the applicable paragraph of this AD into the glider maintenance records in accordance with 14 CFR 43.9(a) and 91.417(a)(2)(v). The record must be maintained as required by 14 CFR 91.417.
(2) For Group 1 gliders, at whichever compliance time in paragraph (h)(2)(i) or (ii) that occurs first, replace the affected part at each affected location with a sealing ring having P/N 831984 in accordance with the instructions of Action 2 or Action 3 of Stemme SB P062-980082, Revision 01, dated July 15, 2025, as applicable.
(i) Before further flight if any leakage is detected during any preflight check required by paragraph (h)(1) of this AD.
(ii) Within 100 hours time-in-service after the effective date of this AD.
For Group 1 and Group 2 gliders: As of the effective date of this AD, do not install an affected part as defined in paragraph (g)(2) of this AD on any glider.
The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the International Validation Branch, send it to the attention of the person identified in paragraph (k) of this AD and email to:
For more information about this AD, contact George Weir, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (817) 222-4045; email:
(1) The Director of the Federal Register approved the incorporation by reference (IBR) of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) Stemme Service Bulletin P062-980082, Revision 01, dated July 15, 2025.
(ii) [Reserved]
(3) For Stemme material identified in this AD, contact Stemme GmbH, Flugplatzstrasse F2 Nr. 6-7, Strausberg, Germany 15344; phone: +49 (0) 3341 3612; email:
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 1100 Main, Kansas City, MO 64105. For information on the availability of this material at the FAA, call (817) 222-5110.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Federal Aviation Administration (FAA), DOT.
Supplemental notice of proposed rulemaking (SNPRM).
The FAA is revising a notice of proposed rulemaking (NPRM) that would have applied to certain Pilatus Aircraft Ltd. (Pilatus) Model PC-12 airplanes. This action revises the NPRM by changing the applicability. The FAA is proposing this airworthiness directive (AD) to address the unsafe condition on these products. Since these actions would impose an additional burden over those in the NPRM for different airplanes, the FAA is requesting comments on this SNPRM.
The FAA must receive comments on this SNPRM by June 29, 2026.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
• For European Union Aviation Safety Agency (EASA) material identified in this proposed AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
• You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 1100 Main, Kansas City, MO 64105. For information on the availability of this material at the FAA, call (817) 222-5110.
Doug Rudolph, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (816) 329-4059; email:
The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments using a method listed under the
Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this SNPRM.
CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this SNPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this SNPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this SNPRM. Submissions containing CBI should be sent to Doug Rudolph, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.
The FAA issued an NPRM to amend 14 CFR part 39 by adding an AD that would have applied to certain Pilatus Model PC-12 airplanes. The NPRM was published in the
In the NPRM, the FAA proposed to require a visual inspection of the PSU trim panel for dual lock fastener tapes and modification if dual lock fastener tapes are not installed. The NPRM also proposed to prohibit the installation of affected parts.
You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2026-0018.
Since the FAA issued the NPRM, the FAA has determined that the applicability of the NPRM referenced the incorrect airplane model. Therefore, this proposed AD revises the NPRM to correct the affected airplane from Model PC-12 to Model PC-12/47E. The FAA is proposing this AD to address the unsafe condition on these products.
The FAA received a comment from the Air Line Pilots Association, International. The commenter supported the NPRM without change.
The FAA reviewed EASA AD 2025-0182, which specifies procedures for modifying the PSU trim panel if dual lock fastener tapes are not installed. EASA AD 2025-0182 also prohibits the installation of an affected part. EASA AD 2025-0182 also refers to instructions to determine whether dual lock fastener tapes are installed on a PSU trim panel. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
These products have been approved by the civil aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, that authority has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this SNPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.
Certain changes described above expand the scope of the NPRM. As a result, it is necessary to reopen the comment period to provide additional opportunity for the public to comment on this SNPRM.
This proposed AD would require accomplishing the actions specified in the material already described, except for any differences identified as exceptions in the regulatory text of this proposed AD. See “Differences Between this SNPRM and the MCAI” for a
Where paragraph (1) of EASA AD 2025-0182 does not specify an inspection to determine whether dual lock fastener tapes are installed on a PSU trim panel, for this proposed AD an inspection would be required in accordance with section B. Part 1 of the material referenced in EASA AD 2025-0182 to determine whether an airplane has the dual lock fastener tapes installed on a PSU trim panel and is either a Group 1 or Group 2 airplane as defined in EASA AD 2025-0182.
In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has since coordinated with other manufacturers and CAAs to use this process. As a result, the FAA proposes to incorporate by reference EASA AD 2025-0182 in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2025-0182 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2025-0182 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2025-0182. Material required by EASA AD 2025-0182 for compliance will be available at regulations.gov under Docket No. FAA-2026-0018 after the FAA final rule is published.
The FAA estimates that this AD, if adopted as proposed, would affect 276 airplanes of U.S. registry.
The FAA estimates the following costs to comply with this proposed AD:
The FAA estimates the following costs to do any necessary modification that would be required based on the results of the proposed inspection. The agency has no way of determining the number of airplanes that might need this modification:
The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected operators.
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Would not affect intrastate aviation in Alaska, and
(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this airworthiness directive (AD) by June 29, 2026.
None.
This AD applies to Pilatus Aircraft Ltd. Model PC-12/47E airplanes, manufacturer serial numbers 2001 through 2999, certificated in any category.
Joint Aircraft System Component (JASC) Code 2500, Cabin Equipment/Furnishings.
This AD was prompted by a report that the emergency exit door could not be opened from inside an airplane. The FAA is issuing this AD to prevent the passenger service unit (PSU) trim panel from blocking the opening of the emergency exit. The unsafe condition, if not addressed, could prevent the opening of the emergency door, which could result in injury to occupants during an emergency evacuation.
Comply with this AD within the compliance times specified, unless already done.
Except as specified in paragraphs (h) and (i) of this AD: Comply with all required actions and compliance times specified in, and in accordance with, European Union Aviation Safety Agency (EASA) AD 2025-0182, dated August 25, 2025 (EASA AD 2025-0182).
(1) Where EASA AD 2025-0182 refers to its effective date, this AD requires using the effective date of this AD.
(2) Where paragraph (1) of EASA AD 2025-0182 does not specify an inspection to determine whether dual lock fastener tapes are installed on a PSU trim panel, for this AD an inspection is required in accordance with section B. Part 1 of the material referenced in EASA AD 2025-0182 to determine whether an airplane has the dual lock fastener tapes installed on a PSU trim panel and is either a Group 1 or Group 2 airplane as defined in EASA AD 2025-0182.
(3) This AD does not adopt the “Remarks” section of EASA AD 2025-0182.
Although the material referenced in EASA AD 2025-0182 specifies to submit certain information to the manufacturer, this AD does not include that requirement.
(1) The Manager, International Validation Branch, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the International Validation Branch, send it to the attention of the person identified in paragraph (k) of this AD and email to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the responsible Flight Standards Office/certificate holding district office.
For more information about this AD, contact Doug Rudolph, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone: (816) 329-4059; email:
(1) The Director of the Federal Register approved the incorporation by reference of the material listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
(2) You must use this material as applicable to do the actions required by this AD, unless the AD specifies otherwise.
(i) European Union Aviation Safety Agency (EASA) AD 2025-0182, dated August 25, 2025.
(ii) [Reserved]
(3) For EASA material identified in this AD, contact EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email:
(4) You may view this material at the FAA, Airworthiness Products Section, Operational Safety Branch, 1100 Main, Kansas City, MO 64105. For information on the availability of this material at the FAA, call (817) 222-5110.
(5) You may view this material at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, visit
Coast Guard, Department of Homeland Security.
Notice of proposed rulemaking.
The Coast Guard is proposing to amend its special local regulations (SLR) for marine events within the USCG East District by adding SLRs for three recurring events located in the Virginia Captain of the Port Zone. This Notice of Proposed Rule Making (NPRM) would provide for the safety of life on the navigable waters of the York River, the East River, and the Elizabeth River Western Branch during high speed boat races which are typically held on each of those rivers annually. We invite your comments on this proposed rulemaking.
Comments and related material must be received by the Coast Guard on or before May 20, 2026.
To submit comments and view available documents, go to
If you have questions about this proposed rule, contact LCDR Justin Z. Strassfield, Sector Virginia Waterways Management Division, U.S. Coast Guard; by phone, at (206) 815-7367, or by email, at
Coast Guard regulations define “regatta or marine parade” as an organized water event of limited duration which is conducted according to a prearranged schedule. 33 CFR 100.05(a). And, as explained in 33 CFR 100.15, Coast Guard requires that an organization planning to hold a regatta or marine event apply for a permit if the event, by its nature, circumstances, or location, will introduce extra or unusual hazards to the safety of life on the navigable waters of the United States. These permits may be approved by the Coast Guard, or by the state in which the event is to take place, if there is a Coast Guard-State agreement in place. See 33 CFR 100.10. Upon the approval of an application, the Captain of the Port, Sector Virginia (COTP) may promulgate such “Special Local Regulations” (SLR's) as he or she deems necessary to ensure safety of life on the navigable waters immediately prior to,
Within the USCG East District, the Coast Guard has compiled many recurring SLRs in one regulation, 33 CFR 100.501. Within § 100.501, these SLRs are arranged in tables, organized by Captain of the Port Zone. We are now proposing to add three recurring marine events to the table for the Virginia Captain of the Port Zone. General provisions of § 100.501, such as definitions, controls on vessel movement, and Coast Guard contact information would apply to these SLRs. In past years, we had promulgated temporary final rules to address particular instances of one of these events. As we anticipate that these events will continue to occur annually for the foreseeable future, we are proposing a permanent SLR for each of the events.
The three events each involve high speed boat races. East River Fest is located on the East River at the Williams Wharf in Mathews, VA. The event is a boat docking contest sponsored by the Mathews Volunteer Fire Department. Multiple commercial workboats will compete to be the fastest boat to moor at designated boat slips at the Williams Wharf. Power Boats at the Park is located on the Elizabeth River Western Branch near Portsmouth City Park in Portsmouth, VA. The event is a high speed boat race sponsored by the Portsmouth Power Boat Association. Multiple vintage and historic recreational vessels will perform on a designated course, sometimes at a high rate of speed. Yorktown Battle of the Boats is located on the York River in the vicinity of the Coleman Bridge in Yorktown, VA. The event is a high speed boat race and a boat docking contest sponsored by the County of York. Multiple deadrise fishing boats will race on a predetermined race course as well as compete to be the fasted boat to moor up to mooring pilings at the Yorktown waterfront piers.
The COTP has determined that hazards associated with these events include personal injury and property damage which could result from collisions between vessels participating in the event, spectator vessels, and other non-participant vessels, such as transiting vessels. To mitigate against the risk that these hazards might occur, and under the authority of 46 U.S.C. 70041, the COTP is proposing to issue these SLRs.
The first proposed SLR would establish a regulated area which would be subject to enforcement on one Saturday in June or July of each year. This year, it would be subject to enforcement June 20, 2026, from 11 a.m. until 6 p.m. The SLR would be located on the East River and would encompass a small portion of the waterway around Williams Wharf in Mathews, VA.
The second proposed SLR would establish a regulated area which would be subject to enforcement on the second or third Saturday and Sunday of August of each year, beginning August 15-16, 2026, from 8 a.m. until 4 p.m. each day. The SLR would encompass the racing area located within a portion of the waters of the Elizabeth River Western Branch in Portsmouth, VA.
The third proposed SLR would establish a regulated area on the first Saturday and Sunday in June of each year, beginning June 6-7, 2026, from 11 a.m. until 6 p.m. each day. The event includes two regulated areas on the York River. The first regulated area would encompass a portion of the waters of the York River in the vicinity of the Coleman Bridge in Yorktown, VA on Saturday for a high speed boat race. The second regulated area would encompass a portion of the waters of the York River within the docking basin between the two Yorktown Waterfront Piers in Yorktown, VA on Sunday for a boat docking contest.
As the dates and times of the events are subject to change, the dates and times that the proposed SLRs would be subject to enforcement would also be subject to change, in accordance with existing regulatory text found in 33 CFR 100.501(g) and in the footnote to Table 1 to paragraph (i)(3) of § 100.501. In the event of a change, and where we have not provided for a specific date or dates, the Captain of the Port will provide notice to the public by publishing a Notification of Enforcement in the
The duration of the SLRs is intended to ensure the safety of vessels and these navigable waters before, during, and after each scheduled marine event. No vessel or person would be permitted to enter the special local regulation without obtaining permission from the COTP or a designated representative. The regulatory text we are proposing appears at the end of this document.
We developed this proposed rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities for the following reasons.
Vessel traffic would be able to safely transit around the regulated areas which would be subject to the rules. This regulation would only impact a small area for a few hours. The enforcement periods would occur during times when vessel traffic is normally low. In addition, the Coast Guard will issue a Broadcast Notice to Marines via VHF FM marine channel 16, which will allow small entities to adjust their transit plans, and the rule allows vessels to request permission to enter the regulated area from the COTP.
If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment (see
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), if this proposed rule will affect your small business, organization, or governmental jurisdiction and you have questions, contact the person listed in the
This proposed rules would not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
We have analyzed this proposed rule under Executive Order 13132, Federalism, and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in that Order.
Also, this proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
As required by The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538), the Coast Guard certifies that this proposed rule would not result in an annual expenditure of $100,000,000 or more (adjusted for inflation) by a State, local, or tribal government, in the aggregate, or by the private sector.
We have analyzed these proposed rules under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
This proposed rule is a special regulated area. It is categorically excluded from further review under paragraph L61.
We view public participation as essential to effective rulemaking and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard is proposing to amend 33 CFR part 100 as follows:
46 U.S.C. 70041; 33 CFR 1.05-1.
(3) Coast Guard Sector Virginia—COTP Zone
Federal Communications Commission.
Proposed rule.
The Federal Communications Commission (Commission or FCC) issues a Second Further Notice of Proposed Rulemaking proposing to cease recognition of test labs, Testing Certification Bodies (TCBs), and laboratory accreditation bodies in non-MRA or trade agreement participants (
Comments are due on or before June 15, 2026 and reply comments are due on or before July 14, 2026.
Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated in the
•
•
• Filings can be sent by hand or messenger delivery, by commercial courier, or by the U.S. Postal Service.
• Hand-delivered or messenger-delivered paper filings for the Commission's Secretary are accepted between 8:00 a.m. and 4:00 p.m. by the FCC's mailing contractor at 9050 Junction Drive, Annapolis Junction, MD 20701. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building.
• Commercial courier deliveries (any deliveries not by the U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701.
• Filings sent by U.S. Postal Service First-Class Mail, Priority Mail, and Priority Mail Express must be sent to 45 L Street NE, Washington, DC 20554.
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Katherine Nevitt of the Office of Engineering and Technology, at 301-317-0062 or
This is a summary of the Commission's
In this document, the Commission issues a
In the
In the
Therefore, based in part on these comments, the Commission reopens the record on whether the FCC should adopt rules that would prohibit the recognition of test labs, TCBs, or laboratory accreditation bodies that are located in, or that conduct testing, certification, or accreditation in, countries that lack an MRA or trade agreements that provides for reciprocity with the U.S. (non-Reciprocal Economies) and withdraw recognition of those test labs, TCBs, and laboratory accreditation bodies already recognized. Should such a prohibition also extend to any test lab, TCB, or laboratory accreditation body directly or indirectly owned by, controlled by, or subject to the jurisdiction or direction of a non-Reciprocal Economy? The FCC seeks comment on whether this would promote the trustworthiness and integrity of the FCC's equipment authorization process. Would such a policy play an important role in promoting national security, reciprocity in international commerce in RF devices, and/or promoting the American and Reciprocal Economy test lab, TCB, and laboratory accreditation body industry?
Are there other reasons that the Commission should or should not adopt these rules or any refinement of these proposed rules the Commission should consider? The Commission notes that its rules already effectively prohibit TCBs from operating in foreign countries that lack an MRA with the United States and that, while OET has recognized hundreds of test labs based in non-MRA countries, the Commission's rules are ambiguous on the permissibility of this recognition. The Commission notes that prior action in 2014 provided a process for recognition of accredited test labs in countries with which there is no operational MRA with the United States; prior to that 2014 action, test labs from non-MRA countries had not been recognized. The Commission seeks comment on how it should clarify or modify its rules to address recognition of test labs from non-Reciprocal Economies. What would be the consequences of such a proposal? If the Commission adopted this proposal, should the Commission have a delayed implementation to facilitate industry's adjustment to the new rules? If so, how long should such a delay last? One year? Longer? Shorter? Should the Commission additionally, or instead, phase out test labs, TCBs, and laboratory accreditation bodies in non-Reciprocal
The Commission seeks comment on whether alternative measures could be adopted to address the continued use of non-Reciprocal Economy test laboratories in the equipment authorization process prior to the implementation of the ultimate prohibition. Specifically, if the Commission were to determine that ultimately prohibiting reliance on non-Reciprocal Economy test labs were in the public interest, are there alternative approaches that the Commission could take prior to prohibition so as to mitigate the costs of transitioning to testing with United States or Reciprocal Economy test labs? For example, should the Commission add an additional fee corresponding with authorizing equipment that is tested in non-Reciprocal Economy test labs? If the Commission adopted such a fee what would be the appropriate amount? For example, should this fee be $20,000? More? Less? Should this fee increase over time and should the Commission specify the fee schedule in advance? Should this fee be further tiered based on application type, equipment classes, grantee entity type based on annual sales, or scaled according to other factors? Alternatively, should the Commission require a more rigorous equipment authorization process for applicants that rely on non-Reciprocal Economy, which could, for instance, involve additional post-market surveillance or auditing? Could the funds from the proposed additional fee be earmarked for enhanced post-market surveillance or auditing? Could the funds from the proposed additional fee be earmarked for training hardware engineers, technicians, and other skilled labor to support U.S.-based testing?
Are there other mechanisms that could incentivize stakeholders to transition away from non-Reciprocal Economy test labs prior to the imposition of an outright prohibition? For example, should the Commission implement an additional waiting period for equipment tested by non-Reciprocal Economy test labs to allow time for additional scrutiny? Is any one of the alternatives more cost-effective than others? Finally, the Commission seeks comment on the potential costs and benefits of these approaches—including a permit fee structure, and/or a prolonged review process, as opposed to an outright prohibition—and invite stakeholders to provide quantitative or qualitative estimates of the impacts on industry, consumers, and Commission resources.
The Commission also seeks comment on what specific protections should be given to intellectual property during the equipment authorization process, including during the testing and certification stages. What contractual, technical and procedural safeguards are necessary to protect intellectual property? How effective are the Commission's rules and the ISO/IEC 17025 requirements at preventing IP theft? Do MRAs or other reciprocal trade agreements (FTAs and ARTs) meaningfully reduce the risk of IP theft? Should safeguards differ between Reciprocal and non-Reciprocal Economies? Is IP theft in non-Reciprocal Economies a significant enough risk that non-Reciprocal Economies test labs should be prohibited? Are there differences in the IP protections available under different legal regimes? What other options should the Commission consider to address this issue? What are the costs and benefits of those solutions?
Expanding
This document seeks further comment on adopting any other measures not adopted in the above portion of this document to expand and streamline testing and certification in United States and allied countries based on other comments the Commission received.
On July 12, 2024, IPVM submitted a comment in this proceeding suggesting that investigating evasions of the FCC equipment authorization requires modernized FCC equipment authorization databases. The Commission seeks comment on this suggestion. What features would be helpful in the Commission's effort to modernize the EAS system, both to support the FCC's enforcement priorities while also streamlining and alleviating administrative burden on the Commission's TCB partners and other participants in the equipment authorization process? What, if any, changes to the information collection would be helpful, and what portions of the process can be streamlined or done in a more parallel fashion? How can the Commission better share information and other data so that TCBs reviewing equipment authorizations applications for prohibited entities can do so more effectively and efficiently? The Commission welcomes all comments and proposals.
Administrative practice and procedures, Communications, Communications equipment, Reporting and recordkeeping requirements, Telecommunications.
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR parts 1 and 2 as follows:
47 U.S.C. chs. 2, 5, 9, 13; 28 U.S.C. 2461 note; 47 U.S.C. 1754, unless otherwise noted.
47 U.S.C. 154, 302a, 303, and 336, unless otherwise noted.
(c) Equipment authorization will be made available and searchable in machine-readable format to the extent possible.
(c) * * *
(4) Is located in or conducts accreditation in countries that lack a relevant Mutual Recognition Agreement or trade agreement that provides for reciprocity with the U.S.
(e) * * *
(4) Is located in or conducts accreditation from within countries that lack a relevant Mutual Recognition Agreement or trade agreement that provides for reciprocity with the U.S.
(b) * * *
(4) Is located in or that conducts testing from within a country that lacks an MRA or trade agreement that provides for reciprocity with the U.S.
(d) * * *
(4) Is located in or that conducts testing from within a country that lacks an MRA or trade agreement that provides for reciprocity with the U.S.
(b) * * *
(4) Is located in or that conducts certification from within a country that lacks an MRA or trade agreement that provides for reciprocity with the U.S.
(h) * * *
(4) Is located in or that conducts certification from within a country that lacks an MRA or trade agreement that provides for reciprocity with the U.S.
Federal Communications Commission.
Proposed rule; proposed auction procedures.
In this document, the Federal Communications Commission (the Commission or FCC) announces an auction of certain FM broadcast construction permits. The Office of Economics and Analytics (OEA) and the Media Bureau (MB) seek comment on minimum opening bid amounts and the procedures to be used for this auction, which is designated as Auction 114.
Comments are due on or before June 9, 2026, and reply comments are due on or before June 24, 2026.
Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated in the
•
•
• Filings can be sent by hand or messenger delivery, by commercial courier, or by the U.S. Postal Service mail.
• Hand-delivered or messenger-delivered paper filings for the Commission's Secretary are accepted between 8 a.m. and 4 p.m. by the FCC's mailing contractor at 9050 Junction Drive, Annapolis Junction, MD 20701. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building.
• Commercial courier mail (any not sent by the U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701.
• Filings sent by U.S. Postal Service First-Class Mail, Express, and Priority mail must be sent to 45 L Street NE, Washington, DC 20554.
•
This is a summary of the Commission's document (
1. In the
2. Auction 114 will offer 132 construction permits in the FM broadcast service, including 33 construction permits that were offered but not sold or were defaulted upon in prior auctions. Attachment A to the
3. Consistent with the provisions of 47 U.S.C. 309(j)(3)(E)(i), OEA and MB seek comment on a variety of auction-specific procedures relating to the conduct of Auction 114.
4. The Commission's part 1 and part 73 competitive bidding rules require each applicant seeking to bid to acquire a construction permit in a broadcast auction to provide certain information in a short-form application (FCC Form 175), including ownership details and numerous certifications. The competitive bidding rules in part 1, subpart Q, and part 73 also contain a framework for the implementation of a competitive bidding design, application and certification procedures, reporting requirements, and the prohibition of certain communications.
5. OEA and MB propose to require any party seeking to participate in Auction 114 to certify in its short-form application, under penalty of perjury, that it has read the public notice
6. OEA and MB propose to limit information available in Auction 114 to discourage unproductive and anti-competitive strategic behavior. With respect to bidding, OEA and MB will not identify bidders placing particular bids until after the bidding has closed, that is, they will implement anonymous bidding. In addition, while OEA and MB generally make available to the public information provided in each applicant's short-form application following an initial review by Commission staff, they propose to not make public until after bidding has closed: (1) the permits that an applicant selects for bidding in its short-form application, (2) the amount of any upfront payment made by or on behalf of an applicant, (3) an applicant's bidding eligibility, and (4) any other bidding-related information that might reveal the identity of the bidder placing a bid. OEA and MB note that an applicant in a broadcast auction that is seeking a new entrant bidding credit and has an attributable interest in no more than three mass media facilities is required to disclose those facilities in its short-form application and to indicate whether any such facility is in the “same area” as the permit(s) selected in its short-form application. Because this could reveal the permits selected by an applicant, OEA and MB also propose to not make public until after bidding has closed any applicant's response to the question of whether a disclosed existing mass media facility is in the “same area” as a selected permit.
7. Under this proposal, OEA and MB would also not make public any real-time information on bidder-specific activity until after the close of bidding. However, bidders would have access to additional information related to their own bidding and bidding eligibility before and during the bidding via the FCC auction bidding system.
8. Under this proposal, after the close of bidding, bidders' permit selections, upfront payment amounts, bidding eligibility, bids, and other bidding-related information would be made publicly available.
9. OEA and MB seek comment on the above details of their proposal for implementing limited information procedures, or anonymous bidding, in Auction 114. Commenters opposing the use of limited information procedures in Auction 114 should explain their reasoning and propose alternative information rules.
10. In keeping with the usual practice in spectrum auctions, OEA and MB propose that applicants be required to submit upfront payments as a prerequisite to becoming qualified to bid. As described below, the upfront payment is a refundable deposit made by an applicant to establish its eligibility to bid on construction permits. Upfront payments protect against frivolous or insincere bidding and provide the Commission with a source of funds from which to collect payments owed at the close of the bidding.
11. OEA and MB seek comment on an appropriate upfront payment for each construction permit being auctioned, taking into account such factors as the efficiency of the auction process and the potential value of similar construction permits. With these considerations in mind, OEA and MB propose the upfront payments set forth in Attachment A to the
12. OEA and MB further propose that the amount of the upfront payment submitted by a bidder will determine its initial bidding eligibility in bidding units, which are a measure of bidder eligibility and bidding activity. OEA and MB propose to assign each construction permit a specific number of bidding units, equal to one bidding unit per dollar of the upfront payment listed in Attachment A on the Auction 114 website at
13. As part of the pre-bidding process for each auction, OEA and MB seek comment on the use of a minimum opening bid amount and/or reserve price, as mandated by the Act. OEA and MB propose to establish minimum opening bid amounts for Auction 114. Based on their experience in past broadcast auctions, OEA and MB have found that setting a minimum opening bid amount judiciously is an effective bidding tool for accelerating the competitive bidding process. In the most recent FM broadcast auction, Auction 109, OEA and MB similarly proposed establishing minimum opening bids but not reserve prices; in that auction, no comments opposed the proposal, and OEA and MB adopted it. Based on these facts, OEA and MB propose establishing minimum opening bids for Auction 114. OEA and MB do not propose to establish separate reserve prices for any of the construction permits to be offered in Auction 114, nor do they see any reason to propose an aggregate reserve price for this auction.
14. For Auction 114, OEA and MB propose minimum opening bid amounts determined by taking into account the type of service and class of facility offered, market size, population covered by the proposed broadcast facility, and recent broadcast transaction data, to the extent such information is available. OEA and MB seek comment on the proposed minimum opening bid amounts for Auction 114, which are specified in Attachment A on the Auction 114 website at
15. For Auction 114, OEA and MB propose that at any time before or during the bidding process, they may delay, suspend, or cancel bidding in the auction in the event of a natural disaster, technical obstacle, network interruption, administrative or weather necessity, evidence of an auction security breach or unlawful bidding activity, or for any other reason that affects the fair and efficient conduct of competitive bidding. OEA and MB will notify participants of any such delay, suspension, or cancellation by public notice and/or through the FCC auction bidding system's messages function. If bidding is delayed or suspended, OEA and MB may, in their sole discretion, elect to resume the auction starting from the beginning of the current round or from some previous round, or cancel the auction in its entirety. OEA and MB emphasize that they will exercise this authority solely at their discretion, and not as a substitute for situations in which bidders may wish to apply activity rule waivers. OEA and MB seek comment on this proposal.
16. Any winning bidder that defaults or is disqualified after the close of an auction (
17. The Commission's rules provide that, in advance of each auction, it will establish a percentage between 3% and 20% of the applicable winning bid to be assessed as an additional default payment. As the Commission has indicated, the level of this additional payment in each auction will be based on the nature of the service and the construction permits being offered.
18. For Auction 114, OEA and MB propose to establish an additional default payment of 20%, which is consistent with the percentage in prior auctions of broadcast construction permits. As the Commission has noted, defaults weaken the integrity of the auction process and may impede the deployment of service to the public, and an additional 20% default payment will be more effective in deterring defaults than the 3% used in some earlier auctions. In light of these considerations, OEA and MB propose for Auction 114 an additional default payment of 20% of the relevant bid. OEA and MB seek comment on this proposal.
19. OEA and MB propose to use the Commission's simultaneous multiple-round auction format for Auction 114. As described further below, this type of auction offers every construction permit for bid at the same time and consists of successive bidding rounds in which qualified bidders may place bids on individual construction permits. In this type of auction, which OEA and MB have used in all recent broadcast auctions, bidding typically remains open on all construction permits until bidding stops on every construction permit. OEA and MB seek comment on this proposal.
20. Under OEA's and MB's proposal, Auction 114 will consist of sequential bidding rounds, each of which would be followed by the release of round results. A bidder will be able to place, and remove, a bid during a round, but will not be able to withdraw the bid once the round closes. The initial bidding schedule will be announced in a public notice to be released at least one week before the start of bidding. Details on viewing round results, including the location and format of downloadable round results files for each round, will be included in that same public notice.
21. OEA and MB propose that the initial bidding schedule may be adjusted in order to foster an auction pace that reasonably balances speed with the bidders' need to study round results and adjust their bidding strategies. Under this proposal, such changes may include the amount of time
22. The Commission will conduct Auction 114 over the internet using the FCC auction bidding system. A bidder will also have the option of placing bids by telephone through a dedicated auction bidder line.
23. OEA and MB have discretion to establish stopping rules before or during multiple round auctions in order to complete the auction within a reasonable time. For Auction 114, OEA and MB propose to employ a simultaneous stopping rule approach, which means all construction permits remain available for bidding until bidding stops on every construction permit. Specifically, bidding will close on all construction permits after the first round in which no bidder submits any new bid on a construction permit for which the bidder is not the provisionally winning bidder. Consequently, under this approach, it is not possible to determine in advance how long the bidding in this auction will last.
24. In certain circumstances, for example, where the auction is proceeding unusually slowly or quickly, there is minimal overall bidding activity, or it appears likely that the auction will not close within a reasonable period of time or will close prematurely, OEA and MB are likely to attempt to change the pace of the auction. For example, OEA and MB may adjust the pace of bidding by changing the number of bidding rounds per day or the minimum acceptable bids. OEA and MB propose to retain the discretion to exercise any of these options with or without prior announcement during the auction. OEA and MB seek comment on these proposals. Commenters should provide specific reasons for supporting or objecting to these proposals.
25. OEA and MB intend to make available, after each round closes, for each permit its current provisionally winning bid amount, the minimum acceptable bid amount for the following round, and the number of bids placed on the permit during the round. These reports would be publicly accessible. Moreover, after the auction closes, OEA and MB propose to make available complete reports of all bids placed during each round of the auction, including bidder identities.
26. OEA and MB also will provide bidders with secure access to certain non-public bidding information while bidding is ongoing. Specifically, after each round ends, and before the next round begins, OEA and MB will make the following information available to individual bidders:
• The bidder's activity, based on all bids in the previous round; and
• Summary statistics of the bidder's bidding and other bidding-related actions in each round, including the permits on which it bid and the price it bid for each of those permits, the result of each of its bids, whether it has any provisionally winning bids, and remaining activity rule waivers.
27. OEA and MB believe that limiting the availability of bidding information during the auction balances their interest in providing bidders with sufficient information about the status of their own bids and the general level of bidding on all permits to allow them to bid confidently and effectively, while restricting the availability of information that may facilitate identification of bidders placing particular bids, which could potentially lead to undesirable strategic bidding. OEA and MB seek comment on this view.
28. To ensure that the auction closes within a reasonable period of time, an activity rule requires bidders to bid actively throughout the auction, rather than wait until late in the auction before participating. For purposes of the activity rule, the FCC auction bidding system calculates a bidder's activity in a round as the sum of the bidding units associated with any construction permits upon which the bidder places bids during the current round and the bidding units associated with any construction permits for which the bidder holds provisionally winning bids. Bidders are required to be active on a specific percentage of their current bidding eligibility during each round of the auction. OEA and MB propose that in each bidding round, a bidder desiring to maintain its current bidding eligibility be required to be active on 100% of its bidding eligibility. Thus, the activity requirement would be satisfied when a bidder has bidding activity on construction permits with bidding units that sum to 100% of the bidder's current eligibility in the round. If the activity rule is met, then the bidder's eligibility does not change in the next round. Failure to maintain the requisite activity level will result in the use of an activity rule waiver, if any remain, or a reduction in the bidder's eligibility for the next round of bidding, possibly curtailing or eliminating the bidder's ability to place additional bids in the auction. OEA and MB seek comment on this proposal. OEA and MB encourage commenters that oppose a 100% activity requirement to explain their reasons with specificity.
29. For their proposed simultaneous multiple-round auction format, OEA and MB propose that when a bidder's activity in the current round is below the required minimum level, the bidder may preserve its current level of eligibility through an activity rule waiver, if available. An activity rule waiver applies to an entire round of bidding, not to a particular construction permit. Activity rule waivers are primarily a mechanism for a bidder to avoid the loss of bidding eligibility in the event that exigent circumstances prevent it from bidding in a particular round.
30. The FCC auction bidding system will assume that a bidder that does not meet the activity requirement would prefer to use an activity rule waiver (if available) rather than lose bidding eligibility. Therefore, the system will automatically apply a waiver at the end of any bidding round in which a bidder's activity level is below the minimum required level unless: (1) the bidder has no activity rule waiver remaining; or (2) the bidder overrides the automatic application of a waiver by electing to reduce eligibility, thereby meeting the activity requirement. If a bidder has no waivers remaining and does not satisfy the required activity level, the bidder's current eligibility will be permanently reduced, possibly curtailing or eliminating the ability to place additional bids in the auction.
31. A bidder with insufficient activity may wish to reduce its bidding eligibility rather than use an activity rule waiver. If so, the bidder must affirmatively override the automatic waiver mechanism during the bidding round by using the
32. Consistent with prior Commission auctions of broadcast construction permits, OEA and MB propose that each bidder in Auction 114 be provided with three activity rule waivers that may be used as set forth above at the bidder's discretion during the course of the auction. OEA and MB seek comment on this proposal.
33. OEA and MB propose that, in each round, a qualified bidder will be able to place a bid on a given construction permit in any of up to nine different amounts: the minimum acceptable bid amount or one of eight additional bid amounts.
34.
35.
36. For Auction 114, OEA and MB propose to use a minimum acceptable bid increment percentage of 10%. This means that the minimum acceptable bid amount for a construction permit will be approximately 10% greater than the provisionally winning bid amount for the construction permit. To calculate the additional acceptable bid amounts, OEA and MB propose to use a bid increment percentage of 5%. OEA and MB have used a minimum acceptable bid increment percentage of 10% coupled with an additional bid increment percentage of 5% in past broadcast auctions and have found that these percentages allow bidders to express their valuations in sufficient granularity while also assuring that the auction moves at a satisfactory pace. OEA and MB seek comment on these proposals.
37.
38. OEA and MB seek comment on these proposals. If commenters disagree with the proposal to begin the auction with nine acceptable bid amounts per construction permit, they should suggest an alternative number of acceptable bid amounts to use. Commenters may wish to address the role of the minimum acceptable bids and the number of acceptable bid amounts in managing the pace of the auction, and compare how these parameters manage the auction's pace relative to decisions regarding the bidding schedule, activity requirement, minimum opening bid amounts, or other parameters.
39. The FCC auction bidding system will determine provisionally winning bids consistent with practice in past auctions. Specifically, at the end of a bidding round, the bidding system will determine a provisionally winning bid for each construction permit based on the highest bid amount received for that permit. The FCC auction bidding system will advise bidders of the status of their bids when round results are released. A provisionally winning bid cannot be withdrawn and will remain the provisionally winning bid until there is a higher bid on the same construction permit at the close of a subsequent round. Provisionally winning bids at the end of the auction become the winning bids. As a reminder, provisionally winning bids count toward activity for purposes of the activity rule.
40. The FCC auction bidding system assigns a pseudo-random number generated by an algorithm to each bid when the bid is entered. If identical high bid amounts are submitted on a construction permit in any given round (
41. The Commission intends to provide additional information on the bidding system and to offer demonstrations and other educational opportunities for applicants in Auction 114 to familiarize themselves with the FCC auction application system and the auction bidding system. For example, OEA and MB intend to release an online tutorial that will help applicants understand the procedures to be followed in the filing of their short-form applications and on the bidding procedures for Auction 114.
42. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission prepared Initial Regulatory Flexibility Analyses (IRFAs) in connection with the
43.
44. The
• A requirement that any applicant seeking to participate in Auction 114 certify in its short-form application, under penalty of perjury, that it has read the public notice adopting procedures for Auction 114 that will be released in advance of the short-form application deadline, and that it has familiarized itself with those procedures and the requirements for obtaining a construction permit for an FM station;
• Use of anonymous bidding/limited information procedures, which will not make public until after bidding has closed: (1) the permits that an applicant selects for bidding in its short-form application, (2) the amount of any upfront payment made by or on behalf of an applicant, (3) any applicant's bidding eligibility, and (4) any other bidding-related information that might reveal the identity of the bidder placing a bid;
• Establishment of an additional default payment of 20% under 47 CFR 1.2104(g)(2) in the event a winning bidder defaults or is disqualified after the auction closes;
• Use of a simultaneous multiple-round auction format, consisting of sequential bidding rounds with a simultaneous stopping rule;
• Provision of delegated authority to OEA, in conjunction with MB, to exercise its discretion to delay, suspend, or cancel bidding in Auction 114 for any reason that affects the ability of the competitive bidding process to be conducted fairly and efficiently;
• Retention by OEA of discretion to adjust the bidding schedule in order to manage the pace of Auction 114;
• A specific minimum opening bid amount for each construction permit to be offered in this auction;
• A specific number of bidding units for each construction permit;
• A specific upfront payment amount for each construction permit;
• Establishment of a bidder's initial bidding eligibility in bidding units based on that bidder's upfront payment;
• Establishment of an activity rule requiring the bidder to be active on 100% of its bidding eligibility in each bidding round;
• Provision of three activity waivers for each bidder to allow it to preserve eligibility during the course of the auction;
• Use of minimum acceptable bid amounts and additional bid increments, along with a proposed methodology for calculating such amounts, while retaining discretion to change the methodology if circumstances dictate; and
• A procedure for breaking ties if identical high bid amounts are submitted on a construction permit in a given round.
45.
46.
47. OEA's and MB's actions, over time, may affect small entities that are not easily categorized at present. OEA and MB therefore describe three broad groups of small entities that could be directly affected by their actions. In general, a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States, which translates to 34.75 million businesses. Next, “small organizations” are not-for-profit enterprises that are independently owned and operated and not dominant in their field. While OEA and MB do not have data regarding the number of non-profits that meet that criteria, over 99 percent of nonprofits have fewer than 500 employees. Finally, “small governmental jurisdictions” are defined as cities, counties, towns, townships, villages, school districts, or special districts with populations of less than fifty thousand. Based on the 2022 U.S. Census of Governments data, OEA and MB estimate that at least 48,724 out of 90,835 local government jurisdictions have a population of less than 50,000.
48. The specific procedures and minimum opening bid amounts on which comment is sought in the
49. The proposed procedures in the
50.
51. In the
52. OEA and MB do not expect the processes and procedures proposed in the
53.
54. In the
55. In addition, consistent with previous Commission auctions of broadcast construction permits, the
56. To assist with the Commission's evaluation of the economic impact on small entities that may result from the actions and alternatives that have been discussed in this proceeding, the
57.
Federal Communications Commission.
Proposed rule.
In this document, the Commission proposes to revise the Audible Crawl Rule, which requires video programming providers and distributors to make non-textual visual emergency information provided during non-newscast programming accessible via a secondary audio stream. The revised rule would provide that the accessibility requirement is met if a textual crawl provides emergency information duplicative of or equivalent to non-textual visual emergency information, so long as the textual crawl is also conveyed aurally.
Comments are due on or before June 15, 2026; reply comments are due on or before June 29, 2026.
Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first
•
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• Filings can be sent by hand or messenger delivery, by commercial courier, or by the U.S. Postal Service. All filings must be addressed to the Secretary, Federal Communications Commission.
• Hand-delivered or messenger-delivered paper filings for the Commission's Secretary are accepted between 8:00 a.m. and 4:00 p.m. by the FCC's mailing contractor at 9050 Junction Drive, Annapolis Junction, MD 20701. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building.
• Commercial courier deliveries (any deliveries not by the U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701.
• Filings sent by U.S. Postal Service First-Class Mail, Priority Mail, and Priority Mail Express must be sent to 45 L Street NE, Washington, DC 20554.
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For additional information on this proceeding, contact Diana Sokolow,
This is a summary of the Commission's Third Further Notice of Proposed Rulemaking (FNPRM), in MB Docket No. 12-107, FCC 26-31, adopted on April 30, 2026 and released on May 1, 2026. The full text of this document is available electronically in ASCII, Microsoft Word, and/or Adobe Acrobat via ECFS and at
The FCC seeks to take a commonsense approach to regulations that do not work as enacted. One such rule has been waived in part for the entirety of the more than ten years since its enactment. The Audible Crawl Rule requires video programming distributors and providers to provide an aural representation of visual, non-textual emergency information shown during non-newscast video programming, such as radar maps or other graphics, on a secondary audio stream. While recognizing the need to revise the rule, we continue to appreciate the Commission's statutory obligations to guard accessibility and consumer interests. Our actions here satisfy both requirements. The revised rule would provide that the accessibility requirement is met if a video programming distributor or provider provides textual crawls that convey emergency information duplicative of or equivalent to the visual, non-textual information, and if those textual crawls are conveyed aurally.
On April 9, 2013, pursuant to the Twenty-First Century Communications and Video Accessibility Act of 2010 (CVAA), the Commission released the
Although the compliance deadline for the Audible Crawl Rule was May 26, 2015, the Media Bureau has granted seven successive waiver requests pertaining to the requirement that visual but non-textual emergency information displayed during non-newscast programming be conveyed aurally.
Second, on November 16, 2016, the Bureau granted an 18-month waiver extension requested jointly by NAB, ACB, and AFB. The petitioners explained that “the additional time will allow broadcasters and accessibility advocates to continue coordinating with vendors on a technical solution as well as to explore other potential sources for a solution, and will give the Commission's Disability Advisory Committee (DAC) time to consider the issue.” The Bureau found that a waiver was justified to allow time for the creation of “a long-term, automated solution,” which would be “preferable to a short-term, manual solution that requires station personnel to describe every graphic, particularly given that such an approach may be burdensome to broadcasters and may raise its own technical complexities.” In addition, the Bureau required the petitioners to submit a status report on November 22, 2017, detailing “the extent to which images are conveyed with a corresponding on-screen crawl that includes the critical details conveyed by that image regarding the emergency and how to respond to the emergency,” as well as “information about the development of automated description solutions.” NAB, ACB, and AFB jointly submitted the status report in which they stated, “It is exceedingly rare for a television station to broadcast an image that conveys information not already captured in an accompanying text crawl.” They also explained that, despite efforts on this issue, there still was not any viable technical compliance solution available.
Third, on May 25, 2018, the Bureau granted a five-year waiver extension requested jointly by NAB, ACB, and AFB. The petitioners explained that their efforts to develop an automated approach to aurally describing visual, non-textual emergency information had not yet yielded any solution, and that enforcing the requirement would lead to the removal of graphic emergency information to avoid the risk of Commission enforcement actions. The Bureau found good cause to grant the waiver, and it required NAB to submit a status report by November 25, 2020, detailing progress achieved to that point. NAB submitted the status report, which explained that there still was not any viable technical compliance solution available despite industry efforts. The report also discussed NAB's continued engagement with the disability community and with educating broadcasters on best practices, and it explained that the Audible Crawl Rule's application to visual non-textual graphic images shown during non-news programming is a small portion of televised emergency information.
Fourth, on May 26, 2023, the Bureau granted NAB's waiver request for a period of 18 months. ACB and AFB filed joint comments indicating that although they supported NAB's prior waiver requests, they did not support further extension of the waiver due to concerns about a lack of effort to develop a technical solution. ACB and AFB also requested that, if the Commission were to extend the waiver, it should require broadcasters to use an interim manual solution to convey visual emergency information aurally. The Bureau detailed the good faith efforts NAB indicated it had made to develop a solution, even though those efforts were unsuccessful. The Bureau declined to require broadcasters to implement an interim manual solution, citing NAB's
Fifth, NAB filed the Petition on November 15, 2024, requesting modification of the Audible Crawl Rule and a waiver of the rule for 18 months (until May 2026), subject to the Commission's discretion to terminate the waiver earlier depending on the outcome of NAB's request. On November 25, 2024, the Bureau sought comment on the Petition; three comments were filed on December 26, 2024, and one reply comment was filed on January 9, 2025, all of which support the Petition, so long as any revised rule ensures that people who are blind or visually impaired have access to the same critical details of an emergency as sighted viewers. No party objected to NAB's waiver request. Because the waiver expired during the comment period on the Petition, NAB filed a request for an expedited retroactive extension of the waiver on November 27, 2024, explaining that “numerous large television station groups have ceased the display of such weather radar maps and similar visual images,” which “will harm the public.”
Sixth, the Bureau on its own motion extended the waiver of the Audible Crawl Rule for one year (through May 27, 2026) or until there was a ruling in effect on the underlying Petition, whichever occurred sooner. On January 10, 2025, in its reply comments, NAB renewed its original request for an 18-month extension of the current waiver if the Commission did not resolve its Petition before the waiver's expiration. No party objected to NAB's renewed waiver request, and the Bureau's waiver order reiterated the reasoning found in the prior waiver orders.
Most recently, on April 8, 2026, the Bureau on its own motion extended the waiver of the Audible Crawl Rule for 18 months (through November 29, 2027) or until there is a ruling in effect on the underlying Petition, whichever is sooner. The Bureau explained that it is not aware of any change in circumstances relevant to this matter since it released the
In this Third Further Notice of Proposed Rulemaking (FNPRM), we consider the Petition and the record developed thereto. As discussed in section III below, we grant NAB's Petition for Rulemaking and propose to implement the rule change requested in the Petition, namely, that we specify that with regard to visual but non-textual emergency information, compliance with the Audible Crawl Rule is fulfilled if a textual crawl provides emergency information duplicative of or equivalent to the visual but non-textual emergency information, so long as the textual crawl is also conveyed aurally.
After review of the NAB Petition, and the comments filed in response, we conclude that the record supports initiation of a rulemaking proceeding to seek further comment on the proposals in the Petition. We propose to revise the Audible Crawl Rule to specify that the requirement that video programming providers and distributors make visual emergency information provided during non-newscast programming accessible via a secondary audio stream is met if a textual crawl provides emergency information duplicative of or equivalent to non-textual visual emergency information, so long as the textual crawl is also conveyed aurally. In so doing, we explicitly and unequivocally recognize “that people who are blind or have low vision must have equal access to emergency information, just as sighted people do.”
We tentatively conclude that a technical solution to comply with the current rule is not currently possible with regard to visual but non-textual emergency information, making compliance with the rule infeasible absent our proposed revision to the Audible Crawl Rule, and it is uncertain whether or when such a solution may be available. The Petition and the responsive comments indicate that at this time, there is no technical means of complying with the Audible Crawl Rule for visual but non-textual emergency information.
AFB and ACB “note that the rule does not specifically require automation.” The Bureau has recognized however “that mandating a manual solution could lead some broadcasters . . . to forego the use of non-textual graphic displays altogether . . . .” And the Bureau has concluded in the context of granting rule waivers that “a short-term, manual solution that requires station personnel to describe every graphic . . . may be burdensome to broadcasters and may raise its own technical complexities.” Therefore, we tentatively conclude that although the existing rule potentially could be satisfied by means of a manual solution, we should provide the rule amendment NAB requests because interpreting the rule to require a manual solution in every instance could be burdensome, result in additional complexities, and lead some video programming distributors and video programming providers to forego the use of non-textual graphic displays altogether, depriving some viewers of an opportunity to receive such information visually. We seek comment on these matters.
We propose to add the following language after the existing first sentence of § 79.2(b)(2)(ii) of the Commission's rules: “With regard to visual but non-textual emergency information, this requirement is met if a textual crawl provides emergency information duplicative of or equivalent to the visual but non-textual emergency information, so long as the textual crawl is also conveyed aurally.” We invite comment on this proposal, which is consistent with the Petition and the existing record. We invite comment on what it means for emergency information to be “duplicative of or equivalent to” the visual but non-textual emergency information. For example, must the same critical details regarding the emergency and how to respond to the emergency be conveyed via either means? AFB and ACB state that, if the emergency information in the textual crawl is not duplicative of that shown in a non-textual visual, “then blind viewers expect to receive the same emergency information as sighted viewers aurally either through the use of the primary audio stream or a secondary audio stream.” Is the requirement that a textual crawl contain information “duplicative of or equivalent to” that contained in the visual image specific enough to instruct stations as to what the rule requires?
We invite comment on whether the Commission also should codify certain “best practices” set forth by NAB.
We tentatively conclude that the proposed modification to the Audible Crawl Rule is likely to have multiple benefits. First, we tentatively conclude that codifying this rule change would ensure that video programming distributors and video programming providers continue to provide visual but non-textual emergency information during non-newscast programming. If the existing waiver were to expire and the rule were not modified, video programming distributors and video programming providers might stop providing this emergency information to both individuals who are blind or visually impaired and the public at large. Second, we tentatively conclude that our proposed action would enhance government efficiency and regulatory certainty by modifying an unworkable part of a rule and eliminating the need for multiple successive waivers, and consecutive waiver proceedings, spanning over a decade. In addition to these benefits, we tentatively conclude that the existing record indicates that the proposed modification to the Audible Crawl Rule would have limited, if any, negative impacts. Importantly, we expect the accessibility of emergency information for people who are blind or visually impaired to either improve or remain constant. In addition, we do not expect costs for video programming distributors and video programming providers to increase significantly because the record indicates that stations generally provide text crawls conveyed aurally that would satisfy the proposed rule. We seek comment on this analysis.
We tentatively conclude that the proposed modification to the Audible Crawl Rule will best effectuate the CVAA's statutory directive to promulgate regulations that require covered entities “to convey such emergency information in a manner accessible to individuals who are blind or visually impaired.” We tentatively find that the proposed rule change is authorized under the CVAA, which neither requires nor suggests a verbatim aural translation of visual but non-textual emergency information. As one commenter, Gray, points out, “[w]hile the CVAA requires emergency information to be disseminated accessibly,” there is nothing in the CVAA's statutory language that requires exact parity between the information provided in graphics on screen and that provided over an audio channel. We tentatively find that our modified rule will fulfill the statutory directive by ensuring that individuals who are blind or visually impaired are provided emergency information that is duplicative of or equivalent to visual non-textual emergency information, such as radar maps and other graphics. At the same time, we propose a commonsense approach to our regulation, recognizing that there is not a viable technical compliance solution available at this time. We seek comment on this analysis.
Finally, we seek comment on a non-substantive proposal to eliminate the phrase “beginning May 26, 2015” from the text of the Audible Crawl Rule. That date was more than a decade ago, and we expect that its inclusion in the rule may no longer serve any purpose.
The projected reporting, recordkeeping, and other compliance requirements are as follows. The FNPRM proposes to revise the Audible Crawl Rule to specify that the requirement that video programming providers and distributors make visual emergency information provided during non-newscast programming accessible via a secondary audio stream is met if a textual crawl provides emergency information duplicative of, or equivalent to, nontextual visual emergency information, so long as the textual crawl is also conveyed aurally. The revised Audible Crawl Rule thus would ease compliance burdens for small and other entities because it would not impose the compliance requirements that currently are not technically feasible with regard to non-textual visual emergency information.
In the alternative to the proposed rule changes contained in the FNRPM, there are other approaches to ensure that video programming distributors and video programming providers provide an aural representation of visual, non-textual emergency information shown during non-newscast video programming. The first alternative approach would be to allow the Audible Crawl Rule, as it is already codified, to go into effect without any waiver. This occurred while the Petition was pending, and it resulted in broadcasters ceasing the provision of non-textual visual emergency information, until the Media Bureau granted a retroactive waiver extension. Relatedly, the FNPRM considers utilizing a manual solution, and it tentatively concludes that the rule amendment is preferable because requiring a manual solution in every instance may not be possible, could be burdensome to implement, and could lead video programming distributors and video programming providers to forego the use of non-textual graphic displays altogether, depriving some viewers of an opportunity to receive such information visually. The second alternative approach would be to continue the current approach of granting successive waiver requests. Such an approach would unnecessarily burden the petitioners, has the potential to create regulatory uncertainty, and is unjustified given that it does not appear that an automated solution to the issue will be available in the near future. The FNPRM also considers whether the Commission should encourage or require continued investigations into potential technical solutions, and if so how such elements should be structured. Additionally, the FNPRM seeks comment on whether it should codify certain “best practices” set forth by NAB in its Petition.
The proposed action is authorized pursuant to the Twenty-First Century Communications and Video Accessibility Act of 2010, Public Law 111-260, 124 Stat. 2751, and the authority contained in sections 4(i), 4(j), and 713 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), and 613.
Cable television operators, Communications equipment, Multichannel video programming distributors (MVPDs), Satellite television service providers, Television broadcasters.
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 79 as follows:
47 U.S.C. 151, 152(a), 154(i), 303, 307, 309, 310, 330, 544a, 613, 617.
(b) * * *
(2) * * *
(ii) Emergency information that is provided visually during programming that is neither a regularly scheduled newscast, nor a newscast that interrupts regular programming, must be accompanied with an aural tone, and except as provided in paragraph (b)(6) of this section, must be made accessible to individuals who are blind or visually impaired through the use of a secondary audio stream to provide the emergency information aurally. With regard to visual but non-textual emergency information, this requirement is met if a textual crawl provides emergency information duplicative of or equivalent to the visual but non-textual emergency information, so long as the textual crawl is also conveyed aurally. Emergency information provided aurally on the secondary audio stream must be preceded by an aural tone and must be conveyed in full at least twice. Emergency information provided through use of text-to-speech (“TTS”) technologies must be intelligible and must use the correct pronunciation of relevant information to allow consumers to learn about and respond to the emergency, including, but not limited to, the names of shelters, school districts, streets, districts, and proper names noted in the visual information. The video programming distributor or video programming provider that creates the visual emergency information content and adds it to the programming stream is responsible for providing an aural representation of the information on a secondary audio stream, accompanied by an aural tone. Video programming distributors are responsible for ensuring that the aural representation of the emergency information (including the accompanying aural tone) gets passed through to consumers.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice of proposed rulemaking (NPRM).
This document responds to petitions for reconsideration of FRA's May 21, 2024 final rule addressing the Certification of Dispatchers. Based on FRA's review and analysis of the issues raised in the petitions for reconsideration, this document proposes to rescind the final rule.
Comments on the proposed rule must be received by July 14, 2026. FRA may consider comments received after that date, but only to the extent practicable.
Curtis Dolan, Railroad Safety Specialist, Dispatch Operating Practices, FRA, telephone: (470) 522-6633, email:
On May 31, 2023, FRA published an NPRM proposing the establishment of dispatcher certification requirements in 49 CFR part 245 (part 245).
FRA published a final rule on May 21, 2024, requiring railroads to develop written programs for certifying individuals who work as dispatchers on their territories and to submit those written certification programs to FRA for approval prior to implementation.
This rule requires all Class I railroads (including the National Railroad Passenger Corporation (Amtrak)) and railroads providing commuter service to submit their certification programs to FRA by March 17, 2025.
On July 12, 2024, the Association of American Railroads (AAR), the American Short Line and Regional Railroad Association (ASLRRA), and the Commuter Rail Coalition (CRC) filed timely petitions for reconsideration of the Dispatcher Certification final rule.
FRA issued a response to these petitions for reconsideration on January 17, 2025. The response stated that FRA was granting APTA's petition and would initiate a rulemaking to extend the deadlines for all railroads to submit their dispatcher certification program to FRA by six months. The response also stated FRA's intent to grant in part and deny in part AAR, ASLRRA, and CRC's petitions.
On February 6, 2025, representatives from AAR, ASLRRA, and CRC met with FRA to discuss their concerns with part 245 which they raised in their petitions for reconsideration.
In this NPRM, FRA is proposing to rescind part 245 in its entirety. While FRA is undertaking this rulemaking to rescind part 245 in its entirety, it will place on hold its review of any dispatcher certification programs it has received or will receive during the pendency of this rulemaking. In addition, during the pendency of this rulemaking, FRA will continue to exercise its enforcement discretion and will not take enforcement action based on the current deadlines found in 49 CFR 245.103(a)-(b) and 245.105(c)-(e).
As noted above, FRA received petitions for reconsideration of the May 21, 2024 final rule on dispatcher certification from AAR, ASLRRA, CRC, and APTA. These petitions asked FRA to revise part 245 to address a range of concerns presented by the final rule. For example, CRC requested that part 245 be amended to allow contractors to certify dispatchers because: (1) part 245 places the obligations of certification on parties that do not have the necessary resources or expertise to certify dispatchers, such as small commuter railroads; (2) contractors are in a better position to track, monitor, and keep records related to their employees; and (3) requiring multiple railroads to carry out the same task would lead to duplicative work and could result in different railroads reaching different conclusions about the same individual.
In addition, AAR expressed concerns about the estimated costs of part 245 being greater than the estimated benefits.
Lastly, the petitions raised issues regarding changes in ownership for short line railroads and the rule's definition of a “material modification.” Regarding ownership changes, ASLRRA noted that short line railroads change ownership more frequently than Class I railroads and would be affected adversely by § 245.103(b). Specifically, ASLRRA alleged that a railroad with a program approved previously may have to stop operations if there is a change in ownership while it resubmits its program and waits for FRA approval, which would result in an unnecessary disruption to railroad operations.
All four petitions for reconsideration are available to the public in the docket for this rulemaking which can be found at
Based on FRA's review of these issues raised in the petitions for reconsideration, and in accordance with E.O. 14219, FRA has concluded preliminarily that rescission of the 2024 final rule in its entirety is warranted because the expected benefits do not justify the expected costs. In the 2024 final rule, FRA discussed unquantified safety benefits relating to “accident clean up, third party property damage, lost lading, environmental damage, loss of economic activity to the community, and train delays.” FRA is requesting public comment or additional information on these unquantified safety benefits. FRA's proposal to rescind part 245 in its entirety would eliminate all the issues and concerns that were raised in the petitions for reconsideration and would eliminate the estimated costs associated with the 2024 final rule.
While FRA has the statutory authority to issue regulations requiring dispatcher certification, it is not obligated to issue such regulations. Specifically, the RSIA provides that “[t]he Secretary
For the reasons stated above, FRA proposes to rescind part 245 in its entirety. If FRA issues a final rule that rescinds part 245, FRA will continue to gather data on this issue and may reassess in the future whether certification requirements for dispatchers are warranted. Alternatively, if, after review of any comments received in response to this NPRM, FRA decides not to rescind this rule in its entirety, FRA proposes to extend the compliance dates for this rule to provide railroads with additional time to come into compliance with part 245. The proposed extension could be for a period of approximately six to twelve months from the effective date of a new final rule and would provide the regulated community assurance that they would not be liable for noncompliance with the existing regulation, should FRA ultimately determine not to finalize the rescission of part 245.
FRA has considered the impact of this NPRM under E.O. 12866 (58 FR 51735, Oct. 4, 1993), Regulatory Planning and Review, and DOT Regulatory Policies and Procedures. The Office of Management and Budget (OMB) Office of Information and Regulatory Affairs determined that this NPRM is not a significant regulatory action under section 3(f) of E.O. 12866.
FRA is proposing to rescind the May 21, 2024 final rule addressing the Certification of Dispatchers. FRA has analyzed the potential costs and benefits of this proposed rule.
In the 2024 final rule, FRA estimated 10-year costs of $5.4 million (PV, 7 percent). If FRA finalizes the proposed rescission of that final rule, those costs would become a cost savings. Table 1 shows the total 10-year cost savings of this proposed rule.
In the 2024 final rule, FRA estimated 10-year benefits of $0.6 million (PV, 7 percent), which would no longer be realized if the 2024 final rule is rescinded.
FRA recognizes there may be some railroads who may have begun to comply with the 2024 final rule and therefore, incurred costs. However, FRA expects that the cost savings that would be realized from rescinding the 2024 rule ultimately are greater than the foregone safety benefits.
E.O. 14192 (90 FR 9065, Jan. 31, 2025), Unleashing Prosperity Through Deregulation, requires that for “each new [E.O. 14192 regulatory action] issued, at least ten prior regulations be identified for elimination.”
An E.O. 14192 deregulatory action is defined as “an action that has been finalized and has total costs less than zero.” This proposed rule, if finalized as proposed, is expected to have total costs less than zero or negligible costs, and therefore it would be considered an E.O. 14192 deregulatory action. The rescission of the 2024 final rule is expected to result in an estimated 10-year cost savings of $5.4 million, discounted at 7 percent.
The Regulatory Flexibility Act ((RFA), 5 U.S.C. 601
FRA certified that the 2024 final rule for Certification of Dispatchers
In accordance with section 213(a) of SBREFA (Pub. L. 104-121, 110 Stat. 857), FRA wants to assist small entities in understanding this proposed rule so they can better evaluate its effects on themselves and participate in the rulemaking initiative. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult the person listed under
There is no new collection of information requirements contained in this proposed rule and, in accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 3501
FRA has analyzed this proposed rule for the purposes of the National Environmental Policy Act of 1969 (NEPA). In accordance with 42 U.S.C. 4336 and DOT NEPA Order 5610.1D, FRA has determined that this rule is categorically excluded pursuant to 23 CFR 771.116(c)(15). This rulemaking is not anticipated to result in any environmental impacts, and there are no unusual or extraordinary circumstances present in connection with this rulemaking.
This proposed rule will not have a substantial effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Thus, in accordance with E.O. 13132, “Federalism” (64 FR 43255, Aug. 10, 1999), preparation of a Federalism Assessment is not warranted.
This proposed rule would not result in the expenditure, in the aggregate, of $100,000,000 or more, adjusted for inflation, in any one year by State, local, or Indian Tribal governments, or the private sector. Thus, consistent with section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 2 U.S.C. 1532), FRA is not required to prepare a written statement detailing the effect of such an expenditure.
E.O. 13211 requires Federal agencies to prepare a Statement of Energy Effects for any “significant energy action.”
FRA has evaluated this proposed rule in accordance with the principles and criteria contained in E.O. 13175, Consultation and Coordination with Indian Tribal Governments (Nov. 6, 2000). The proposed rule would not have a substantial direct effect on one or more Indian tribes, would not impose substantial direct compliance costs on Indian tribal governments, and would not preempt tribal laws. Therefore, the funding and consultation requirements of E.O. 13175 do not apply, and a tribal summary impact statement is not required.
The Trade Agreement Act of 1979
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to
As required by 5 U.S.C. 553(b)(4), a summary of this rule can be found at regulations.gov, Docket No. FRA-2022-0019, in the
Administrative practice and procedure, Dispatcher, Penalties, Railroad employees, Railroad operating procedures, Railroad safety, Reporting and recordkeeping requirements.
Issued in Washington, DC.
Federal Railroad Administration (FRA), Department of Transportation (DOT).
Notice of proposed rulemaking (NPRM).
This document responds to petitions for reconsideration of FRA's May 21, 2024 final rule addressing the Certification of Signal Employees. Based on FRA's review and analysis of the issues raised in the petitions for reconsideration, this document proposes to rescind the final rule.
Written comments on the proposed rule must be received by July 14, 2026. FRA may consider comments received after that date, but only to the extent practicable.
Cory Johnson, Railroad Safety Specialist, Signal, Train Control, and Crossings Division, FRA, telephone: (701) 516-6594, email:
On May 31, 2023, FRA published an NPRM proposing the establishment of signal employee certification requirements in 49 CFR part 246 (part 246).
FRA published a final rule on May 21, 2024, (“2024 final rule”) requiring railroads to develop written programs for certifying signal employees who work on signal systems and signal-related technology on their networks.
This rule requires all Class I railroads (including the National Railroad Passenger Corporation (Amtrak)) and railroads providing commuter service to submit their signal employee certification programs to FRA by March 17, 2025.
On July 12, 2024, the Association of American Railroads (AAR), the American Short Line and Regional Railroad Association (ASLRRA), and the Commuter Rail Coalition (CRC) filed timely petitions for reconsideration of the Signal Employee Certification final rule.
FRA issued a response to these petitions for reconsideration on January 17, 2025. The response stated that FRA was granting APTA's petition and would initiate a rulemaking to extend the deadlines for all railroads to submit their signal employee certification program to FRA by six months. The response also stated FRA's intent to grant in part and deny in part AAR, ASLRRA, and CRC's petitions.
On February 6, 2025, representatives from ASLRRA, AAR, and CRC met with FRA to discuss their concerns with part 246 which they raised in their petitions for reconsideration.
In this NPRM, FRA is proposing to rescind part 246 in its entirety. While FRA is undertaking this rulemaking to rescind part 246 in its entirety, it will place on hold its review of any signal employee certification programs it has received or will receive during the pendency of this rulemaking. In addition, during the pendency of this rulemaking, FRA will continue to exercise its enforcement discretion and will not take enforcement action based on the current deadlines in 49 CFR 246.103(a)-(b) and 246.105(c)-(e).
As noted above, FRA received petitions for reconsideration of the 2024 final rule from AAR, ASLRRA, CRC, and APTA. These petitions asked FRA to revise part 246 to address a range of concerns presented by the final rule. For example, CRC requested that part 246 be amended to allow contractors to certify signal employees because: (1) part 246 places the obligations of certification on parties that do not have the necessary resources or expertise to certify signal employees, such as small commuter railroads; (2) contractors are in a better position to track, monitor, and keep records related to their employees; and (3) requiring multiple railroads to carry out the same task would lead to duplicative work and could result in different railroads reaching different conclusions about the same individual.
With respect to the rule's definition of “signal employee” in 49 CFR 246.7, CRC's petition expressed concern that the definition could be interpreted to include a broad swath of employees, which would make compliance with part 246 impracticable, impossible, unreasonable, and not in the public interest.
AAR's petition also expressed concern that the rule's definition of “signal system” in 49 CFR 246.7 exceeds the statutory definition of this term in 49 U.S.C. 20501 and improperly includes components that are in non-signaled territory, that are not integrated with signal or train control systems, and that are not otherwise connected to signal or train control systems.
In addition, AAR expressed concern about the estimated costs of part 246 being greater than the estimated benefits.
Lastly, the petitions raised issues regarding changes in ownership for short line railroads and the rule's definition of a “material modification.” Regarding ownership changes, ASLRRA noted that short line railroads change ownership more frequently than Class I railroads and would be adversely affected by § 246.103(b). Specifically, ASLRRA alleged that a railroad with a program approved previously may have to stop operations if there is a change in ownership while it resubmits its program and waits for FRA approval, which would result in an unnecessary disruption to railroad operations.
All four petitions for reconsideration are available to the public in the docket for this rulemaking which can be found at
Based on FRA's review of these issues raised in the petitions for reconsideration, and in accordance with E.O. 14219, FRA has concluded preliminarily that rescission of the 2024 final rule in its entirety is warranted because the expected benefits do not justify the expected costs. In the 2024 final rule, FRA discussed unquantified safety benefits relating to “accident clean up, third party property damage, lost lading, environmental damage, loss of economic activity to the community, and train delays.” FRA is requesting public comment or additional information on these unquantified safety benefits. FRA's proposal to rescind part 246 in its entirety would eliminate all the issues and concerns that were raised in the petitions for reconsideration and would eliminate the estimated costs associated with the 2024 final rule.
While FRA has the statutory authority to issue regulations requiring signal employee certification, it is not obligated to issue such regulations. Specifically, the RSIA provides that “[t]he Secretary
For the reasons stated above, FRA proposes to rescind part 246 in its entirety. If FRA issues a final rule that rescinds part 246, FRA will continue to gather data on this issue and may reassess in the future whether certification requirements for signal employees are warranted. Alternatively, if FRA decides not to rescind this rule in its entirety, FRA proposes to extend the compliance dates for this rule to provide railroads with additional time to come into compliance with part 246. The proposed extension could be for a period of approximately six to twelve months from the effective date of a new final rule and would provide the regulated community assurance that they would not be liable for noncompliance with the existing regulation, should FRA determine not to finalize the rescission of part 246.
FRA has considered the impact of this NPRM under E.O. 12866 (58 FR 51735, Oct. 4, 1993), Regulatory Planning and Review, and DOT Regulatory Policies and Procedures. The Office of Management and Budget (OMB) Office of Information and Regulatory Affairs determined that this NPRM is not a significant regulatory action under section 3(f) of E.O. 12866.
FRA is proposing to rescind the May 21, 2024 final rule addressing the Certification of Signal Employees. FRA has analyzed the potential costs and benefits of this proposed rule.
In the 2024 final rule, FRA estimated 10-year costs of $9.4 million (PV, 7 percent). If FRA finalizes the proposed rescission of that final rule, those costs would become a cost savings. Table 1 shows the total 10-year cost savings of this proposed rule.
In the 2024 final rule, FRA estimated 10-year benefits of $2.9 million (PV, 7 percent), which would no longer be realized if the 2024 final rule is rescinded.
FRA recognizes there may be some railroads who may have begun to comply with the 2024 final rule and therefore, incurred costs. However, FRA expects that the cost savings that would be realized from rescinding the 2024 rule ultimately are greater than the foregone safety benefits.
E.O. 14192 (90 FR 9065, Jan. 31, 2025), Unleashing Prosperity Through Deregulation, requires that for “each new [E.O. 14192 regulatory action] issued, at least ten prior regulations be identified for elimination.”
An E.O. 14192 deregulatory action is defined as “an action that has been finalized and has total costs less than zero.” This proposed rule, if finalized as proposed, is expected to have total costs less than zero or negligible costs, and therefore it would be considered an E.O. 14192 deregulatory action. The rescission of the 2024 final rule is expected to result in an estimated 10-year cost savings of $9.4 million, discounted at 7 percent.
The Regulatory Flexibility Act ((RFA), 5 U.S.C. 601
FRA certified that the 2024 final rule for Certification of Signal Employees
In accordance with section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat. 857), FRA wants to assist small entities in understanding this proposed rule so they can better evaluate its effects on themselves and participate in the rulemaking initiative. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult the person listed under
There is no new collection of information requirements contained in this proposed rule and, in accordance
FRA has analyzed this proposed rule for the purposes of the National Environmental Policy Act of 1969 (NEPA). In accordance with 42 U.S.C. 4336 and DOT NEPA Order 5610.1D, FRA has determined that this rule is categorically excluded pursuant to 23 CFR 771.116(c)(15). This rulemaking is not anticipated to result in any environmental impacts, and there are no unusual or extraordinary circumstances present in connection with this rulemaking.
This proposed rule would not have a substantial effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Thus, in accordance with E.O. 13132, Federalism (64 FR 43255, Aug. 10, 1999), preparation of a Federalism Assessment is not warranted.
This proposed rule would not result in the expenditure, in the aggregate, of $100,000,000 or more, adjusted for inflation, in any one year by State, local, or Indian Tribal governments, or the private sector. Thus, consistent with section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 2 U.S.C. 1532), FRA is not required to prepare a written statement detailing the effect of such an expenditure.
E.O. 13211 requires Federal agencies to prepare a Statement of Energy Effects for any “significant energy action.”
FRA has evaluated this proposed rule in accordance with the principles and criteria contained in E.O. 13175, Consultation and Coordination with Indian Tribal Governments (Nov. 6, 2000). The proposed rule would not have a substantial direct effect on one or more Indian tribes, would not impose substantial direct compliance costs on Indian tribal governments, and would not preempt tribal laws. Therefore, the funding and consultation requirements of E.O. 13175 do not apply, and a tribal summary impact statement is not required.
The Trade Agreement Act of 1979
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, to
As required by 5 U.S.C. 553(b)(4), a summary of this rule can be found at regulations.gov, Docket No. FRA-2022-0020, in the
Administrative practice and procedure, Signal employee, Penalties, Railroad employees, Railroad safety, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, under the authority of E.O. 14219 and 49 U.S.C. 20103, FRA proposes to remove 49 CFR part 246.
Issued in Washington, DC.
Rural Business-Cooperative Service, U.S. Department of Agriculture (USDA).
Notice of funding opportunity.
The Rural Business-Cooperative Service (RBCS or the Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA) is issuing a Notice of Funding Opportunity (NOFO) to announce acceptance of applications under the Rural Business Developmental grant program for fiscal year (FY) 2026. In future years this funding opportunity will only be announced on the Agency website and
May 15, 2026.
Full funding notice is available on grants.gov. Program guidance and application forms may be obtained at
Rachel Resister at
The full text of the Notice of Funding Opportunity (NOFO) is available on the Agency website and on
Economic Development Administration, Department of Commerce.
Notice of information collection, request for comment.
The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB.
To ensure consideration, comments regarding this proposed information collection must be received on or before July 14, 2026.
Interested persons are invited to submit written comments by email to Jason Goodwin, Business Analyst, U.S. Department of Commerce,
Requests for additional information or specific questions related to collection activities should be directed to the Jason Goodwin, Business Analyst, Economic Development Administration, U.S. Department of Commerce, at
The Economic Development Administration (EDA) leads the Federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy. Guided by the basic principle that sustainable economic development should be locally driven, EDA works directly with communities and regions to help them build the capacity for economic development based on local business conditions and needs. The Public Works and Economic Development Act of 1965 (PWEDA) (42 U.S.C. 3121
The approved data collection instrument (OMB 0610-0098) covers four separate forms; the ED-915, ED-916, ED-917, and ED-918, which are used to collect performance data on EDA's infrastructure (ED-915) and non-infrastructure (ED-916/ED-917/ED-918) program portfolios. This data collection instrument provides EDA with a comprehensive view of the entirety of its grant programming and helps ensure investments are evidence-based, data-driven, and accountable to participants and the public. EDA's expansive portfolio of programs, changing technology, and advances in the field of program evaluation require EDA to regularly review the questions on these forms and the associated burden with each to ensure relevant data collections that increase EDA's transparency, accountability, and inform the effectiveness of its investments. Through this review, EDA proposes
The purpose of this notice is to seek comments from the public and other Federal agencies on a request for an extension with revision on the ED-916 non-infrastructure metrics for recipients of awards under EDA's non-infrastructure portfolio of programs and an extension of the ED-915 construction metrics for recipients under EDA's construction portfolio of programs. EDA will require award recipients to submit this data at predetermined intervals (ED-916: annually for 5 years from award; ED-915 at 3-, 6-, 9-year intervals from award) to determine the activities grantees were able to undertake because of the EDA award and the outcomes from those activities for both grantee organizations and the communities they serve.
Data will be collected electronically.
We are soliciting public comments to permit the Department/Bureau to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Golden Pass LNG Terminal LLC (GPLNG) submitted a notification of proposed production activity to the FTZ Board (the Board) for its facility in Port Arthur, Texas within Subzone 116E. The notification conforming to the requirements of the Board's regulations (15 CFR 400.22) was received on May 7, 2026.
Pursuant to 15 CFR 400.14(b), FTZ production activity would be limited to the specific foreign-status material(s)/component(s) and specific finished product(s) described in the submitted notification (summarized below) and subsequently authorized by the Board. The benefits that may stem from conducting production activity under FTZ procedures are explained in the background section of the Board's website—accessible via
The proposed finished product is a natural gas terminal (duty rate is duty-free).
The proposed foreign-status materials/components include: molecular sieve; sulfur impregnated activated carbon; activated alumina (aluminosilicate); ceramic balls; polyurethane heat isolation block; urethane block rigid polyurethane foam; polyethylene gasket; plastic o-ring; plastic cable tie; plastic washer; plastic wiper; plastic support; vibrocut si-rubber sheet; vulcanized rubber gasket; denso-feu tape; textile hose; gasket-carbon fiber; flat steel; steel spring wire; seamless stainless steel pipe; seamless non-alloy steel line pipe; seamless stainless steel tubing; seamless alloy steel (non-stainless) line pipe; submerged arc welded (saw) line pipe of non-alloy steel; welded stainless steel line pipe; stainless steel flanges; stainless steel blind flange; stainless steel weld neck raised face flange; stainless steel threaded pipe connectors; stainless steel butt weld pipe fittings; stainless steel pipe fittings; steel weld neck raised face flange; steel flanges; steel weld neck raised face serrated flange; steel long weld neck raised face flange; steel blind flange raised face; steel blind flange ring-to-joint; steel spectacle blind; threaded steel pipe fittings; steel pipe fittings; steel pipe union; steel washer; structural steel angle; steel plate; structural steel support; steel beam; steel column; structural steel v length brace; structural steel post; structural steel support angle; steel frame; steel amine regenerator; steel rail; structural steel platform with grate; steel directional brace; steel stair case; steel safety gate; steel ladder; steel cladding; steel personnel protection unit; steel template for drum; steel fence panel; steel structure; steel doors; steel joints; steel hexagon nut; steel rivets; steel duct; steel cable; steel tank; steel vessel; steel drum; steel bar; steel wire mesh screen; steel support; steel bolts; polytetrafluoroethylene washer; polytetrafluoroethylene sleeve; teflon plate; steel lifting eye; steel screw; steel anchor; steel threaded rod; fluoropolymer bolting auxiliary module; stainless steel hexagonal nut; steel clip; steel compression spring; steel cable tie; pipe support steel trunnion; steel pipe support pipe shoe; pipe support structure steel support; steel guide; pipe support steel stopper; pipe support round steel bar; pipe support bracing steel support; polytetrafluorethylene stainless steel plate; steel pipe support pipe clamp shoe with thermoplastic heat isolation block; steel cold rolled strip; steel spacer; steel pad; pipe support steel plate; pipe support steel rib; pipe support steel saddle; steel silencer; sealing ring; steel cable tray; steel cable tray reducer; steel cable tray elbow; steel cable tray blind end; steel cable tray bonding jumper; steel clamp; steel stanchion; steel pipe strap; tin mounting bracket; steel channel; steel rod; steel hose rack; galvanized steel grating saddle clips; steel foil strip; balance piston; steel disc; nickel alloy pipe; nickel flange; nickel pipe fittings; welding rod; steel shell; steel exhaust stack; steel shear block; steel flange; steel handle; steel lug; steel gas baffles; steel baffle keeper; insulation; steel bypass stack; purge air fan duct module; steel stack angle; steel hanger; steel air cooled condenser; heat recovery steam generator; steel gear box; aluminum fan hub; aluminum fan blade; steam filter; steel rotor coupling; steel inner casing; piston ring; aluminum guide blade carrier; o-ring; mineral oil mist separator skid; acoustic enclosure; gas valve skid; ethernet connection; steel chassis; analog connection; serial modbus converter; digital input/output; main central processing unit; diode; fuel gas wobbe index meter; stainless steel probes; steel pipe; universal analog input/output; controller; ethernet switch; input/output pack; power distribution module; performance monitoring panel; steel male connector; stainless steel cable gland; steel oval flange; steel shrouds; stainless steel modeling tubing; stainless steel ferrule; oil supply unit; gasket—spiral wound; steel cowl; tetraglass gasket; dehumidifier; steel grating; steel spool; steel coupling; steel pedestal; steel coupling guard; local control station; steel sheet metal; steel collar; centrifugal fan; rubber antivibration pad; fuel gas skid; steel casing drain; pressure gauge; chemical mortar cartridge; steel blind rivet nut; steel angle fitting; rubber hose; neoprene gasket; pressure transmitter; steel restriction orifice; steel earthing bar; steel reducer nipple; junction box; firefighting skid; filter house; duct reducer; steel exhaust frame; air cooler; water wash skid; pumps skid; steel plenum; internal tooth steel lockwasher; silicon gasket; steel union tee; steel plug; air separator; pressure transducer; pressure sensor; steel probe holder; pitot tube; steel sleeve; charge amplifier; steel unistrut; oil vapor separator; steel safety valve; fuel gas analysis console (chromatograph); steel cartridge; steel clamping block; pneumatic actuator; steel sieve basket; steel ring; steel head flange lifting device; steel rotation rotor device; steel spanset eye-bolt; steel shackle; steel adaptor flange; stainless steel bearings; steel rotor locking device; steel bracket; steel shaft; steel hydraulic cylinder; dial gauge; steel centering half ring; threaded steel bushing; panel key; centrifugal compressor; cork gaskets; copper bars; aluminum high voltage cable box; high voltage surge arresters; electric motor; steel radiators; profile iron; steel conservator; transformer; steel counter flanges; compressor; gas turbine; steel burners; steel riser; aluminum cold box; expander stainless steel line; stainless steel bolt; stainless steel flat washer; stainless steel expansion joint; stainless steel conical strainer; actuator; stainless steel transition box; rock wool; perlite; steel coalescer; mercury adsorber; steel guard; steel strainer; steel filter element; steel davit; steel separator; alloy steel socket head cap screw; automatic data processing machine—server; steel valve; steel bearing shell; steel bearing; ac multi-phase motor; steel foundation bolt; conical steel seat; resistance temperature detector; resistance thermometer; contact brush; threaded steel heating body; transmitter; generator; stainless steel valve plug; stainless steel expansion bellows; level transmitter; steel collar sleeve; steel pin; profile steel; console; steel thermo well extension; steel socket; flanged steel tube; feeler gage; temperature transducer; steel terminal box; steel dowel; steel shaft turning unit; steel pressure test port; elbow screw fitting; t-type steel bolt; steel blind flange; hot dip galvanized conduit; switch cabinet; plastic wieland plug; smoke detector; differential pressure switch; fluorescent tube; aluminum electric cable duct holder extension; heater; steel hoist trolley; steel hoist chain; system ax; thermowall; aluminum cable channel; steel drainage collector; resistor; surge arrestors; relay; bypass tube; desiccant agent; steel handwheel; pressure relief device; stainless steel cable strips; steel cap; sound roof; steel turnbuckle; heating element; stainless steel clips; rotor earthing; taper key; flexible steel braid; short circuit bar; fuse; bus duct; cubicle; oil cooler; sight glass; temperature gauge; profile aluminum alloy; condensate pump; aluminum cable lug; low density poly ethylene tube foil; condensate pump; splitter; insulator; axial fan; rubber sponge; sealant; welding wire; aluminum pipe; steel link; compensator; silicone bushing; earthing pad; lithium battery; signal light; communications processor; display monitor; network surge suppressor; circuit breaker; initiator; amplifier; auxiliary switch block; manual push button; connection plug; composite wire sleeve; terminal; shield connection clamp; control cabinet;
The request indicates that certain materials/components are subject to duties under section 122 of the Trade Act of 1974 (Section 122), section 232 of the Trade Expansion Act of 1962 (section 232), or section 301 of the Trade Act of 1974 (section 301), depending on the country of origin. The applicable section 122, section 232, and section 301 decisions require subject merchandise to be admitted to FTZs in privileged foreign (PF) status (19 CFR 146.41). The request also indicates that seamless non-alloy steel line pipe; seamless alloy steel (non-stainless) line pipe; submerged arc welded (saw) line pipe of non-alloy steel; stainless steel flanges; stainless steel blind flange; stainless steel weld neck raised face flange; steel weld neck raised face flange; steel blind flange raised face; steel long weld neck raised face flange; threaded steel pipe fittings; steel butt weld pipe fittings; steel pipe fittings; steel pipe union; steel cap; steel plug; steel bolts; steel threaded rod; steel clip; flat steel; submerged arc welded (saw) line pipe of non-alloy steel; stainless steel butt weld pipe fittings; steel flanges; steel tee; non-stainless steel hollow bar; steel plug; and steel caps are subject to an antidumping/countervailing duty (AD/CVD) order/investigation if imported from certain countries. The Board's regulations (15 CFR 400.13(c)(2)) require that merchandise subject to AD/CVD orders, or items which would be otherwise subject to suspension of liquidation under AD/CVD procedures if they entered U.S. customs territory, be admitted to the zone in PF status (19 CFR 146.41).
Public comment is invited from interested parties. Submissions shall be addressed to the Board's Executive Secretary and sent to:
A copy of the notification will be available for public inspection in the “Online FTZ Information System” section of the Board's website.
For further information, contact Christopher Williams at
International Trade Administration, Enforcement & Compliance, Commerce.
Notice of information collection, request for comment.
The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB.
To ensure consideration, comments regarding this proposed information collection must be received on or before July 14, 2026.
Interested persons are invited to submit written comments to Julie Al-Saadawi, Director, Industrial Monitoring and Analysis Unit, International Trade Administration by email to
Requests for additional information or specific questions related to collection activities should be directed to Julie Al-Saadawi, Director, Industrial Monitoring and Analysis Unit, International Trade Administration by email to
The President's Proclamation on Steel Safeguards mandated that the Departments of Commerce and Treasury institute an import licensing system to facilitate the monitoring of certain steel imports in 2002. In 2005, Commerce enacted regulations that implemented the Steel Import Monitoring and Analysis (SIMA) System and expanded on the licensing system for steel that was part of those safeguards. Most recently, in October 2020, Commerce modified its SIMA regulations to require that steel import license applicants identify the country of melt and pour as an additional field on the steel import license application and expanded the licensing requirement to apply to all steel products.
The import license information is necessary to assess import trends of steel products. In order to effectively monitor steel imports, Commerce must collect and provide timely aggregated summaries about the imports. The Steel Import License is the tool used to collect the necessary information. The Census Bureau currently collects import data and disseminates aggregate information about steel imports. However, the time required to collect, process, and disseminate this information through Census can take up to 90 days after importation of the product, giving interested parties and the public far less time to respond to injurious sales.
The license application can be submitted electronically via the Commerce website (
We are soliciting public comments to permit the Department/Bureau to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Notice; correction.
The U.S. Department of Commerce (Commerce) published an Advance Notification of Sunset Review in the
Brenda E. Brown, Office of AD/CVD Operations, Customs Liaison Unit, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, telephone: (202) 482-4735.
On May 1, 2026, Commerce published in the
In the
This notice is issued and published in accordance with section(s) 751(a)(1) and 777(i)(1) of the Tariff Act of 1930, as amended, and 19 CFR 351.213(d)(4).
International Trade Administration, Enforcement & Compliance, Commerce.
Notice of Information Collection, request for comment.
The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public's reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB.
To ensure consideration, comments regarding this proposed information collection must be received on or before July 14, 2026.
Interested persons are invited to submit written comments to Julie Al-Saadawi, Director, Industrial Monitoring and Analysis Unit, International Trade Administration by email to
Requests for additional information or specific questions related to collection activities should be directed to Julie Al-Saadawi, Director, Industrial Monitoring and Analysis Unit, International Trade Administration by email to
Under the Aluminum Import Monitoring and Analysis (AIM) system, importers, custom brokers, or their agents are required to obtain an import license for each entry of covered aluminum products. To obtain an import license, each applicant must identify, among other fields, the country or countries where the largest and second largest volume of primary aluminum used in the manufacture of the imported aluminum product was smelted and the country where the aluminum product was most recently cast. On December 23, 2020, Commerce published the final rule adopting regulations establishing the AIM system in 19 CFR part 361 (85 FR 83804; December 23, 2020).
The import license information is necessary to assess import trends of aluminum products. In order to effectively monitor aluminum imports, Commerce must collect and provide timely aggregated summaries about the imports. The Aluminum Import License form is the tool used to collect the necessary information. The Census Bureau currently collects import data and disseminates aggregate information about aluminum imports. However, the time required to collect, process, and disseminate this information through Census can take up to 45 days after importation of the product, giving
The license application can be submitted electronically via the Commerce website (
We are soliciting public comments to permit the Department/Bureau to: (a) Evaluate whether the proposed information collection is necessary for the proper functions of the Department, including whether the information will have practical utility; (b) Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used; (c) Evaluate ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this ICR. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you may ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
International Trade Administration, U.S. Department of Commerce.
Notice.
On June 13, 2025, the International Trade Administration published a Notice titled “Procedures To Administer Import Adjustment Offset Amounts for Certain Imports of Automobile Parts Under Proclamation 10908, as Amended” (June 13 Notice), which established procedures for automobile manufacturers to apply for and use the import adjustment offset amount established by Presidential Proclamation 10925 of April 29, 2025, “Amendments to Adjusting Imports of Automobiles and Automobile Parts Into the United States” to incentivize domestic automobile production and reduce American reliance on imports of foreign automobiles and their parts. This notice amends those procedures consistent with the amendments to Proclamation 10925 set forth in Presidential Proclamation 10984 of October 17, 2025, “Adjusting Imports of Medium- and Heavy-Duty Vehicles, Medium- and Heavy-Duty Vehicle Parts, and Buses Into the United States”. This notice also amends those procedures to allow domestic manufacturers of Medium- and Heavy-Duty Vehicles (MHDV) to claim import adjustment offsets for imports of MHDV parts (MHDVPs) and automobile parts in a manner consistent with Proclamation 10984. The procedures exclude certain heavy-duty vehicle assembly operations determined to be “limited production operations” from being considered in the calculation of offsets, and notes that these procedures will be amended to exclude limited production operations for automobiles and medium-duty vehicles at a later date. This notice replaces the procedures set forth in ITA's June 13 Notice. The import adjustment offset process will be amended at a later date to establish an equivalent process for domestic manufacturers of automobile engines and MHDV engines, as provided for in Proclamation 10984.
Applications from domestic manufacturers of MHDVs can be submitted starting May 15, 2026. Domestic manufacturers of automobiles may continue to submit applications at the address below.
Offset applications must be submitted electronically to:
Emily Davis, Director for Public Affairs, International Trade Administration, U.S. Department of Commerce, 202-482-3809,
On March 26, 2025, the President issued Proclamation 10908, finding that imports of automobiles (defined as passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans) and light trucks) and certain automobile parts continue to threaten to impair the national security of the United States and imposing specified tariffs to adjust imports of automobiles and certain automobile parts so that such imports will not threaten to impair national security pursuant to section 232 of the Expansion Act of 1962, as amended (19 U.S.C. 1862) (90 FR 14705). Proclamation 10908 imposed a 25 percent tariff on certain imports of automobiles, effective April 3, 2025, and certain imports of automobile parts, effective May 3, 2025.
On April 29, 2025, the President issued Proclamation 10925, which allowed for automobile manufacturers assembling automobiles in the United States to apply for an import adjustment offset amount, which would offset certain tariff liability under Proclamation 10908 on imports of automobile parts (90 FR 18899). Proclamation 10925 required the Secretary of Commerce (Commerce) to establish a process by which automobile manufacturers may submit documentation supporting eligibility for an import adjustment offset amount. Commerce established an import adjustment offset process through the June 13 Notice “Procedures To Administer Import Adjustment Offset Amounts for Certain Imports of
On October 17, 2025, the President issued Proclamation 10984, finding that imports of MHDVs, certain MHDVPs, and buses threaten to impair the national security of the United States and imposing specified tariffs to adjust imports of MHDVs, certain MHDVPs, and buses so that such imports will not threaten to impair national security, and imposing a 25 percent tariff on certain imports of MHDVs and MHDVPs, effective November 1, 2025 (90 FR 48451). Under Proclamation 10984, buses and other vehicles classified in Harmonized Tariff Schedule of the United States (HTSUS) heading 8702 are subject to a 10 percent tariff. Given the “close connections and overlap between part suppliers” for the automobile industry and the MHDV industry, Proclamation 10984 also amends Proclamation 10925 to conform certain aspects of the tariff system imposed by Proclamations 10908 and 10925 for automobiles and automobile parts to the tariff system imposed by Proclamation 10984.
Proclamation 10984 allowed MHDV manufacturers assembling MHDVs in the United States to apply for an import adjustment offset amount, which would offset certain tariff liability under Proclamation 10984 on imports of MHDVPs. Proclamation 10984 required Commerce to establish a process by which MHDV manufacturers may submit documentation supporting eligibility for an import adjustment offset amount. This notice amends the Offset Process to allow domestic manufacturers of MHDVs to apply for and receive import adjustment offsets, including application, documentation, and certification requirements, eligibility conditions, and coordination with U.S. Customs and Border Protection (CBP). Commerce is still considering if and how the Offset Process should apply to manufacturers based on bus production; no determination regarding the availability of such offsets has yet been made. The Offset Process procedures set forth in this notice replace the Offset Process procedures set forth in the June 13 Notice.
Proclamation 10984 authorized Commerce to issue regulations and guidance consistent with that proclamation, including to address operational necessity. Commerce has determined that, in light of the “close connections and overlap between part suppliers” for the automobile industry and the MHDV industry identified in Proclamation 10984, and the fact that the President found that conforming the tariff systems between automobiles and MHDVs will more effectively address the threat to national security found in Proclamations 10908 and 10984, it is necessary to allow MHDV manufacturers assembling MHDVs in the United States to apply for an import adjustment offset amount for automobile parts as well as for MHDVPs, allowing them to offset tariff liability under both Proclamation 10984 and Proclamation 10908. Similarly, Commerce has determined that, in light of that close connection, it is necessary to allow automobile manufacturers assembling automobiles in the United States to apply for an import adjustment offset amount for MHDVPs as well as for automobile parts, allowing them to offset tariff liability under both Proclamation 10908 and Proclamation 10984.
Proclamation 10984 also provides Commerce with the authority to prohibit MHDV manufacturers from using offset amounts for imports of products where offsets would be inconsistent with addressing the threat to the national security found in that Proclamation. Through Proclamation 10984, for MHDV, the President sought to strengthen supply chains, bolster industrial resilience, create high-quality jobs that will expand the skilled workforce in the United States, and increase domestic capacity utilization and U.S. MHDV market share. Similarly, for automobiles, Proclamation 10925 expressed the goals of reducing reliance on foreign manufacturing and importation of automobiles and automobile parts, strengthening U.S. vehicle assembly operations, shifting manufacturing activity into the United States, creating jobs in the automotive industry, and ensuring that other benefits of production are concentrated in the United States.
In light of these goals, Commerce found that it is appropriate to exclude assembly operations determined to be “limited production operations” from being considered in the calculation of offsets. Commerce also found that what should be determined to be “limited production operations” should be determined in light of the manufacturing processes for that particular class of vehicles.
With respect to heavy-duty vehicles (vehicles in Classes 7 and 8, as defined in 49 CFR 565.15), Commerce has determined that production operations in the United States that rely on imported chassis, chassis gliders, chassis with engine, or engines, should be considered to be limited production operations. Heavy-duty vehicles are large enough to allow for separate components to be fully assembled elsewhere, imported, and bolted together to make a finished heavy-duty vehicle, and this type of limited production operation does not forward the national security goals of Proclamation 10984. Therefore, heavy-duty vehicle production that includes incorporating an imported chassis, chassis glider, chassis with engine, or engine in the vehicle, is not eligible for offsets under the Offset Process.
Commerce is not applying this definition of limited production operations to automobiles (including light-duty trucks classifiable in the HTSUS subheadings listed in Part A of Annex I to Proclamation 10908) and medium-duty vehicles (Classes 3, 4, 5, and 6 as defined in 49 CFR 565.15) vehicles because of the significant differences in the manufacturing operations between those vehicles and heavy-duty vehicles (Class 7 and 8); manufacturing operations for these different classes of vehicles are fundamentally different. Processes differ in terms of scale of production, number and type of significant components sourced from outside parties, type of assembly activity conducted and the state of the vehicles when they leave the production line. Because of these differences, it is appropriate to limit the determination above regarding what should be considered “limited production operations” to heavy-duty vehicles.
Commerce is not restricting offsets for automobiles and medium-duty vehicles on the basis of “limited production operations” at this time as Commerce is still considering what assembly operations for these vehicles should be considered to be “limited production operations.” Commerce will further consider this issue and amend the Offset Process at a later date once it makes a determination. As part of this consideration, Commerce will review information submitted with offset applications with respect to current vehicle assembly operations in the United States.
Section 3 of Proclamation 10925 states that Commerce, “in consultation with the Secretary of the Treasury and the Commissioner of CBP, shall issue such regulations, guidance, and procedures as necessary to carry out the provisions of this proclamation and Proclamation 10908, and may establish standards for . . . validating manufacturer certifications.” To validate MHDV and automobile manufacturer certifications used to calculate offsets provided in preceding years, the Secretary has determined that
Proclamation 10984 also requires Commerce to establish an offset process for MHDV engine manufacturers and an offset process for automobile engine manufacturers equivalent to the processes for manufacturers of MHDVs and automobiles. Commerce will publish a
Proclamation 10984 provides that MHDV manufacturers are eligible for an import adjustment offset amount equal to 3.75 percent of the aggregate value of all MHDVs assembled in the United States by that manufacturer, as determined annually by Commerce, from November 1, 2025, through October 31, 2030. The relevant annual periods are:
• MHDVs assembled between November 1, 2025, and October 31, 2026;
• MHDVs assembled between November 1, 2026, and October 31, 2027;
• MHDVs assembled between November 1, 2027, and October 31, 2028;
• MHDVs assembled between November 1, 2028, and October 31, 2029; and
• MHDVs assembled between November 1, 2029, and October 31, 2030.
Proclamation 10984 also provides that automobile manufacturers are eligible for an import adjustment offset equal to 3.75 percent of the aggregate Manufacturer's Suggested Retail Price (MSRP) of all automobiles assembled in the United States by that manufacturer, as determined annually by Commerce, from April 5, 2025, through April 30, 2030. The relevant annual periods are:
• Automobiles assembled between April 5, 2025 and April 30, 2026;
• Automobiles assembled between May 1, 2026, and April 30, 2027;
• Automobiles assembled between May 1, 2027, and April 30, 2028;
• Automobiles assembled between May 1, 2028, and April 30, 2029; and
• Automobiles assembled between May 1, 2029, and April 30, 2030.
Import adjustment offset amounts may be used by MHDV manufacturers to reduce tariffs on MHDVPs provided for in Proclamation 10984 or tariffs on automobile parts provided for in Proclamation 10908, as amended, and may be carried forward indefinitely until fully exhausted, provided they were granted based on qualifying MHDVs assembled between November 1, 2025 and October 31, 2030. Similarly, import adjustment offset amounts may be used by automobile manufacturers to reduce tariffs on MHDVPs provided for in Proclamation 10984 or tariffs on automobile parts provided for in Proclamation 10908, and may be carried forward indefinitely until fully exhausted, provided they were granted based on qualifying automobiles assembled between April 5, 2025 and April 30, 2030.
For purposes of this notice:
• “MHDVPs” means the articles subject to duties under Proclamation 10984 and classified under the subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) that were established by Proclamation 10984 in U.S. note 38(i) of subchapter III of chapter 99 of the HTSUS, or goods entered under a tariff heading subject to Proclamation 10984, based on a certification by the importer of record that such parts will be used for MHDV production or repair activity in the United States.
• “Automobile parts” means the articles subject to duties under Proclamation 10908 and classified under the subheadings of the HTSUS that were established by that proclamation, in U.S. note 33(g) of the HTSUS, or goods entered under a tariff heading subject to Proclamation 10908, as amended, based on the appropriate certification by the importer of record that such parts will be used in automobile production or repair activity in the United States.
• “MHDV” means articles that would be subject to duties under Proclamation 10984 and classified under the subheadings of the HTSUS that were established by that proclamation in U.S. note 38(b) of subchapter III of chapter 99 of the HTSUS. This definition includes both “medium-duty vehicles” and “heavy-duty vehicles,” as described below.
• “Medium-duty vehicle” means a subcategory of MHDVs classified in Class 3 through Class 6 as defined in 49 CFR 565.15 with a gross vehicle weight of 10,001 pounds to 26,000 pounds.
• “Heavy-duty vehicle” means a subcategory of MHDVs classified in Class 7 and 8 as defined in 49 CFR 565.15 with a gross vehicle weight of 26,001 pounds and above.
• “Automobile” means articles that would be subject to duties under Proclamation 10908 and classified under the subheadings of the HTSUS that were established by that proclamation in U.S. note 33(b) of subchapter III of chapter 99 of the HTSUS. This definition includes light-duty trucks classifiable in the HTSUS subheadings listed in Part A of Annex I to Proclamation 10908 with a gross vehicle weight under 10,000 pounds.
Manufacturers seeking an import adjustment offset amount must submit the following documentation for each period for which an import adjustment offset amount is sought. For MHDV manufacturers, this requires submission of one set of documentation for the period of November 1, 2025 through October 31, 2026; and separate sets of documentation for each of the periods of November 1, 2026 through October 31, 2027; November 1, 2027 through October 31, 2028; November 1, 2028 through October 31, 2029; and November 1, 2029 through October 31, 2030. For automobile manufacturers, this requires submission of one set of documentation for each period of April 5, 2025 through April 30, 2026; May 1, 2026 through April 30, 2027; May 1, 2027 through April 30, 2028; May 1, 2028 through April 30, 2029; and May 1, 2029 through April 30, 2030.
Automobile manufacturers that have already submitted documentation covering April 5, 2025 through April 30, 2026 are not required to submit a revised offset application. However, automobile manufacturers who have already submitted documentation covering periods from May 1, 2026 and onward must resubmit documentation, given changes to the Offset Process.
a. For MHDVs: The number of completed MHDVs projected to be produced in the United States by make and model and the plant locations where the projected MHDVs will undergo final production during each reporting period. MHDV manufacturers shall also describe the U.S. manufacturing activities for each model
b. For Automobiles: The number of automobiles projected to be produced in the United States by make and model and the plant locations where the projected automobiles will undergo final production during each reporting period. Automobile manufacturers shall also describe the U.S. manufacturing activities for each model at each plant location, including the location where each part identified as super-core and listed in Table A.2 of the Appendix to Chapter 4 of the USMCA is incorporated into the finished automobile and the country of origin for each part.
a. For MHDVs: The aggregate value of all such MHDVs identified in the Production Forecast as eligible for an offset assembled in the United States during each reporting period. The aggregate value shall not include the cost (if purchased from a third party) or value (if manufactured by the MHDV producer) of the engine contained in the MHDV; manufacturers must calculate the aggregate value using whichever of the following three valuation methods they used in the ordinary course of trade prior to November 1, 2025: MSRP, Dealer Net Cost, or Factory List Price. In calculating the cost of an engine purchased from a third party, manufacturers should use the price paid on the sale from the engine manufacturer to the MHDV manufacturer. In calculating the value of an engine that was not purchased from a third party, manufacturers should use a methodology consistent with the method for calculating net cost set out in Chapter 4 of the USMCA.
b. For Automobiles: The aggregate MSRP value of all such automobiles identified in the Production Forecast as eligible for an offset assembled in the United States during each reporting period. For documentation covering production forecasts for May 1, 2026 and later, manufacturers must deduct the cost (if purchased from a third party) or value (if manufactured by the automobile producer) of the engine contained in the automobile from this MSRP value. In calculating the cost of the engine purchased from a third party, manufacturers should use the price paid on the sale from the engine manufacturer to the automobile manufacturer. In calculating the value of the engine, manufacturers should determine value using the net cost methodology set forth in Chapter 4 of the USMCA. Manufacturers are not required to deduct the cost or value of the automobile engine for documentation covering the April 5, 2025 through April 30, 2026 period.
a. For MHDVs: If a manufacturer received an offset in the previous year, the manufacturer must provide the number of completed MHDVs produced in the United States in the previous reporting period, the aggregate value of those MHDVs, and a description of the U.S. manufacturing activities for each model at each plant location. In providing these figures, manufacturers must use the eligibility considerations and vehicle value methodology used in the prior year's application.
b. For Automobiles: If a manufacturer received an offset in the previous year, the manufacturer must provide the number of automobiles produced in the United States in the previous reporting period and the aggregate MSRP value of those automobiles. In providing these figures, manufacturers must use the same production calculation and vehicle value methodology used in the prior year's application.
a. For MHDVs: Projected MHDV and MHDVPs tariff liability under clauses 1, 7, and 12 of Proclamation 10984, broken down by Proclamation 10984 tariff costs the manufacturer will incur directly and Proclamation 10984 tariff costs the manufacturer's suppliers will incur. These estimates should not include the tariff liability for MHDV engines or parts used in the manufacture of MHDV engines.
b. For Automobiles: Projected automobiles and automobile parts tariff liability under Proclamation 10908 or under clause 12 of Proclamation 10984, broken down by tariff costs the manufacturer will incur directly and tariff costs the manufacturer's suppliers will incur. These estimates should not include the tariff liability for automobile engines or parts used in the manufacture of automobile engines.
a. For MHDVs and Automobiles: Requested total import adjustment offset amount for each reporting period, including details of how such amount was calculated.
a. For MHDV manufacturers and Automobile manufacturers: A list of authorized importers of record eligible to decrement against the manufacturer's import adjustment offset amount. This list must include the importer's Importer of Record number and the amount of the import adjustment offset amount allotted to each importer of record. Updates to this list may be submitted electronically to Commerce at
a. For MHDVs and Automobiles: A sworn statement from a senior officer of the manufacturer confirming that the submission is true, accurate, and complete to the best of the manufacturer's knowledge under penalty of perjury and confirming that the manufacturer has conducted reasonable diligence to verify the accuracy of the assertions and facts contained in its submissions.
a. For MHDVs and Automobiles: Any other information the applicant feels is necessary to facilitate decision making.
Commerce will review applications for completeness. Commerce may request supplemental documentation or clarification. Approved manufacturers will be notified in writing of approval and amount of offset granted, and
Import Adjustment Offset amounts claimed at time of entry for both MHDVs and Automobiles:
• May be used only by approved importers associated with the approved manufacturer;
• May be applied only to reduce tariff liability incurred under clauses 1, 7, or 12 of Proclamation 10984 or Proclamation 10908 on eligible MHDV or automobile parts;
• May not exceed the manufacturer's total tariff liability on covered MHDVPs and automobile parts; and
• May not be traded, sold, or transferred.
Commerce will monitor manufacturer and importer compliance and communicate information regarding noncompliance to CBP, where appropriate. CBP may exercise its authority to conduct audits to ensure compliance with this regulation. If it is determined that inaccurate, incomplete, or false information, has been submitted, penalties may be imposed.
Under Proclamation 10984, Commerce, in consultation with the United States International Trade Commission and CBP, shall determine the modifications necessary to the HTSUS to effectuate that proclamation and shall make such modifications to the HTSUS through notice in the
Effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on November 1, 2025:
Subdivision (i) of U.S. note 38 to subchapter III of chapter 99 of the HTSUS is modified by deleting the first paragraph, and inserting the following in lieu thereof: “Subject to a manufacturer's import adjustment offset amount that may be determined by the Secretary of Commerce under Proclamation 10984 of October 17, 2025 (90 FR 48451), the rates of duty set forth in heading 9903.74.08 applies to parts of medium- and heavy-duty vehicles classifiable in the provisions of the HTSUS enumerated in this subdivision:”
A Federal agency may not conduct or sponsor, and a person is not required to respond to, nor shall a person be subject to a penalty for failure to comply with an information collection subject to the requirements of the Paperwork Reduction Act of 1995 unless the information collection has a currently valid OMB Control Number. The approved OMB Control Number for this information collection is 0690-0283. Without this approval, we could not conduct this information collection. Public reporting for this information collection is estimated to be approximately 40 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the information collection. The estimated burden hours are within the approved burden hour limits of this control number. All responses to this information collection are voluntary. Send comments regarding this burden estimate or any other aspect of this information collection, including suggestions for reducing this burden to the International Trade Administration Paperwork Reduction Act Program:
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) finds that Wuyi Xilinde Machinery Manufacture Co., Ltd. (Wuyi Xilinde), the sole mandatory respondent in this review, sold non-refillable steel cylinders (steel cylinders) from the People's Republic of China (China) at less than normal value during the period of review (POR), May 1, 2023, through April 30, 2024.
Applicable May 15, 2026.
Matthew Palmer, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1678.
On September 11, 2025, Commerce published the
For a complete description of the events that followed the
The products covered by the
As provided in section 782(i) of the Tariff Act of 1930, as amended (the Act), Commerce conducted verification of the sales and factors of production information submitted by Wuyi Xilinde.
All issues raised in the case and rebuttal briefs are addressed in the Issues and Decision Memorandum. A list of the issues that parties raised and to which we responded in the Issues and Decision Memorandum is attached as an appendix to this notice.
Based on a review of the record and comments received from interested parties regarding the
Commerce's policy regarding the conditional review of the China-wide entity applies to this administrative review.
Commerce determines that the following estimated weighted-average dumping margin exists for the period May 1, 2023, through April 30, 2024:
Normally, Commerce discloses to interested parties the calculations performed in connection with a final determination within five days of its public announcement or, if there is no public announcement, within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). However, because Commerce applied AFA to the mandatory respondent in this review in accordance with section 776 of the Act, there are no calculations to disclose.
Pursuant to section 751(a)(2)(A) of the Act, and 19 CFR 351.212(b)(1), Commerce shall determine, and U.S. Customs and Border Protection (CBP) shall assess, antidumping duties on all appropriate entries covered by this review. Because Commerce determined Wuyi Xilinde's margin on the basis of AFA in the final results of this review, Commerce will instruct CBP to assess antidumping duties on all appropriate entries subject merchandise exported by Wuyi Xilinde at the rate equal to the weighted-average dumping margin listed in the table above.
Commerce intends to issue assessment instructions to CBP no earlier than 35 days after the date of publication of the final results of this review in the
The following cash deposit requirements will be effective upon publication of the final results of administrative review for all shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on, or after, the publication date of the final results of review, as provided for by section 751(a)(2)(C) of the Act: (1) the cash deposit rates for Wuyi Xilinde will be equal to the company-specific weighted-average dumping margin established in the final results of this administrative review; (2) for a previously investigated or reviewed exporter of subject merchandise not listed in the final results of review that has a separate rate, the cash deposit rate will continue to be the exporter's existing cash deposit rate; (3) for all Chinese exporters of subject merchandise that do not have a separate rate, the cash deposit rate will be the cash deposit rate established for the China-wide entity,
This notice also serves as a final reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping and/or countervailing duties prior to liquidation of the relevant entries during this POR. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping and/or countervailing duties occurred and the subsequent assessment of double antidumping duties and/or an increase in the amount of antidumping duties by the amount of the countervailing duties.
This notice also serves as the final reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.
We are issuing and publishing this notice in accordance with sections 751(a)(l) and 777(i)(l) of the Act, 19 CFR 351.221(b)(5) and 19 CFR 351.213(h)(1).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) preliminarily finds that Shanghai Tainai Bearing Co., Ltd. (Tainai), the sole company subject to the administrative review of the antidumping duty order on tapered roller bearings and parts thereof, finished or unfinished (TRBs) from the People's Republic of China (China) covering the period of review (POR) June 1, 2024, through May 31, 2025, is not eligible to receive a separate rate and is, therefore, considered part of the China-wide entity. We invite interested parties to comment on these preliminary results.
Applicable May 15, 2026.
Jerry Xiao, AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1246.
On February 26, 1990, Commerce published the
In the
Due to the lapse in appropriations and Federal Government shutdown, on November 14, 2025, Commerce tolled all deadlines in administrative proceedings by 47 days.
The product covered by the
Commerce considers China to be an NME country.
In all proceedings involving an NME country, Commerce maintains a rebuttable presumption that all companies are subject to government control and, thus, should be assessed a single weighted-average dumping margin with the exception of companies that can affirmatively demonstrate an absence of government control, both in law (
Under Commerce's policy regarding the conditional review of the China-wide entity,
In this review, Tainai did not submit a SRC to certify that it continues to meet the criteria for obtaining a separate rate. Commerce considers all companies for which a review was requested, and which did not demonstrate separate rate eligibility, to be part of the China-wide entity.
Normally, Commerce will disclose to the parties in a proceeding the calculations performed in connection with preliminary results of review within five days of any public announcement or, if there is no public announcement, within five days of the date of publication of the notice of preliminary results in the
Case briefs and other written comments may be submitted to the Assistant Secretary for Enforcement and Compliance. Pursuant to 19 CFR 351.309(c), we have modified the deadline for interested parties to submit case briefs to Commerce to no later than 21 days after the date of publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than five days after the date for filing case briefs.
As provided under 19 CFR 351.309(c)(2)(iii) and (d)(2)(iii), we request that interested parties provide at the beginning of their briefs a public, executive summary for each issue raised in their briefs.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, filed electronically via ACCESS. An electronically filed hearing request must be received successfully in its entirety by Commerce's electronic records system, ACCESS, by 5:00 p.m. ET within 30 days after the date of publication of this notice.
In accordance with section 751(a)(2)(C) of the Act, the final results of this review shall be the basis for assessment of antidumping duties on entries of merchandise covered by this review.
For the final results of this review, if we continue to find that Tainai is not eligible for a separate rate and treat it as part of the China-wide entity, we will instruct CBP to apply the
The following cash deposit requirements for estimated antidumping duties will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise from China entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(2)(C) of the Act: (1) for subject merchandise exported by a company with a separate rate from a previously completed segment of this proceeding, the cash deposit rate will continue to be the existing exporter-specific rate, or produced-exporter-specific rate, for that exporter, (2) for all exporters of subject merchandise that have not been found to be entitled to a separate rate,
Unless otherwise extended, Commerce intends to issue the final results of this administrative review, including the results of its analysis of issues raised in case and rebuttal briefs, within 120 days of publication of these preliminary results of review in the
This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this POR. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
We are issuing and publishing these preliminary results of review in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.213 and 351.221(b)(4).
Imports covered by the
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The U.S. Department of Commerce (Commerce) determines that Industeel Belgium S.A. (Industeel) made sales of certain carbon and alloy steel cut-to-length plate (CTL plate) from Belgium at less than normal value during the period of review (POR), May 1, 2023, through April 30, 2024. Commerce also determines that NLMK Clabecq S.A., NLMK Plate Sales S.A., NLMK Sales Europe S.A., NLMK Manage Steel Center S.A., and NLMK La Louviere S.A. comprise a single entity (collectively, NLMK Belgium) and had no shipments to the United States during the POR.
Applicable May 15, 2026.
Jerry Xiao, AD/CVD Operations, Office II, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-2273.
On September 11, 2025, Commerce published in the
For a complete description of the events that occurred since the
Commerce conducted this administrative review in accordance with section 751 of the Tariff Act of 1930, as amended (the Act).
The merchandise subject to the
All issues raised in the case and rebuttal briefs are addressed in the Issues and Decision Memorandum and are listed in the appendix to this notice.
Based on a review of the record and comments received from interested parties regarding our
As a result of this review, we determine that the following estimated weighted-average dumping margin exists for the period May 1, 2023, through April 30, 2024:
Commerce intends to disclose the calculations performed in connection with these final results of review to interested parties within five days after public announcement of the final results or, if there is no public announcement, within five days of the date of publication of this notice in the
Pursuant to section 751(a)(2)(C) of the Act, and 19 CFR 351.212(b)(1), Commerce has determined, and U.S. Customs and Border Protection (CBP) shall assess, antidumping duties on all appropriate entries of subject merchandise in accordance with the final results of this review. For these final results, we will instruct CBP to apply an
Commerce's “automatic assessment” will apply to entries of subject merchandise during the POR produced by Industeel in these final results of review for which Industeel did not know that the merchandise it sold to the intermediary (
For NLMK Belgium, we will instruct CBP to liquidate any existing entries of NLMK Belgium but exported by other parties at the rate of the intermediate reseller, if available, or at the all-others rate.
Commerce intends to issue assessment instructions to CBP no earlier than 35 days after the date of publication of the final results of this review in the
Upon publication of this notice in the
This notice serves as a final reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
This notice serves as the only reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3), which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a violation subject to sanction.
We are issuing and publishing this notice in accordance with sections 751(a)(1) and 777(i) of the Act, and 19 CFR 351.221(b)(5).
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of incidental harassment authorization.
NMFS has received a request from the Alaska Department of Transportation and Public Facilities (ADOT&PF) for the re-issuance of a previously issued incidental harassment authorization (IHA) with the only change being effective dates. The initial IHA authorized take of 8 species (12 stocks) of marine mammals, by harassment only, associated with the Angoon Ferry Terminal Modifications Project in Angoon, Alaska. The project has been delayed and none of the work covered in the initial IHA has been conducted. The scope of the activities and anticipated effects remain the same, authorized take numbers are not changed, and the required mitigation, monitoring, and reporting remains the same as included in the initial IHA. NMFS is, therefore, issuing a second identical IHA to cover the incidental take analyzed and authorized in the initial IHA.
This authorization is effective from June 1, 2027, through May 31, 2028.
An electronic copy of the final 2025 IHA previously issued to the ADOT&PF, the ADOT&PF's application, and the
Austin Demarest, Office of Protected Resources, NMFS, (301) 427-8401.
Sections 101(a)(5)(A) and (D) of the Marine Mammal Protection Act (MMPA; 16 U.S.C. 1361
An authorization for incidental takings shall be granted if NMFS finds that the taking will have a negligible impact on the species or stock(s), will not have an unmitigable adverse impact on the availability of the species or stock(s) for subsistence uses (where relevant), and if the permissible methods of taking and requirements pertaining to the mitigation, monitoring and reporting of such takings are set forth.
NMFS has defined “negligible impact” in 50 CFR 216.103 as an impact resulting from the specified activity that cannot be reasonably expected to, and is not reasonably likely to, adversely affect the species or stock through effects on annual rates of recruitment or survival.
The MMPA states that the term “take” means to harass, hunt, capture, kill or attempt to harass, hunt, capture, or kill any marine mammal.
Except with respect to certain activities not pertinent here, the MMPA defines “harassment” as any act of pursuit, torment, or annoyance which (i) has the potential to injure a marine mammal or marine mammal stock in the wild (Level A harassment); or (ii) has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering (Level B harassment).
On June 5, 2025, NMFS issued an IHA authorizing take of marine mammals incidental to the Angoon Ferry Terminal Modifications Project in Angoon, Alaska (90 FR 24385, June 10, 2025). The initial IHA would have been effective for 1 year, with an expiration date not later than June 4, 2027. On March 24, 2026, the ADOT&PF informed NMFS that the project was delayed. None of the work identified in the initial IHA (
The planned activities (including mitigation, monitoring, and reporting), authorized incidental take, and anticipated impacts on the affected stocks are the same as those analyzed and authorized through the previously issued IHA.
The purpose of the ADOT&PF's construction project is to make improvements to the existing Angoon Ferry Terminal to accommodate the new larger Alaska Class Vessel berthing. The need for the proposed action is to modify the existing Angoon Ferry Terminal because the original ferry terminal was designed for the Alaska Marine Highway System fast ferries and motor vessels, but ADOT&PF is in the process of replacing these aging vessels with longer and wider Alaska Class Ferries. The location, timing, and nature of the activities, including the types of equipment planned for use, are identical to those described in the initial IHA. The mitigation and monitoring are also as prescribed in the initial IHA.
Species that are expected to be taken by the planned activity include humpback whale (
We refer to the documents related to the previously issued IHA, which include the
The ADOT&PF will conduct activities as analyzed in the initial 2025 IHA. As described above, the number of authorized takes of the same species and stocks of marine mammals are identical to the numbers that were found to meet the negligible impact and small numbers standards and authorized under the initial IHA, and no new information has emerged that would change those findings. The re-issued IHA includes identical required mitigation, monitoring, and reporting measures as the initial IHA, and there is no new information suggesting that our analysis or findings should change.
Based on the information contained here and in the referenced documents, NMFS has determined the following: (1) the required mitigation measures will effect the least practicable impact on marine mammal species or stocks and their habitat; (2) the authorized takes will have a negligible impact on the affected marine mammal species or stocks; (3) the authorized takes represent small numbers of marine mammals relative to the affected stock abundances; and (4) the ADOT&PF's activities will not have an unmitigable adverse impact on taking for subsistence purposes as no subsistence uses of marine mammals are affected by this action.
To comply with the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. 4321
This action is consistent with categories of activities identified in CE B4 of the Companion Manual for NAO 216-6A, which do not individually or cumulatively have the potential for significant impacts on the quality of the human environment and for which we have not identified any extraordinary circumstances that would preclude this categorical exclusion. Accordingly, NMFS determined that the issuance of the initial IHA qualified to be categorically excluded from further NEPA review. NMFS has determined that the application of this categorical exclusion remains appropriate for this reissued IHA.
Section 7(a)(2) of the Endangered Species Act of 1973 (ESA: 16 U.S.C. 1531
The effects of this proposed Federal action were adequately analyzed in NMFS' Biological Opinion for the Angoon Ferry Terminal Project, dated June 3, 2025, which concluded that the take NMFS proposed to authorize through this IHA would not jeopardize the continued existence of any endangered or threatened species or destroy or adversely modify any designated critical habitat.
NMFS has issued an IHA to the ADOT&PF for in-water construction activities associated with the specified activity from June 1, 2027 through May 31, 2028. All previously described mitigation, monitoring, and reporting requirements from the initial 2025 IHA are incorporated.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of incidental harassment authorization.
In accordance with regulations implementing the Marine Mammal Protection Act (MMPA) as amended, notification is hereby given that NMFS has issued an incidental harassment authorization (IHA) to the City of Homer (Homer) for authorization to take marine mammals incidental to Homer Harbor System Four Float Replacement Project in Homer, AK.
This authorization is effective for 1 year from the date of notification by the IHA-holder, not to exceed 1 year from the date of issuance (May 13, 2026).
Electronic copies of the application and supporting documents, as well as a list of the references cited in this document, may be obtained online at:
Craig Cockrell, Office of Protected Resources, NMFS, (301) 427-8401.
The MMPA prohibits the “take” of marine mammals, with certain exceptions. Among the exceptions is section 101(a)(5)(D) of the MMPA (16 U.S.C. 1361
Specifically, NMFS shall issue an IHA if it finds that the taking will have a negligible impact on the species or stock(s) and will not have an unmitigable adverse impact on the availability of the species or stock(s) for taking for subsistence uses (where relevant). Further, NMFS must prescribe the permissible methods of taking and other “means of effecting the least [practicable] adverse impact” on the affected species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of such species or stocks for taking for certain subsistence uses (referred to here as “mitigation”). NMFS must also prescribe requirements pertaining to the monitoring and reporting of such takings. The definitions of key terms, such as “take,” “harassment,” and “negligible impact,” can be found in the MMPA and the NMFS' implementing regulations (see 16 U.S.C. 1362; 50 CFR 216.103).
On April 2, 2026, a notice of NMFS' proposal to issue an IHA to Homer for take of marine mammals incidental to Homer Harbor System Four Float Replacement Project in Homer, AK was published in the
No comments were received during the public comment period. There are no changes to the specified activity, the species taken, the proposed numbers, type, or methods of take, or the mitigation, monitoring, or reporting measures in the proposed IHA notice. No new information that would change any of the preliminary analyses, conclusions, or determinations in the proposed IHA notice has become available since that notice was published, and therefore, the preliminary analyses, conclusions, and determinations included in the proposed IHA are considered final.
To comply with the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. 4321
This action is consistent with categories of activities identified in Categorical Exclusion B4 (IHAs with no anticipated serious injury or mortality) of the Companion Manual for NOAA Administrative Order 216-6A, which do not individually or cumulatively have the potential for significant impacts on the quality of the human environment and for which we have not identified any extraordinary circumstances that would preclude this categorical exclusion. Accordingly, NMFS has determined that the issuance of the IHA qualifies to be categorically excluded from further NEPA review.
Section 7(a)(2) of the Endangered Species Act of 1973 (ESA; 16 U.S.C. 1531
NMFS is authorizing take of the Mexico DPS of humpback whales (
Accordingly, consistent with the requirements of section 101(a)(5)(D) of the MMPA, NMFS has issued an IHA to Homer for authorization to take marine mammals incidental to Homer Harbor System Four Float Replacement Project in Homer, AK.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of incidental harassment authorization.
In accordance with regulations implementing the Marine Mammal Protection Act (MMPA) as amended, notification is hereby given that NMFS has issued an incidental harassment authorization (IHA) to The Aleut Corporation (TAC) for authorization to take marine mammals incidental to the Port of Adak Pier 5 Improvements Project at Adak Island, Alaska.
This authorization is effective for 1 year from the date of notification by the IHA-holder, not to exceed 1 year from the date of issuance (May 12, 2026).
Electronic copies of the application and supporting documents, as well as a list of the references cited in this document, may be obtained online at:
Howard Goldstein, Office of Protected Resources, NMFS, (301) 427-8417.
The MMPA prohibits the “take” of marine mammals, with certain exceptions. Among the exceptions is section 101(a)(5)(D) of the MMPA (16 U.S.C. 1361
Specifically, NMFS shall issue an IHA if it finds that the taking will have a negligible impact on the species or stock(s) and will not have an unmitigable adverse impact on the availability of the species or stock(s) for taking for subsistence uses (where relevant). Further, NMFS must prescribe the permissible methods of taking and other “means of effecting the least [practicable] adverse impact” on the affected species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of the species or stocks for taking for certain subsistence uses (referred to here as “mitigation”). NMFS must also prescribe requirements pertaining to the monitoring and reporting of such takings. The definitions of key terms, such as “take,” “harassment,” and “negligible impact,” can be found in the MMPA and the NMFS' implementing regulations (see 16 U.S.C. 1362; 50 CFR 216.103).
On March 12, 2026, a notice of NMFS' proposal to issue an IHA to TAC for take of marine mammals incidental to the Port of Adak Pier 5 Improvements Project at Adak Island, Alaska was published in the
No substantive comments were received during the 30-day public comment period. There are no changes to the specified activity, the species taken, the proposed numbers, type, or methods of take, or the mitigation, monitoring, or reporting measures in the proposed IHA notice. No new information that would change any of the preliminary analyses, conclusions, or determinations in the proposed IHA notice has become available since that notice was published, and therefore, the preliminary analyses, conclusions, and determinations included in the proposed IHA are considered final.
To comply with the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. 4321
Section 7(a)(2) of the Endangered Species Act (ESA; 16 U.S.C. 1531
NMFS Office of Protected Resources (OPR) is authorizing take of Mexico DPS of humpback whale, Western North Pacific DPS of humpback whale, and Western DPS of Steller sea lion which are listed under the ESA. We have determined that the action is likely to adversely affect these species of marine mammals and requested initiation of section 7 consultation with the NMFS Alaska Regional Office for the issuance of this IHA. The resultant Biological Opinion determined that the action was not likely to jeopardize the continued existence of Mexico DPS of humpback whale, Western North Pacific DPS of humpback whale, and Western DPS of Steller sea lion or adversely modify critical habitat.
Accordingly, consistent with the requirements of section 101(a)(5)(D) of the MMPA, NMFS has issued an IHA to TAC for authorization to take marine mammals incidental to the Port of Adak Pier 5 Improvements Project at Adak Island, Alaska.
Committee for Purchase From People Who Are Blind or Severely Disabled.
Addition to the Procurement List.
This action adds product(s) to the Procurement List that will be furnished by nonprofit agencies employing persons who are blind or have other severe disabilities.
Committee for Purchase From People Who Are Blind or Severely Disabled, 250 E Street SW, Suite 3100, Washington, DC 20024.
For further information or to submit comments contact: Michael R. Jurkowski, Telephone: (703) 489-1322, or email
On February 6, 2026, the Committee for Purchase From People Who Are Blind or Severely Disabled (operating as the U.S. AbilityOne Commission) published an initial notice of proposed additions to the Procurement Lists. (91 FR 5435) This final notice is published pursuant to 41 U.S.C. 8503(a)(2) and 41 CFR 51-2.3. The Committee has determined that the product listed below is suitable for procurement by the Federal Government and has added this product to the Procurement List. In accordance with 41 CFR 51-5.2, the Committee has authorized the qualified nonprofit agencies described with the product as the mandatory source(s) of supply. Additionally, in accordance with 41 CFR 51-2.4, the Committee considered relevant information from the contracting activity that this (product) requirement is not applicable to other Federal entities and has granted the activity's requested preference for purchase or distribution. This product is not available through the Commission's Commercial Distribution Program, and other Federal entities wishing to purchase this product must contact the contracting activity listed directly for information on purchase availability.
After consideration of the material presented to it concerning capability of qualified nonprofit agencies to provide the product(s) and impact of the additions on the current or most recent contractors, the Committee has determined that the product(s) listed below are suitable for procurement by the Federal Government under 41 U.S.C. 8501-8506 and 41 CFR 51-2.4.
1. The action will not result in additional reporting, recordkeeping or other compliance requirements for small entities.
2. The action may result in authorizing small entities to furnish the product(s) and service(s) to the Government.
3. There are no known regulatory alternatives which would accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 8501-8506) in connection with the product(s) and service(s) deleted from the Procurement List.
Accordingly, the following product(s) are added to the Procurement List:
The Committee finds good cause to dispense with the 30-day delay in the
Department of Defense (DoD).
Renewal of Federal Advisory Committee.
The Department of War (DoW) is publishing this notice to announce it is renewing the Air University Board of Visitors (AU BoV) as a discretionary Federal advisory committee.
Jim Freeman, Advisory Committee Management Officer for the DoW, 703-692-5952.
The DoW is renewing the AU BoV in accordance with chapter 10 of title 5 United States Code (U.S.C.) (commonly known as the “Federal Advisory Committee Act” or “FACA”) and 41 Code of Federal Regulations (CFR) 102-3.50(d), and DoW policies and procedures. The public or interested organizations may submit written statements about the AU BoV mission and functions. Written statements may be submitted at any time or in response to the stated agenda of planned meetings of the AU BoV. All written statements shall be submitted to the AU BoV Designated Federal Officer (DFO), and this individual will ensure that all written statements are provided to the membership for their consideration. The AU BoV's DFO is Dr. Ella Temple, and she may be contact at (334) 953-3063, or
Consistent with 41 CFR 102-3.65(a), the DoW is publishing the AU BoV's Public Interest Determination.
Pursuant to 41 CFR 102-3.60(a), to establish, renew, reestablish, or merge a discretionary (agency discretion) advisory committee, an agency must first consult with the General Services Administration's Committee Management Secretariat (the Secretariat) and, as part of the consultation, provide a written public interest determination approved by the head of the agency to the Secretariat with a copy to the Office of Management and Budget. In addition, pursuant to 41 CFR 102-3.35, an agency shall follow the same consultation process and document in writing the same determination of need before creating a subcommittee under a discretionary committee that is not made up entirely of members of a parent advisory committee. Information on the following factors for the Air University Board of Visitors (AU BoV) is provided to the Secretariat to demonstrate that renewing the AU BoV is in the public interest:
1.
a. Federal personnel on a full-time equivalent (FTE) basis: The estimated AU BoV's annual fully burdened personnel cost to the DoW is .75 full-time equivalents at $120,000, which includes basic pay with cost-of-living allowances (COLA).
b. Other Federal internal costs: Other administrative costs for the AU BoV is $1,000.
c. Proposed payments to members: Consistent with 10 U.S.C. 173, members of the AU BoV are not compensated for their services, except for travel and per diem reimbursement for official AU BoV-related business.
d. Proposed number of members: As authorized by the Secretary of War (SecWar), the AU BoV will be composed of not more than 15 members.
e. Reimbursable costs: The estimated reimbursement costs, to include travel, for AU BoV staff and members are $22,000.
2.
3.
In selecting members, the DoW seeks to capitalize on recognized talented, innovative private and public sector leaders to provide the broadest knowledge and expertise based on a balanced AU BoV membership composition. The AU BoV membership is not static, and the SecWar and Deputy Secretary of War (“the DoW Appointing Authority”) may change the membership based upon work assigned to the AU BoV by the DoW Appointing Authority or the Secretary of the Air Force, as the AU BoV's DoW Sponsor.
4.
5.
The AU BoV provides expert advice and recommendations of all new courses, degree plans, and financial management functions, ensuring that AU continues to operate rigorous educational programs that are perfectly aligned with the AU's mission, and as an extension, the DoW's Joint Professional Military Education Program.
6. If
• Completion of a full review of all academic programs to inform DoW so that DoW could ensure alignment with Air Force Science, Technology, Engineering, and Mathematics needs.
• Integration of data analytics into the graduate curriculum and Professional Continuing Education (PCE) courses.
• The launch of an initiative entitled “AD-21 Initiative” is designed to provide faculty with salaried, part-time research and teaching assistants.
• Improvement of the established process for promotion and tenure to faculty temporary duty (TDYs) to collaborate with high-priority hubs like AFWERX.
• Assistance to the DoW in planning the framework to transition to Office 365 and upgrade campus WiFi to better support modern classroom environments.
• Completion of the Quality Initiative Project (QIP) and development of the Air Force Institute of Technology (AFIT) assurance narrative for the 2020 HLC visit.
• Recommendation of the endorsement of new vision and mission statements that align with the 2018 National Defense Strategy.
• Creation and approval a new role: The Associate Chancellor for Research and Partnerships to centralize and manage strategic AFIT institutional collaborations.
• Restructuring logistics training from a task-based model to a competency-based model to improve officer education.
• Support for the response to the COVID-19 pandemic, the integration of Space Force Education, and incorporation of Great Power Competition into curriculum.
• Ensuring AU's financial stability and monitoring progress on AU's Student Information System.
• Support for AFIT's reaffirmation with the HLC.
• Redefining the CCAF mission statement and creating the Associate of Applied Science in Miliary Technology and Applied Science Management degree.
• Creation of the AU BOV Self-Evaluations for continuous improvement.
• Approval of new AFIT vision/mission statements and recognized the addition of “deterrence.”
• Approval of AU's updated AUI 36-2602 and the Educational Program Enhancement Process.
• Approval of key requirements for HLC reaffirmation, including AFIT's Assurance Agreement and hosted the HLC Team Visit.
• Support of the AU transition to Office 365 and upgrade of Wi-Fi for enhanced classroom experience; and the expenditure of $30,000 on facility modifications.
• Formalization of agreement with AFWERX that allowed AFIT faculty 10-week TDYs at AFWERX hubs.
• Recommendation of a new direction for AFIT's vision and mission statements.
• The increase in the use of non-tenured faculty across AU programs, based on earlier formal recommendations.
• The improvement of the faculty promotion and tenure processes.
• The establishment and execution of a plan that provided TDY support for faculty to assist high-priority AF programs, specifically AFWERX.
• Support for the newly established Nuclear Expertise for Advancing Technologies Center, a model shop that provided students with interdisciplinary experiential learning.
• Support for the AFIT faculty participation in developing the Air Force Science and Technology 2030 Strategy.
• Fulfilled, on behalf of the DoW, the requirements for HLC accreditation. AU's BOV Chair and Vice Chair joined AFIT's Subcommittee and fulfilled the requirement for HLC accreditation standards.
• The execution of “stackable credentials” within the Community College of the Air Force (CCAF) to assist Airmen transitioning to civilian life.
• Assistance with CCAF credentialing initiatives that ensured that they were relevant in civilian communities.
• Creation and proposal of the “Multi-capable Enlisted Leader/Technical Expert” career field diagram that illustrated earning potential and education levels.
• Proposal of innovative steps that addressed major obstacles (specifically public speaking and math) that hindered students from completing CCAF associate's degrees.
• Support of the proposed Outcomes Reporting System designed to measure and address demands for institutional effectiveness reporting.
• Support of the approval of the new handbook created to guide the Commander's Mission Analysis and Review process and developed an institutional effectiveness outcomes report form.
• Review and identification of top-quality Intermediate Developmental Education (IDE) and Senior Developmental Education candidates to have the opportunity to attend Air University.
• Support for AU's wargaming strategy which enabled LeMay Center's Wargaming Center to become the leader in Wargaming compared to other military services.
• Development of innovative approaches to use virtual reality in the Muir S. Fairchild Library and AU Teaching and Learning Center.
• Support of AU's academic programs and taking critical steps toward institutional accreditation to develop AU's Fifth-Year Interim Report.
• Achievement of excellent product development through AU and the CCAF team, specifically regarding the new Competency Credit Awarding Process plan.
• Initiation and guidance of leadership in the process that attained acceptance of the AF Teaching certification offered by CCAF and accepted by numerous states for K-12 licensure.
• Modification of the Quality Enhancement Plan (QEP) that addressed Air Force competencies in ethical decision-making, empathy, and fostering innovation.
• Recommendation of a shift to combined command team courses verses maintaining separate commander and command chief courses Recommendation was implemented and has been a success.
• Notable contributions to the Re-Imagining Air Force Accessions initiative through the Holm Center.
• Transformation of the Officer Training School (OTS) program to use the forward-thinking Operation Victory (OTS-Victory) framework.
• Support of improved utilization of newly commissioned 2d Lieutenants awaiting Undergraduate Pilot Training and AU Fellows which augmented faculty.
• Development and migration of AU's enterprise data systems and Student Information System.
• Development of a comprehensive strategic action plan focusing on developing warfighters, enhancing force development delivery, elevating the AU experience, and modernizing the learning environment.
• Recommendation of strategic decisions regarding the reorganization of Air University.
• Providing financial management support to optimize funding to support both funded and unfunded mission requirements.
• Support of the consolidated CCAF registrar functions, collapsed degree programs, and tracked faculty qualifications.
• Providing expert advice and feedback for the Fifth-Year Interim Report and QEP
• Support of the International Officer School (IOS) mission and support of diplomacy and partnership building with U.S. allies.
• Support for the development of the Agile Learning Concept through the Air Command and Staff College and GCPME.
• Establishment of the AU International Alumni of Distinction program.
• Adoption of the new mission and vision statements focused on both deterrence and warfighting.
• The launch of the Registrar's technological innovation “Transcript Automation” to handle both inbound Department of Air Force Bot Operations Team and outbound (Parchment) transcripts across Air University.
• The launch of the Registrar's “AURORA,” a generative AI chatbot in ServiceNow that provided self-service guidance to students, the first in AU history.
• Procedural advice that had a positive impact on the graduation cycle resulting in an on-time fall graduation at AFIT-EN for 84 master's students and 15 Ph.D.'s.
• Delivery of the enhanced Agile Learning educational experience, achieving a 92% student satisfaction rate.
• Conducting of invaluable consultation work that identified and introduced successful use cases through the Digital Innovation & Integration Center of Excellence.
• Support of an increased research funding sponsorship across AFIT and AFIT faculty.
• Support of the DoW decision which assisted students who were waiting for undergraduate pilot training and offered a T6 Simulator as the alternative which provided a cost-effective head-start.
• Technological expertise and directive supported research awards. AU won the Harold Brown Award (awarded to Dr. Nykl) and successfully developed vision-based relative navigation algorithm research for autonomous vehicle air refueling.
• Support of the establishment of a new course for nuclear leaders that highlighted differences between nuclear and conventional operations which included nuclear warfighting capstone events.
• Support for the approval of the integrated real-world Great Power Competition (GPC) events and their impacts into the education of nuclear studies.
• Support of the implementation of the strategic civilian enterprise development program.
• Recommendation of continued improvements to the Student Life-cycle Management (SLcM) system, revised accordingly.
• Recommendation of initiatives to reoptimize the institution for GPC.
• Provision of artificial intelligence (AI) support (blue, red, and green teams) and selection of players to the Air Force Wargaming Institute.
AU BoV 2025 Accomplishments: Following the Secretary of Defense's 2025 advisory committee stand-down directive, the AU BoV did not convene in Spring 2025. DoW is actively reconstituting the AU BoV in FY26, establishing updated bylaws and a revised charter that align with current Administration priorities.
7.
The AU BoV advances the Department's core business of building lethal, merit-based joint airpower warriors across the full spectrum of the force through career-long Professional Military Education. The AU BoV advice and recommendations assist the DoW in ensuring that AU trains Airmen and Guardians to seamlessly leverage multi-domain power in large-scale combat operations. The AU BoV supports AU's role as a premier research institution, ensuring operationally relevant research reaches sponsors across the joint force in direct support of the 2026 National Defense Strategy and Joint Warfighting Concepts.
Office of Critical Minerals and Energy Innovation, Department of Energy.
Request for information.
The U.S. Department of Energy (DOE) invites public comment on its Request for Information (RFI) number DE-FOA-0003573 regarding the Industrial Technology Capital Connector (ITCC), a partnering program to connect private sector capital interested in early-stage industrial technologies with ITO-supported technology developers.
Responses to the RFI must be received by July 10th, 2026.
Interested parties are to submit comments electronically to
Questions may be addressed to Paul Gauche at 202-816-1170,
This RFI intends to solicit feedback from capital providers (Venture Capital, Angel Investors, Financial Institutions, etc.), adjacent organizations (Incubators,
Office of Environmental Management, Department of Energy.
Notice of open meeting.
This notice announces an in-person meeting of the Environmental Management Site-Specific Advisory Board (EM SSAB), Portsmouth. The Federal Advisory Committee Act requires that public notice of this meeting be announced in the
Tuesday, June 23, 2026; 6-8 p.m. EDT.
The Ohio State University, Endeavor Center, 1862 Shyville Road, Room 165, Piketon, Ohio 45661.
Greg Simonton, Deputy Designated Federal Officer, Phone: (740) 897-3737 or Email:
In accordance with the National Environmental Policy Act of 1969 and the Federal Energy Regulatory Commission's (Commission) regulations, 18 CFR part 380, the Office of Energy Projects has reviewed the application for a new license to continue to operate and maintain the Narrows Hydroelectric Project No. 1403. The existing 12-megawatt (MW) project is located on the mainstem of the Yuba River in northern California in Nevada County approximately 23 miles northeast of the City of Marysville. The project affects 0.55 acres of Federal land managed by the U.S. Army Corps of Engineers. Commission staff has
The EA contains staff's analysis of the potential environmental impacts of the project and concludes that licensing the project, with appropriate environmental protective measures, would not constitute a major federal action that would significantly affect the quality of the human environment.
The Commission provides all interested persons with an opportunity to view and/or print the EA via the internet through the Commission's Home Page (
You may also register online at
Any comments should be filed with the Commission by 5:00 p.m. Eastern Time on Thursday June 11, 2026.
The Commission strongly encourages electronic filing. Please file comments using the Commission's eFiling system at
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202) 502-6595 or
For further information, contact Rebecca Kipp at (202) 502-8846 or at
On February 28, 2023, Eagle Creek Sartell Hydro, LLC filed a relicense application for the 8.925-megawatt Sartell Hydroelectric Project No. 8315 (project). The project is located on the Mississippi River in Stearns and Benton Counties, Minnesota.
In accordance with the Commission's regulations, on February 12, 2026, Commission staff issued a notice that the project was ready for environmental analysis (REA notice). Based on the information in the record, including comments filed on the REA Notice, staff does not anticipate that licensing the project would constitute a major federal action significantly affecting the quality of the human environment. Therefore, staff intends to prepare an environmental assessment (EA) on the application to relicense the project.
The EA will be issued and circulated for review by all interested parties. All comments filed on the EA will be analyzed by staff and considered in the Commission's final licensing decision.
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202)502-6595 or
The application will be processed according to the following schedule. The EA will be issued for a 30-day comment period. Revisions to the schedule may be made as appropriate.
Any questions regarding this notice may be directed to Michael Davis
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202) 502-6595 or
Take notice that the Commission received the following electric rate filings:
Filed Date: 4/30/26.
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202) 502-6595 or
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection.
a.
b.
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d.
e.
f.
g.
h.
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j. Deadline for filing comments, recommendations, terms and conditions, and prescriptions: on or before 5:00 p.m. Eastern Time on July 13, 2026; reply comments are due on or before 5:00 p.m. Eastern Time on August 25, 2026.
The Commission strongly encourages electronic filing. Please file comments, recommendations, terms and conditions, and prescriptions using the Commission's eFiling system at
The Commission's Rules of Practice and Procedure require all intervenors filing documents with the Commission to serve a copy of that document on each person on the official service list for the project. Further, if an intervenor files comments or documents with the Commission relating to the merits of an issue that may affect the responsibilities of a particular resource agency, they must also serve a copy of the document on that resource agency.
k. This application has been accepted for filing and is now ready for environmental analysis.
l.
The existing project consists of a dam that includes a 57-foot-long spillway with 3-foot-high flashboards with a crest elevation of 1,133.41 feet National Geodetic Vertical Datum of 1929 (NGVD 29), a 3-foot-long sluice gate, and an intake structure that includes a 3-foot-long sluice gate and a trashrack with 1-inch clear bar spacing. The dam creates an impoundment that has a surface area of approximately 2 acres at the crest of the flashboards. From the impoundment, water flows through the intake structure to a 1,525-foot-long penstock and then a powerhouse that contains a 75-kilowatt (kW) vertical fixed propeller turbine-generator unit, a 100-kW horizontal cross-flow turbine-generator unit, and a 50-kW vertical fixed propeller turbine-generator unit. Water from the powerhouse discharges to a tailrace that empties into the Ashuelot River.
Electricity generated at the powerhouse is transmitted to the electric grid via an approximately 1,830-foot-long transmission line and three 75 kilovolt-amp pole mounted transformers.
Marlow Hydro proposes to continue operating the project in a run-of-river mode and maintaining the impoundment elevation at 1,133.41 feet NGVD 29. Marlow Hydro also proposes to continue releasing a minimum flow of 14.5 cubic feet per second through a 40-inch-long, 15-inch high notch in the flashboards to the bypassed reach, and avoid tree cutting from April 1 through October 31, to protect the federally endangered northern long-eared bat.
m. A copy of the application may be viewed on the Commission's website at
All filings must (1) bear in all capital letters the title “COMMENTS,” “REPLY COMMENTS,” “RECOMMENDATIONS,” “TERMS AND CONDITIONS,” or “PRESCRIPTIONS;” (2) set forth in the heading the name of the applicant and the project number of the application to which the filing responds; (3) furnish the name of the person submitting the filing; and (4) otherwise comply with the requirements of 18 CFR 385.2001 through 385.2005. All comments, recommendations, terms and conditions or prescriptions must set forth their evidentiary basis and otherwise comply with the requirements of 18 CFR 4.34(b).
You may also register online at
n. For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202) 502-6595 or
o. Public notice of the filing of the initial development application, which has already been given, established the due date for filing competing applications or notices of intent. Under the Commission's regulations, any competing development application must be filed in response to and in compliance with public notice of the initial development application. No competing applications or notices of intent may be filed in response to this notice.
p. A license applicant must file on or before 5:00 p.m. Eastern Time on July 13, 2026: (1) a copy of the water quality certification; (2) a copy of the request for certification, including proof of the date on which the certifying agency received the request; or (3) evidence of waiver of water quality certification.
The staff of the Federal Energy Regulatory Commission (FERC or Commission) will prepare an environmental document that will discuss the environmental impacts of the Longwall Mining Panel M2 and M3 Project involving excavation, elevation, replacement, rerouting, and operation of facilities by Texas Eastern Transmission, LP (Texas Eastern) in Greene County, Pennsylvania. The Commission will use this environmental document in its decision-making process to determine whether the project is in the public convenience and necessity.
This notice announces the opening of the scoping process the Commission will use to gather input from the public and interested agencies regarding the project. As part of the National Environmental Policy Act (NEPA) review process, the Commission takes into account concerns the public may have about proposals and the environmental impacts that could result from its action whenever it considers the issuance of a Certificate of Public Convenience and Necessity. This gathering of public input is referred to as “scoping.” The main goal of the scoping process is to focus the analysis in the environmental document on the important environmental issues. Additional information about the Commission's NEPA process is described below in the
By this notice, the Commission requests public comments on the scope of issues to address in the environmental document. To ensure that your comments are timely and properly recorded, please submit your comments so that the Commission receives them in Washington, DC on or before 5:00 p.m. Eastern Time on June 11, 2026. Comments may be submitted in written form. Further details on how to submit comments are provided in the
Your comments should focus on the potential environmental effects, reasonable alternatives, and measures to avoid or lessen environmental impacts. Your input will help the Commission staff determine what issues they need to evaluate in the environmental document. Commission staff will consider all written comments during the preparation of the environmental document.
If you submitted comments on this project to the Commission before the opening of this docket on March 23, 2026, you will need to file those comments in Docket No. CP26-148-000 to ensure they are considered as part of this proceeding.
This notice is being sent to the Commission's current environmental mailing list for this project. State and local government representatives should notify their constituents of this proposed project and encourage them to comment on their areas of concern.
If you are a landowner receiving this notice, a pipeline company representative may contact you about the acquisition of an easement to construct, operate, and maintain the proposed facilities. The company would seek to negotiate a mutually acceptable easement agreement. You are not required to enter into an agreement. However, if the Commission approves the project, the Natural Gas Act conveys the right of eminent domain to the company. Therefore, if you and the company do not reach an easement agreement, the pipeline company could initiate condemnation proceedings in court. In such instances, compensation would be determined by a judge in accordance with state law. The Commission does not subsequently grant, exercise, or oversee the exercise of that eminent domain authority. The courts have exclusive authority to handle eminent domain cases; the Commission has no jurisdiction over these matters.
Texas Eastern provided landowners with a fact sheet prepared by the FERC entitled “An Interstate Natural Gas Facility On My Land? What Do I Need To Know?” which addresses typically asked questions, including the use of eminent domain and how to participate in the Commission's proceedings. This fact sheet along with other landowner topics of interest are available for viewing on the FERC website (
There are three methods you can use to submit your comments to the Commission. Please carefully follow these instructions so that your comments are properly recorded. The Commission encourages electronic filing of comments and has staff available to assist you at (866) 208-3676 or
(1) You can file your comments electronically using the eComment feature, which is located on the Commission's website (
(2) You can file your comments electronically by using the eFiling feature, which is located on the Commission's website (
(3) You can file a paper copy of your comments by mailing them to the Commission. Be sure to reference the project docket number (CP26-148-000) on your letter. Submissions sent via the U.S. Postal Service must be addressed to: Debbie-Anne A. Reese, Secretary, Federal Energy Regulatory Commission, 888 First Street NE, Room 1A, Washington, DC 20426. Submissions sent via any other carrier must be addressed to: Debbie-Anne A. Reese, Secretary, Federal Energy Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.
Additionally, the Commission offers a free service called eSubscription which makes it easy to stay informed of all issuances and submittals regarding the dockets/projects to which you subscribe. These instant email notifications are the fastest way to receive notification and provide a link to the document files which can reduce the amount of time you spend researching proceedings. Go to
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202)502-6595 or
According to Texas Eastern, the Project would allow for the safe and efficient operation of its natural gas transportation system in Greene County, Pennsylvania during sub-surface longwall mining activities. Texas Eastern proposes to excavate, elevate, replace, and reroute segments of four existing pipelines ranging in length between approximately 5,000 feet and 6,100 feet near Graysville, Pennsylvania. Texas Eastern would also abandon by removal an approximately 5,000-foot segment of non-operational pipeline. Lastly, Texas Eastern proposes to modify existing minor aboveground facilities elsewhere in Greene County. Upon completion of the mining activities, Texas Eastern would return three of the four pipelines to their original locations and easements. The fourth pipeline would be rerouted into the abandoned easement. Texas Eastern anticipates these activities would occur between 2027 and 2029.
The general location of the project facilities is shown in appendix 1.
Texas Eastern would require the temporary use of approximately 127.87 acres of land to complete the proposed activities. Following construction, Texas Eastern would permanently maintain 20.98 acres of land to operate the Project. No new easement would be required for the Project.
Any environmental document issued by the Commission will discuss impacts that could occur as a result of the construction and operation of the proposed project under the relevant general resource areas:
• geology and soils;
• water resources and wetlands;
• vegetation and wildlife;
• threatened and endangered species;
• cultural resources;
• land use and visual resources;
• air quality and noise; and
• reliability and safety.
Commission staff have already identified several issues that deserve attention based on a preliminary review of the proposed facilities and the environmental information provided by Texas Eastern. This preliminary list of issues may change based on your comments and our analysis:
• steep slopes;
• erosion and sediment controls;
• threatened and endangered species;
• public safety; and
• public access and road closures.
Commission staff will also evaluate reasonable alternatives to the proposed project or portions of the project and make recommendations on how to lessen or avoid impacts on the various resource areas. Your comments will help Commission staff identify and focus on the issues that might have an effect on the human environment and potentially eliminate others from further study and discussion in the environmental document.
Following this scoping period, Commission staff will determine whether to prepare an Environmental Assessment (EA) or an Environmental Impact Statement (EIS). The EA or the EIS will present Commission staff's independent analysis of the issues. If Commission staff prepares an EA, a
With this notice, the Commission is asking agencies with jurisdiction by law and/or special expertise with respect to the environmental issues of this project to formally cooperate in the preparation of the environmental document.
In accordance with the Advisory Council on Historic Preservation's implementing regulations for section 106 of the National Historic Preservation Act, the Commission is using this notice to initiate consultation with the applicable State Historic Preservation Office(s), and to solicit their views and those of other government agencies, interested Indian tribes, and the public on the project's potential effects on historic properties.
The environmental mailing list includes federal, state, and local government representatives and agencies; elected officials; Native American Tribes; environmental and public interest groups; other interested parties; and local libraries and media outlets. This list also includes all affected landowners (as defined in the Commission's regulations) who are potential right-of-way grantors, whose property may be used temporarily for project purposes, or who own homes within certain distances of aboveground facilities, and anyone who submits comments on the project and includes a mailing address with their comments. Commission staff will update the environmental mailing list as the analysis proceeds to ensure that Commission notices related to this environmental review are sent to all individuals, organizations, and government entities interested in and/or potentially affected by the proposed project.
(1) Send an email to
(2) Return the attached “Mailing List Update Form” (appendix 2).
Additional information about the project is available from the FERC website at
Public sessions or site visits will be posted on the Commission's calendar located at
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following Complaints and Compliance filings in EL Dockets:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following foreign utility company status filings:
The filings are accessible in the Commission's eLibrary system (
Any person desiring to intervene, to protest, or to answer a complaint in any of the above proceedings must file in accordance with Rules 211, 214, or 206 of the Commission's Regulations (18 CFR 385.211, 385.214, or 385.206) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
For public inquiries and assistance with making filings such as interventions, comments, or requests for rehearing, contact the Office of Public Participation at (202) 502-6595 or
Southeastern Power Administration, Department of Energy (DOE).
Notice of proposed rates, public forum, and opportunities for public review and comment.
Southeastern Power Administration (Southeastern or SEPA) proposes to revise existing schedules of rates and charges applicable to the sale of power from the Jim Woodruff Project, effective October 1, 2026, through September 30, 2031. Opportunities will be available for interested persons to review the present rates, supporting studies, to participate in a public forum and to submit written comments. Southeastern will evaluate all comments received in this process.
Written comments are due on or before August 13, 2026. A public information forum will be held in-person at Florida Electric Cooperatives Association, 2916 Apalachee Parkway, Tallahassee, FL 32301, at 12:00 p.m. EDT on June 4, 2026. There will also be an option to attend the forum virtually via Microsoft Teams. Persons desiring to speak at the public information forum should notify Southeastern at least seven (7) days before the scheduled forum date so a list of forum participants can be prepared. A public comment forum will be held in-person at Southeastern Power Administration, 1166 Athens Tech Road, Elberton, Georgia at 1 p.m. EDT on July 7, 2026. There will also be an option to attend the public comment forum virtually via Microsoft Teams. Persons desiring to speak at the public information forum or the public comment forum should specify this in their notification to Southeastern; others may speak if time permits. Notifications should be submitted by email to
Written comments should be submitted to: Administrator, Southeastern Power Administration, Department of Energy, 1166 Athens Tech Road, Elberton, Georgia 30635-6711; Email:
Alexa Webb, Senior Public Utilities Specialist, Finance and Marketing, Southeastern Power Administration, Department of Energy, 1166 Athens Tech Road, Elberton, Georgia 30635-6711, (706) 213-3805; Email:
The Federal Energy Regulatory Commission (FERC) confirmed and approved on a final basis, Wholesale Power Rate Schedules JW-1-L and JW-2-F applicable to the Jim Woodruff System for a period ending September 30, 2026. (FERC Docket No. EF21-4-000 (Feb. 10, 2022)). On August 6, 2024, Southeastern submitted a notice of cancellation of the JW-2-F Rate Schedule for the sale of power from Southeastern's Jim Woodruff Project to Duke Energy Florida effective October 6, 2024. There are no remaining obligations under the JW-2-F Rate schedule. (FERC Docket No. EF24-8-000 (Sep. 13, 2024)).
Southeastern is proposing the following rate schedule, JW-1-M, to be effective for the period from October 1, 2026, through September 30, 2031.
This document of the Department of Energy was signed on May 12, 2026, by Virgil G. Hobbs III, Administrator for Southeastern Power Administration, pursuant to delegated authority from the Secretary of Energy. That document, with the original signature and date, is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the
Export-Import Bank of the United States.
Notice.
This Notice is to inform the public, in accordance with the Export-Import Bank Act of 1945, as amended, the Export-Import Bank of the United States (“EXIM”) has received an application for final commitment for a long-term loan or financial guarantee in excess of $100 million. Comments received within the comment period specified below will be presented to the EXIM Board of Directors prior to final action on this Transaction.
Comments must be received on or before June 9, 2026 to be assured of consideration before final consideration of the transaction by the Board of Directors of EXIM.
Comments may be submitted through
Export-Import Bank of the United States.
Notice.
This Notice is to inform the public, in accordance with the Export-Import Bank Act of 1945, as amended, the Export-Import Bank of the United States (“EXIM”) has received an application for final commitment for a long-term loan or financial guarantee in excess of $100 million. Comments received within the comment period specified below will be presented to the EXIM Board of Directors prior to final action on this Transaction.
Comments must be received on or before June 9, 2026 to be assured of consideration before final consideration of the transaction by the Board of Directors of EXIM.
Comments may be submitted through
Federal Communications Commission.
Notice; request for comments.
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995, the Federal Communications Commission (FCC or the Commission) invites the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Pursuant to the Small Business Paperwork Relief Act of 2002, the FCC seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees. The Commission may not conduct or sponsor a collection of information unless it displays a currently valid Office of Management and Budget (OMB) control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written comments and recommendations for the proposed information collection should be submitted on or before June 15, 2026.
Comments should be sent to
For additional information or copies of the information collection, contact Nicole Ongele at (202) 418-2991. To view a copy of this information collection request (ICR) submitted to OMB: (1) go to the web page
As part of its continuing effort to reduce paperwork burdens, as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the FCC invited the general public and other Federal Agencies to take this opportunity to comment on the following information collection. Comments are requested concerning: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. Pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the FCC seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees.
The Federal Communications Commission will hold an Open Meeting on the subjects listed below on Wednesday, May 20, 2026, which is scheduled to commence at 10:30 a.m. in the Commission Meeting Room of the Federal Communications Commission, 45 L Street, NE, Washington, DC
While attendance at the Open Meeting is available to the public, the FCC headquarters building is not open access and all guests must check in with and be screened by FCC security at the main entrance on L Street. Attendees at the Open Meeting will not be required to have an appointment but must otherwise comply with protocols outlined at:
The meeting will be webcast at:
Press Access—Members of the news media are welcome to attend the meeting and will be provided reserved seating on a first-come, first-served basis. Following the meeting, the Chairman may hold a news conference in which she will take questions from credentialed members of the press in attendance. Also, senior policy and legal staff will be made available to the press in attendance for questions related to the items on the meeting agenda. Commissioners may also choose to hold press conferences. Press may also direct questions to the Office of Media Relations (OMR):
Additional information concerning this meeting may be obtained from the Office of Media Relations, (202) 418-0500. Audio/Video coverage of the meeting will be broadcast live with open captioning over the internet from the FCC Live web page at
Authority: This meeting is held, in accordance with the Government in the Sunshine Act (Sunshine Act), Public Law 94-409, as amended (5 U.S.C. 552b).
Federal Mediation and Conciliation Service (FMCS).
60-Day notice and request for comments.
The Federal Mediation and Conciliation Service (FMCS) invites the public and other Federal Agencies to take this opportunity to comment on the following information collection request, Service Request Form. This information collection request will be submitted for approval to the Office of Management Budget (OMB) in compliance with the Paperwork Reduction Act (PRA). The Service Request Form was developed to process requests for services while ensuring compliance with the paperwork reduction act.
Comments must be submitted on or before July 14, 2026.
You may submit comments, identified by the Service Request Form, through one of the following methods:
•
•
Jennifer Disotell, Associate Deputy Director of Field Operations, 206-553-4821,
A copy of the agency form and confirmation PDF are attached. A confirmation PDF will be sent once the form is submitted online.
FMCS solicits comments to:
i. Evaluate whether the proposed collections of information are necessary for the proper performance of the functions of the agency, including whether the information will have practical utility.
ii. Enhance the accuracy of the agency's estimates of the burden of the proposed collection of information.
iii. Enhance the quality, utility, and clarity of the information to be collected.
iv. Minimize the burden of the collections of information on those who are to respond, including the use of appropriate automated, electronic collection technologies or other forms of information technology.
The official records are electronic records.
Pursuant to 42 U.S.C. 5195c(e), critical infrastructure is defined as “systems and assets, whether physical or virtual, so vital to the United
Type of Upcoming Negotiation* (select) Successor Contract (
*Please be patient while submitting your Request to FMCS. Do not click the 'Submit' button more than once. Doing so may cause a duplicate submission and no confirmation page.
1. After you submit this request, you should receive a date, time, AND a confirmation number as well as an emailed pdf of your request. Please note, only the named Requester on this form will receive an emailed pdf of the request. If you do not receive a confirmation number or email, please contact FMCS at
If you are having issues with this page, have questions about our Services, or would like someone to contact you to discuss your needs in advance of a service request or following a service delivery, please contact us at
The notificants listed below have applied under the Change in Bank Control Act (Act) (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the applications are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at
Comments received are subject to public disclosure. In general, comments received will be made available without change and will not be modified to remove personal or business information including confidential, contact, or other identifying information. Comments should not include any information such as confidential information that would not be appropriate for public disclosure.
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Benjamin W. McDonough, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington DC 20551-0001, not later than June 1, 2026.
1.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, the Centers for Disease Control and Prevention (CDC) announces the following meeting of the Advisory Board on Radiation and Worker Health (ABRWH). This meeting is open to the public, but without an oral public comment period. The public is welcome to submit written comments in advance of the meeting, to the contact person below. The public is also welcome to listen to the meeting by joining the audio conference (information below). The audio conference line has 150 ports for callers.
The meeting will be held on June 18, 2026, from 11 a.m. to 1 p.m., EDT.
Written comments must be received on or before June 11, 2026.
You may submit comments by mail to: Rashaun Roberts, Ph.D., Designated Federal Officer, National Institute for Occupational Safety and Health, Centers for Disease Control and Prevention, 1090 Tusculum Avenue, Mailstop C-24, Cincinnati, Ohio 45226. Email:
Written comments received in advance of the meeting will be included in the official record of the meeting.
Rashaun Roberts, Ph.D., Designated Federal Officer, National Institute for Occupational Safety and Health, Centers for Disease Control and Prevention, 1090 Tusculum Avenue, Mailstop C-24, Cincinnati, Ohio 45226, Telephone: (513) 533-6800, Email:
The charter was issued on August 3, 2001, renewed at appropriate intervals, and rechartered under Executive Order 14109 (September 29, 2023) on March 22, 2024. Unless continued by the President, the Advisory Board will terminate on September 30, 2027, consistent with Executive Order 14354 of September 29, 2025.
The Director, Office of Strategic Business Initiatives, Office of the Chief Operating Officer, Centers for Disease Control and Prevention, has been delegated the authority to sign
Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).
Notice.
This notice announces the imposition of a 6-month nationwide moratorium on the Medicare enrollment of hospices.
This moratorium is effective on May 13, 2026.
Frank Whelan, (410) 786-1302.
Under the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (collectively known as the Affordable Care Act), Congress provided the Secretary with new tools and resources to combat fraud, waste, and abuse in Medicare, Medicaid, and the Children's Health Insurance Program (CHIP). One of these was section 6401(a) of the Affordable Care Act, which added a new section 1866(j)(7) to the Social Security Act (the Act). It provided the Secretary with authority to impose a temporary moratorium on the enrollment of new fee-for-service (FFS) Medicare, Medicaid or CHIP providers and suppliers (including categories of providers and suppliers) if the Secretary determines that a moratorium is necessary to prevent or combat fraud, waste, or abuse under these programs.
Section 6401(b) of the Affordable Care Act added specific moratorium language applicable to Medicaid at section 1902(kk)(4) of the Act, requiring States to comply with any moratorium imposed by the Secretary unless the state determines that the imposition of such moratorium would adversely impact Medicaid beneficiaries' access to care. Section 6401(c) of the Affordable Care Act amended section 2107(e)(1) of the Act to provide that all the Medicaid provisions in sections 1902(a)(77) and 1902(kk) also apply to CHIP.
In February 2011, in accordance with the aforementioned authority, CMS published a final rule with comment period titled, “Medicare, Medicaid, and Children's Health Insurance Programs; Additional Screening Requirements, Application Fees, Temporary Enrollment Moratoria, Payment Suspensions and Compliance Plans for Providers and Suppliers” (76 FR 5862). This final rule implemented section 1866(j)(7) of the Act by establishing new regulations at 42 CFR 424.570. Under § 424.570(a)(2)(i) and (iv), CMS—or CMS in consultation with the Department of Health and Human Services Office of Inspector General (HHS-OIG), the Department of Justice (DOJ), or both—may impose a temporary moratorium on newly enrolling Medicare providers and suppliers if CMS determines that there is a significant potential for fraud, waste, or abuse with respect to a particular provider or supplier type, particular geographic areas, or both.
Per § 424.570(b), a temporary enrollment moratorium imposed by CMS remains in effect for 6 months. If CMS deems it necessary, the moratorium may be extended in 6-month increments. CMS evaluates whether to extend or lift the moratorium before the end of the initial 6-month period and, if applicable, before the expiration of any subsequent moratorium period. If the moratorium announced in this notice is extended, CMS will publish a document regarding such extension(s) in the
As provided in § 424.570(d), CMS may lift a moratorium at any time if: (1) the President declares an area a disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act; (2) circumstances warranting the imposition of a moratorium have abated or CMS has implemented program safeguards to address the program vulnerability; (3) the Secretary has declared a public health emergency; or (4) in the judgment of the Secretary, the moratorium is no longer needed. Once a moratorium is lifted, the provider or supplier types that were unable to enroll because of the moratorium will be assigned to the “high” screening level in accordance with §§ 424.518(c)(3)(iii) and 455.450(e)(2) if such provider or supplier applies for enrollment at any time within 6 months from the date the moratorium was lifted.
Under § 424.570(a)(1)(iii), a temporary moratorium does not apply to any of the following:
• Changes in practice location (except if the location is changing from a location outside the moratorium area to a location inside the moratorium area).
• Changes in provider or supplier information, such as phone numbers.
• Changes in ownership (except changes in ownership of home health agencies, hospices, or suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that would require an initial enrollment).
Also, in accordance with § 424.570(a)(1)(iv), a temporary moratorium does not apply to any enrollment application that has been received by the Medicare contractor prior to the date the moratorium is imposed.
CMS states at § 424.570(a)(1)(ii) that it will announce a temporary moratorium in a
We first used our moratorium authority in a notice issued on July 31, 2013 (78 FR 46339). The moratorium prevented enrollment of: (1) new home health agencies (HHAs) in Miami-Dade County, Florida and Cook County, Illinois, as well as surrounding counties; and (2) Part B ambulance suppliers in Harris County, Texas and surrounding counties. We exercised our moratorium authority again in a notice published on February 4, 2014 (79 FR 6475). This involved—
• Extending our existing moratoria for an additional 6 months.
• Expanding it to include enrollment of—
++ HHAs in Broward County, Florida; Dallas County, Texas; Harris County, Texas; and Wayne County, Michigan and surrounding counties; and
++ Ground ambulance suppliers in Philadelphia, Pennsylvania and surrounding counties.
We extended these moratoria for additional 6-month periods on August 1, 2014 (79 FR 44702), February 2, 2015 (80 FR 5551), July 28, 2015 (80 FR 44967), and February 2, 2016 (81 FR 5444).
We again extended these moratoria for another 6 months on August 3, 2016 (81 FR 51120) and also expanded them statewide with respect to the enrollment of new HHAs in Florida, Illinois, Michigan, and Texas, and Part B non-emergency ambulance suppliers in New Jersey, Pennsylvania, and Texas. Yet in this same notice, we announced the lifting of temporary moratoria for all Part B emergency ambulance suppliers.
The original 2013 moratorium, after being extended and revised several times,
In determining whether to establish an enrollment moratorium, CMS considers whether a high risk of fraud, waste, or abuse exists. CMS also relies on its own and law enforcement's longstanding experience with ongoing and emerging fraud trends and activities gained through civil, criminal, and administrative investigations and prosecutions.
The HHS-OIG has highlighted the problem of hospice fraud, waste, and abuse. It recently stated: “[T]here are significant problems with the (hospice) program. Our reports and investigations have revealed several concerning issues, including poor—sometimes harmful—quality of care, fraud schemes that involve enrolling beneficiaries without their consent, inappropriate billing practices, limited transparency for patients and their families, a payment system that creates incentives to minimize services, and a rapid growth in the number of new hospices, often to take advantage of these conditions.”
The OIG and DOJ have in the past encouraged CMS to undertake anti-fraud measures regarding hospices, and we believe the action announced by this notice is consistent therewith.
In contemplating the present moratorium, we also used data analysis that included reviewing (i) both current and historic Medicare enrollment data and (ii) indicators of fraud, waste, and abuse. Sections II.A. and B. of this notice discuss our review in more detail.
Patient access to care in Medicare, Medicaid and CHIP is of critical importance to CMS and our state partners. CMS has carefully evaluated access to hospice care for Medicare beneficiaries nationwide. We discuss our findings later in this notice.
Per our authority at § 424.570(a)(2)(i) and (a)(2)(iv), CMS is implementing a nationwide temporary moratorium on the Medicare enrollment of hospices. In this section of this notice, we explain the rationale for and scope of this moratorium.
As previously indicated, hospice fraud, waste, and abuse has been a dilemma for some time. Although, on the surface, hospices traditionally had not appeared to pose the program integrity threat of certain other provider/supplier types like HHAs and DMEPOS suppliers, the elevated risk was still there. This risk has dramatically increased in the past 7 years to the point where hospices present no less of a payment safeguard threat than HHAs and DMEPOS suppliers. CMS outlined the rising problems in 2023, noting in part the following:
• Instances of hospices certifying patients for hospice care when they were not terminally ill and providing little to no services to beneficiaries.
• The rapid growth in potentially fraudulent hospices, particularly in
• “Churn and burn” schemes whereby a new hospice opens and starts billing but once that hospice is audited or reaches its statutory yearly payment limit, it shuts down, keeps the money, and buys a new Medicare billing number; it then transfers its patients over to the new Medicare billing number, and starts billing again.
Other problems we have seen included but were not limited to: (1) hospices paying recruiters to target beneficiaries who are not eligible for hospice care, sometimes without the beneficiary's knowledge; (2) hospices paying kickbacks to physicians for the latter to falsely certify a patient's terminal status (or falsely certifying even without receiving renumeration); and (3) parties establishing hospices for the exclusive purpose of selling them for a profit and/or after committing fraud but before they can be revoked from Medicare. Furnishing quality patient care was not a priority—or even a consideration—for these parties.
The tremendous growth in the number of hospices in certain states has been especially noteworthy and disturbing. In Arizona, California, Nevada, and Texas, the percentage increase has been far higher than that of hospice beneficiaries. Consider the following CMS data between calendar year (CY) 2019 and 2023:
The problem has been particularly acute in places like Los Angeles County in California, where numerous hospices were simultaneously operating out of a single building or otherwise were massed in large numbers within a very small geographic area or neighborhood.
In the CY 2024 Home Health Prospective Payment System (HH PPS) final rule (88 FR 77676) and the Fiscal Year (FY) 2024 Hospice Wage Index final rule (88 FR 51164), we outlined a number of improper hospice activities we had seen.
• A former Louisiana resident in June 2024 was sentenced to 6 years in prison for conspiracy to commit health care fraud and three counts of health care fraud. Evidence presented at trial demonstrated that over 24 patients were placed on hospice by the defendant's hospice without meeting the criteria required by Medicare. During the time period that the patients were under the care and supervision of the hospice, none of them had been diagnosed with a terminal condition and, in fact, many of the patients and their families never even knew they had been placed on hospice. One patient testified at trial that Medicare refused to cover a procedure he needed to have because, unbeknownst to him, he was listed as a hospice patient. Many of these patients thought they were receiving some type of home health or free services, rather than being placed on hospice.
• A Utah health care company in March 2023 agreed to pay over $1 million to resolve allegations they violated the False Claims Act by submitting false claims to Medicare and Medicaid for hospice services that were not medically necessary; the patients' records lacked documentation of a terminal illness to qualify for services.
• Several California residents were sentenced to prison in 2025 for their roles in defrauding Medicare of nearly $16 million through sham hospice companies and laundering the fraudulent proceeds. According to court documents, the individuals—who operated several sham hospices—schemed to bill Medicare for hospice services that were medically unnecessary and never provided. They concealed the scheme by using foreign nationals' names and personally identifiable information to act as straw owners for the hospices and to open bank accounts, submit information to Medicare, and sign property leases. They also controlled and used cell phones in the names of the foreign nationals in furtherance of the scheme. After defrauding Medicare, the individuals moved the funds between various assets and accounts—including bank accounts in the names of shell companies—to further conceal their actions.
• Two California residents were found guilty in December 2024 of paying and receiving hundreds of thousands of dollars in illegal kickbacks for patient referrals that resulted in the submission of approximately $3.2 million in fraudulent claims to Medicare for purported hospice care. One of the individuals had been excluded from Medicare because of prior federal convictions for receiving illegal kickbacks. While excluded, she purchased a hospice through her daughter and concealed her ownership interest in the hospice from Medicare. She (the owner) then paid “marketers” (including her co-defendant) hundreds of thousands of dollars in illegal kickbacks for patient referrals that she could bill to Medicare for purported hospice care.
Also, and consistent with the owner's instructions, the co-defendant falsely
++ When Medicare requested additional documentation from the hospice to support the purported hospice claims, the owner and her husband directed employees to create fake patient charts and had said charts submitted to Medicare.
++ Court documents alleged that while awaiting trial in this matter, the owner took control of three other hospices and caused the submission of approximately $4.8 million in claims for purported hospice care.
• A successor to a hospice chain agreed in July 2024 to pay over $19 million to resolve allegations that the chain knowingly submitted false claims and knowingly retained overpayments for hospice services provided to patients who were ineligible to receive hospice benefits. The hospice locations included sites in Rhode Island, Texas, Missouri, Alabama, Indiana, and Ohio. The specific allegations included the following:
++ The defendants knowingly submitted or caused to be submitted false claims for hospice services provided to hospice patients who were ineligible for the Medicare or Medicaid hospice benefit because they were not terminally ill.
++ Some locations knowingly and improperly concealed or avoided obligations to repay the foregoing hospice claims.
++ One location allegedly violated the Anti-Kickback Statute by willfully paying renumeration to a consulting physician to induce hospice referrals.
• A Georgia hospice and its owners and managers in June 2024 agreed to pay $1.4 million to resolve allegations that they violated the False Claims Act by entering into kickback arrangements with medical directors in exchange for referrals of hospice patients to the hospice. The alleged kickbacks included monthly stipends and a signing bonus paid to the medical directors. The compensation allegedly increased when the medical director referred more patients and decreased when the medical director failed to make referrals. The Special Agent in Charge of the Federal Bureau of Investigation's Atlanta office stated: “The False Claims Act settlement in this case will hopefully be a deterrent to those who selfishly evade our federal healthcare programs for their own benefit.” The Georgia Attorney General added: “Decisions regarding end-of-life care are incredibly difficult and personal, and families must be able to trust the intentions of their chosen providers. Those who instead take advantage of the system for their own personal gain will be held accountable.”
• The owner and operator of a Louisiana hospice with multiple offices was sentenced to 20 years in prison in May 2024 for orchestrating an extensive health care fraud scheme. The hospice billed Medicare approximately $84 million in fraudulent claims and was paid approximately $42 million relating to these claims. The scheme involved: (1) overbilling for hospice patients for expensive general inpatient services; and (2) manipulating Medicare billing codes despite such services being medically unnecessary or despite their inclusion in the daily hospice benefit the hospice already received for its patients. The Special Agent in Charge at HHS-OIG said the defendant, “showed no regard for quality end-of-life hospice care. Instead, [his] motivation centered around multiple fraud schemes to maximize profit and steal from American taxpayers.” The Special Agent in Charge of the FBI New Orleans Division stated: “Each fraudulent claim filed by [the defendant] potentially deprived another deserving and suffering individual from the emotional and physical comfort of end-of-life care.”
• Several companies in May 2024 agreed to pay $4.2 million to resolve allegations that they violated the False Claims Act by knowingly submitting false claims and knowingly retaining overpayments for the care of hospice patients in Texas; the patients were ineligible for the Medicare hospice benefit because they were not terminally ill.
• The owner of two California-based hospice companies, along with his biller/consultant, were sentenced to prison in March 2024 for their roles in a scheme that resulted in obtaining over $9 million from Medicare in false and fraudulent claims for hospice services. According to court documents, the owner concealed his ownership and control over the hospice entities from Medicare, inserted nominee owners, paid kickbacks to patient recruiters, and profited from the scheme. The biller/consultant, meanwhile, submitted false and fraudulent Medicare enrollment forms, falsely identifying a straw owner as the sole owner and manager and concealing the actual owners and managers.
• In February 2024, a California man was convicted for his role in a scheme to defraud Medicare by billing $2.8 million for hospice services that patients did not need. According to court documents and evidence presented at trial, the individual was the medical director of several hospice companies. He fraudulently certified Medicare patients of one hospice as having terminal illnesses that the patients did not have so the hospice could bill Medicare for hospice services. The individual in 2015 was listed as the attending provider for more hospice claims paid by Medicare than any other provider in the nation.
• A Texas man in September 2023 was sentenced to prison for his role in a scheme that involved the submission of over $150 million in false and fraudulent claims to Medicare for hospice and other health care services. According to court documents, the person was the medical director of a large health care company that operated dozens of locations throughout Texas. Evidence at the trial of his co-defendants showed that the company marketed their hospice programs through a group of companies. They enrolled patients with long-term incurable diseases, such as Alzheimer's and dementia, as well as patients with limited mental capacity who lived at group homes, nursing homes, and in housing projects. In some instances, the company marketers falsely told patients they had less than six months to live. They also sent chaplains to the patients based on the false pretense they were near death. The group hired the defendant and other medical directors but made payment of their medical director fees contingent upon an
• An Oklahoma hospice company agreed to pay over $48,000 to resolve allegations that it violated the False Claims Act by knowingly submitting false claims to Medicare for hospice care provided to beneficiaries who did not qualify for the services (they were not terminally ill) and for services that were not medically necessary.
• A health care company in February 2025 agreed to pay $3 million to resolve allegations that it violated the False Claims Act by knowingly submitting false claims for the care of hospice patients in Alabama who were ineligible for the Medicare hospice benefit because they were not terminally ill.
• A California physician who worked for two hospices was sentenced to Federal prison in December 2024. He and his co-defendant schemed to defraud Medicare by submitting nearly $4 million in false and fraudulent claims for hospice services submitted by two hospice companies, which the co-defendant controlled. The physician falsely stated on claim forms that patients had terminal illnesses to make them eligible for hospice services covered by Medicare, typically adopting diagnoses provided to him by hospice employees whether or not they were true. He did so even though he was not the patients' primary care physician and had not spoken to those primary care physicians about the patients' conditions. Medicare paid on the claims supported by the defendant's false evaluations and certifications and recertifications of patients.
To address several of the foregoing issues, CMS has taken a number of regulatory and operational initiatives.
First, all providers/suppliers are assigned to an application screening level under § 424.518 of “limited,” “moderate,” or “high.” Those in the “high” category receive the strictest scrutiny. When initially enrolling in Medicare or undergoing an ownership change “high” level providers/suppliers must undergo a site visit and have their 5 percent or greater owners be subject to fingerprinting for a criminal background check. Hospices in 2011 were originally assigned to the “moderate” category. Given the increase in hospice fraud, waste, abuse—which includes the consequent need to exercise closer scrutiny of hospice owners, such as through criminal background reviews—we moved hospices to the “high” classification beginning in 2024. Hospices are one of only six provider/supplier types in the “high” category, which reflects their uniquely elevated risk.
Second, and to further increase our oversight of hospices, we expanded the change in majority ownership (CIMO) “36-month rule” in § 424.550(b) to include hospices. We found in the mid-2000s that some HHAs were attempting to enter Medicare without undergoing the required State survey or accreditation. Brokers would enroll an HHA (after being surveyed or accredited) with the specific intention of quickly selling it—or “flipping” it—to another party. This enabled the buyer to participate in Medicare with no survey or accreditation of the HHA under its new ownership—hence increasing the possibility of an illegitimate HHA furnishing (and billing for) poor or otherwise non-compliant services to beneficiaries. We thus promulgated § 424.550 in 2009, which required an HHA undergoing a CIMO within 36 months of its initial enrollment (or within 36 months of its most recent CIMO) to initially enroll as a new HHA and undergo a State survey or accreditation (unless certain exceptions apply). As already noted, we have seen similar situations in the hospice realm, whereby promptly selling the business—rather than furnishing good patient care—is the hospice's owner's principal motivation. We believed that expanding the 36-month rule to hospices would help stem the practice by, in part, facilitating a thorough vetting of the new owner and the hospice in question via a survey or accreditation.
Third, 42 CFR 418.22(c) states that (1) the hospice medical director, the physician designee (as defined in § 418.3), or the physician member of the hospice interdisciplinary group (hereafter the “hospice physician”) and (2) the attending physician (if the beneficiary has one) must initially certify the patient's terminal condition. (For subsequent periods, only the hospice physician must do so). We revised 42 CFR 424.507 in 2023 to require these two categories of physicians to be enrolled in or opted-out of Medicare in order for the hospice service to be paid. We concluded that requiring enrollment or opt-out would allow us to screen the certifying physician to ensure they are qualified (for example, licensed) to certify the terminal condition and do not pose program integrity risks such as past final adverse actions (as that term is defined in § 424.502). This is a particularly important consideration given the aforementioned issue of improper certifications.
Fourth, section 1866(j)(3) of the Act permits the Secretary to establish a provisional period of enhanced oversight (PPEO) of between 30 days and 1 year during which new providers or suppliers (including categories thereof) would be subject to enhanced oversight, such as prepayment review and payment caps. Consistent therewith, and in light of the payment safeguard threats that hospices posed, we implemented a PPEO in 2023 on new hospices enrolling in Arizona, California, Nevada, and Texas. Under this initiative, as of June 2025 approximately 670 hospices were subject to medical review with 122 of them revoked from Medicare. This 18 percent revocation rate is far more than the average revocation rate of about 1 to 3 percent. (That is—and though it varies depending on, for example, the provider/supplier type in question and the geographic region involved—1 to 3 percent of providers/suppliers are revoked at least once during their enrollment). The much higher percentage of hospices revoked during this initiative compared to general provider/supplier revocation rates helps demonstrate the extent of the hospice program integrity problem.
Fifth, we revised our provider enrollment regulations to clarify that hospice medical directors and administrators qualify as “managing employees” under § 424.502. They must therefore be reported on the hospice's Form CMS-855A application (Medicare Enrollment Application—Institutional Providers; OMB Control No. 0938-0685). This would foster greater transparency regarding the operators of hospices. It would also permit us to ascertain whether certain medical directors and administrators hold such roles at multiple hospices, which could be an indicator of a broader scheme if
It should be noted, some of these initiatives mirrored recommendations made by national hospice organizations that expressed deep concerns about fraud within the hospice community—concerns that various members of Congress share.
CMS is aggressively continuing its efforts to crush hospice fraud, waste, and abuse via the previous and other measures. Closer examination of hospices via the “36-month rule” and the elevation of hospices to the “high” risk category may well have resulted in some problematic hospice owners being unable to enter Medicare. CMS' PPEO measures have, as stated, resulted in a number of revocations. Yet we are concerned that vulnerabilities remain. Notwithstanding our tighter screening, hospices can still enroll in large numbers if all Medicare requirements are initially met. This is precisely what occurred in Los Angeles County and elsewhere. The dilemma is that some of these providers later engaged in fraudulent activity. Put otherwise, we have indeed established more stringent requirements for hospices to initially enroll, but they cannot in every case prevent a potentially problematic hospice from entering Medicare. Hospice anti-fraud measures require a comprehensive, wide-ranging approach that impact a variety of hospice activities. They cannot be limited to post-enrollment scrutiny (such as medical review), greater screening of new owners, or even both. All facets of hospice enrollment must likewise be addressed. Given the continued severity of hospice program integrity problems, we believe that addressing the very front end of the enrollment process—before the Medicare contractor even starts reviewing the hospice's initial enrollment application, screening the hospice's owners, etc.—is a program integrity gap that must be filled. Preventive action—specifically, halting fraud before it has a chance to begin—is a far better anti-fraud approach than the traditional “pay-and-chase” model of waiting for the fraud to happen before taking remedial steps.
Our previously mentioned HHA and ground ambulance moratoria were intended to address fraud, waste, and abuse among these two provider/supplier types in general and, in particular, the rapid increase in the number of HHAs and ground ambulance suppliers in the affected localities. The two concepts are related. A sudden rise in new enrollments within a particular area that is not tied to a similar increase in the number of Medicare beneficiaries has long been a strong indicator of fraud, waste, and abuse. Consider Nevada in Table 1 of this notice. There was no medical justification for a 151 percent increase in enrolled hospices over a 4-year period, especially since the State's beneficiary population increased by no more than 10 percent during that timeframe; likewise, having dozens of newly enrolled hospices within a fairly small area of Los Angeles County strongly suggests improper behavior.
The previous moratoria were, in our view, successful in stemming similar activity regarding HHAs and ground ambulance suppliers. Since there were no new enrollments of these provider/supplier types in the impacted high-fraud regions, new providers/suppliers that would or might otherwise have engaged in fraud, waste, and abuse in these areas were blocked from doing so. Too, with no new provider/suppliers coming in, we were able focus our program integrity efforts and resources on post-enrollment activities—that is, on enrolled HHAs and ground ambulance suppliers. Through our very close scrutiny of their activities and, in some cases, revocations, the overall number of enrolled HHAs and ground ambulance suppliers in said localities fell to a level more commensurate with the number of beneficiaries therein—and with this, an ostensible reduction in fraud, waste, and abuse.
With the aforementioned program integrity gap at the beginning of the hospice enrollment process, the ongoing hospice payment safeguard issues, and the success of our previous moratoria, we believe that temporarily closing the enrollment door at the very start via a moratorium is required.
Aside from the need to halt hospice fraud at the beginning, there is another consideration behind our planned moratorium and why we believe it should be nationwide: the transitory nature of fraud schemes.
The main impetus for the enrollment measures discussed in section II.A. of this notice were the problems seen in Arizona, California, Nevada, and Texas—mostly involving the quick, sharp increase in new enrollments (described in Table 1). Since CY 2023, the number of new enrollments in Arizona, California, and Texas have fallen substantially, as shown in Table 2:
Encouraging though this is, difficulties remain—and are spreading. The number of newly enrolling hospices in Nevada has changed little since CY 2022 despite our hospice program integrity efforts. Whereas there were five new hospice enrollments in Nevada in CY 2019, between 35 and 39 hospices have enrolled in each of the last 4 calendar years. The total number of enrolled Nevada hospices continues to rise at a rate well beyond that of the beneficiary population—from 138 in CY 2023 to 188 in CY 2025, or 36 percent. This potentially reflects a shifting of some fraudulent hospice activity from California and Arizona to Nevada given the sharp decrease in new enrollments
Considering the foregoing concerns, and after consultation with the OIG, CMS has concluded that hospices have a significant potential for fraud, waste or abuse. With the need to prevent potential fraud before it begins rather than after the fact, we have determined to impose a nationwide moratorium on the enrollment of all hospices and hospice practice locations. Beginning on the effective date of this notice, no new hospices or hospice practice locations will be enrolled in Medicare unless the hospice's enrollment application was received by the applicable Medicare contractor prior to this notice's effective date. Geographically, the moratorium applies to hospices seeking to enroll anywhere in the United States, including all States, territories, and the District of Columbia.
Section 424.550(b), as already mentioned, requires a hospice undergoing a non-exempt CIMO within 36 months of its initial enrollment (or within 36 months of its most recent CIMO) to enroll in Medicare as a brand-new hospice and undergo a State survey or accreditation. The hospice's current enrollment and provider agreement are terminated. This means the hospice's new enrollment is an initial enrollment no less than if the hospice had never enrolled in Medicare before. Hence, our moratorium will prevent a hospice undergoing a non-exempt CIMO from reenrolling in Medicare because, again, it would constitute an initial enrollment; the hospice is “new.”
Section 1866(j)(7) of the Act authorizes imposition of a temporary enrollment moratorium for Medicare, Medicaid or CHIP if the Secretary determines such moratorium is necessary to prevent or combat fraud, waste, or abuse under either program. The Secretary is not required to impose a particular moratorium on all three programs. This statutory discretion enables the Secretary to impose a moratorium on any combination of the three programs or one program alone.
At this time, we believe it is in Medicaid and CHIP beneficiaries' best interest to allow each State to decide whether some form of a hospice moratorium is appropriate for their respective Medicaid programs and CHIPs, and the scope of any such moratorium. Each State has greater expertise and experience with their hospice provider types—including the requirements for each type of hospice—than CMS. Nevertheless, CMS encourages each State to, as appropriate, implement a hospice moratorium tailored to the specifics of their beneficiary population as well as any geographic considerations, (in accordance with 42 CFR 455.470(b)). CMS is also offering every State and territory the opportunity to consult with CMS on the prospect of implementing a Medicaid- or CHIP-based (or both) hospice moratorium in their jurisdictions.
In general, and excluding the recent increases in Arizona, California, Georgia, Nevada, and Texas, the number of enrolled hospices nationwide has remained reasonably stable over the past 7 years. During this period, we saw little evidence of nationwide, across-the-board hospice access-to-care issues for beneficiaries in Medicare—or, for that matter, in Medicaid or CHIP. Therefore, we do not believe that a national moratorium will threaten beneficiaries' ability to receive hospice services in any of these programs. However, we will monitor for any access to care issues.
In accordance with section 1866(j)(7)(B) of the Act, there is no judicial review under sections 1869 and 1878 of the Act, or otherwise, of the
This document does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
This notice is necessary to help reduce the prevalence of Medicare fraud, waste, and abuse among hospices.
We have examined the impacts of this notice as required by E.O. 12866, “Regulatory Planning and Review”; E.O. 13132, “Federalism; E. O. 13563, “Improving Regulation and Regulatory Review”; E.O. 14192, “Unleashing Prosperity Through Deregulation”; the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 through 612; section 1102(b) of the Social Security Act; and section 202 of the Unfunded Mandates Reform Act of 1995.
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select those regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; and distributive impacts). Based on our analysis, the Office of Information and Regulatory Affairs (OIRA) has determined that this notice is not significant pursuant to section 3(f)(1) of Executive Order 12866. In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget. In accordance with Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act), OIRA has also determined that this notice does not meet the criteria for a major rule as defined in 5 U.S.C. 804(2).
In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the RFA provisions at 5 U.S.C. 604. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. This notice is primarily applicable to hospices, not rural hospitals. Therefore, the Secretary has certified that this notice will not have a significant economic impact on the operations of small rural hospitals.
We expect savings to the Medicare program from the reduction in the number of newly enrolling hospices. However, we do not have data upon which to base an estimate of the amount of savings.
The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organization, and small governmental jurisdictions. Most entities and most other providers and suppliers are small entities, either by nonprofit status or by having revenues less than $19 million to $41 million in any 1 year. Individuals and States are not included in the definition of a small entity. We do not believe that this hospice moratorium notice will have a significant economic impact on a substantial number of small businesses. Excluding the aforementioned outliers in Arizona, California, Georgia, Nevada, and Texas, between CY 2023 and CY 2025 the combined nationwide number of new enrollments was roughly 500 (166 per year). If we assumed that a similar number would seek to enroll during the moratorium would be prohibited from doing so, this is a miniscule percentage when compared to the well over 2 million providers and suppliers currently enrolled in Medicare; the same would hold true if several hundred hospice practice locations (aside from the main provider) could not be added by hospice providers. Furthermore—aside from their ability to add new practice locations to their enrollments—the moratorium would not impact the approximately 7,000 currently enrolled hospices, which could continue furnishing services (assuming they remain complaint with all Medicare requirements). Accordingly, very few small businesses will be affected by the moratorium. Even conceding the impact on newly enrolling hospices and prospective hospice practice locations, we believe that the risk that hospice fraud, waste, and abuse poses to the Trust Funds, Medicare beneficiaries, and the taxpayers far exceeds this and thus justifies our measure.
There are two principal alternatives we considered in preparing this notice. First, we considered forgoing a moratorium entirely. Yet as already noted, the longstanding fraud, waste, and abuse problems require remedial measures beyond those we presently utilize. Helpful though the latter have been, more is needed. Second, we contemplated limiting the moratorium to the six States currently subject to the previously-mentioned hospice PPEO. However, we reiterate that the problems the moratorium seeks to address are nationwide instead of restricted to particular geographic areas. As we also stated earlier, the transient nature of fraud schemes—as shown in, for instance, the sudden upswing in new hospices in States like Nevada and Georgia—require nationwide proactivity to prevent these schemes from developing in the first place. Third, we contemplated requiring States to implement a hospice moratorium, but, as noted, we believe States are in the best position to determine whether a moratorium is appropriate for their jurisdictions and beneficiary populations.
Section 202 of UMRA of 1995 UMRA also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2026, that threshold is approximately $193 million. This notice will not impose a mandate that will result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of more than $193 million in any 1 year. UMRA only applies in situations where an agency
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed regulatory action (and subsequent final action) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. Since this notice does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable.
The Administrator of the Centers for Medicare & Medicaid Services (CMS), Dr. Mehmet Oz, having reviewed and approved this document, authorizes Chyana Woodyard, who is the Federal Register Liaison, to electronically sign this document for purposes of publication in the
Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).
Notice.
This notice announces the imposition of a 6-month nationwide moratorium on the Medicare enrollment of home health agencies (HHAs).
This moratorium is effective May 13, 2026.
Frank Whelan, (410) 786-1302.
Under the Patient Protection and Affordable Care Act (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (collectively known as the Affordable Care Act), Congress provided the Secretary with new tools and resources to combat fraud, waste, and abuse in Medicare, Medicaid, and the Children's Health Insurance Program (CHIP). One of these was section 6401(a) of the Affordable Care Act, which added a new section 1866(j)(7) to the Social Security Act (the Act). It provided the Secretary with authority to impose a temporary moratorium on the enrollment of new fee for service (FFS) Medicare, Medicaid or CHIP providers and suppliers—including categories of providers and suppliers—if the Secretary determines that a moratorium is necessary to prevent or combat fraud, waste, or abuse under these programs.
Section 6401(b) of the Affordable Care Act added specific moratorium language applicable to Medicaid at section 1902(kk)(4) of the Act, requiring States to comply with any moratorium imposed by the Secretary unless the State determines that the imposition of such moratorium would adversely impact Medicaid beneficiaries' access to care. Section 6401(c) of the Affordable Care Act amended section 2107(e)(1) of the Act to provide that all the Medicaid provisions in sections 1902(a)(77) and 1902(kk) are also applicable to CHIP.
In February 2011, in accordance with the aforementioned authority, CMS published a final rule with comment period titled, “Medicare, Medicaid, and Children's Health Insurance Programs; Additional Screening Requirements, Application Fees, Temporary Enrollment Moratoria, Payment Suspensions and Compliance Plans for Providers and Suppliers” (76 FR 5862). This final rule implemented section 1866(j)(7) of the Act by establishing new regulations at 42 CFR 424.570. Under § 424.570(a)(2)(i) and (iv), CMS—or CMS in consultation with the Department of Health and Human Services Office of Inspector General (HHS-OIG) or the Department of Justice (DOJ) or both—may impose a temporary moratorium on newly enrolling Medicare providers and suppliers if CMS determines that there is a significant potential for fraud, waste, or abuse with respect to a particular provider or supplier type or particular geographic areas or both.
In accordance with § 424.570(b), a temporary enrollment moratorium imposed by CMS remains in effect for 6 months. If CMS deems it necessary, the moratorium may be extended in 6-month increments. CMS evaluates whether to extend or lift the moratorium before the end of the initial 6-month period and, if applicable, before the expiration of any subsequent moratorium periods. If the moratorium announced in this notice is extended, CMS will publish a document regarding such extension(s) in the
As provided in § 424.570(d), CMS may lift a moratorium at any time if: (1) the President declares an area a disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act; (2) circumstances warranting the imposition of a moratorium have abated or CMS has implemented program safeguards to address the program vulnerability; (3) the Secretary has declared a public health emergency; or (4) in the judgment of the Secretary, the moratorium is no longer needed. Once a moratorium is lifted, the provider or supplier types that were unable to enroll because of the moratorium will be assigned to the “high” screening level in accordance with §§ 424.518(c)(3)(iii) and 455.450(e)(2) if such provider or supplier applies for enrollment at any time within 6 months from the date the moratorium was lifted.
Under § 424.570(a)(1)(iii), a temporary moratorium does not apply to any of the following:
• Changes in practice location (except if the location is changing from a location outside the moratorium area to a location inside the moratorium area).
• Changes in provider or supplier information, such as phone number or address.
• Changes in ownership (except changes in ownership of HHAs, hospices, and suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that would require an initial enrollment).
Also, in accordance with § 424.570(a)(1)(iv), a temporary moratorium does not apply to any enrollment application that has been received by the Medicare contractor prior to the date the moratorium is imposed.
CMS states at § 424.570(a)(1)(ii) that it will announce a temporary moratorium in a
We first used our moratorium authority to prevent enrollment of new HHAs, subunits, and branch locations (hereafter collectively referred to as HHAs) in Miami-Dade County, Florida and Cook County, Illinois, as well as surrounding counties, and Part B ambulance suppliers in Harris County, Texas and surrounding counties, in a notice issued on July 31, 2013 (78 FR 46339). We exercised the moratorium authority again in a notice published on February 4, 2014 (79 FR 6475), when we extended the existing moratoria for an additional 6 months and expanded it to include enrollment of HHAs in Broward County, Florida; Dallas County, Texas; Harris County, Texas; and Wayne County, Michigan and surrounding counties, and enrollment of ground ambulance suppliers in Philadelphia, Pennsylvania and surrounding counties. We extended these moratoria for another 6 months on August 1, 2014 (79 FR 44702); February 2, 2015 (80 FR 5551); July 28, 2015 (80 FR 44967); and February 2, 2016 (81 FR 5444).
We again extended these moratoria for another 6 months on August 3, 2016 (81 FR 51120) and also expanded them Statewide with respect to the enrollment of new HHAs in Florida, Illinois, Michigan, and Texas, and Part B non-emergency ambulance suppliers in New Jersey, Pennsylvania, and Texas. In this same notice, though, we announced the lifting of temporary moratoria for all Part B emergency ambulance suppliers.
The original 2013 moratorium, after being extended and revised several times,
In weighing the need to establish an enrollment moratorium, CMS considers whether a significant risk of fraud, waste, or abuse exists. CMS also relies on its own and law enforcement's longstanding experience with ongoing and emerging fraud trends and activities gained through civil, criminal, and administrative investigations and prosecutions.
The HHS-OIG has long highlighted and documented the problem of HHA fraud, waste, and abuse. The OIG and DOJ have over the years encouraged and supported strong anti-fraud measures targeting HHAs, and we believe the action announced by this notice is consistent therewith.
In contemplating the present moratorium, we also used data analysis that included reviewing: (1) both current and historic Medicare enrollment data; and (2) indicators of fraud, waste, and abuse. Sections II.A. and B. of this notice discuss our review in more detail.
Beneficiary access to care in Medicare, Medicaid and CHIP is of critical importance to CMS and our State partners. In our moratorium determination, we carefully evaluated access to care for Medicare beneficiaries nationwide. We discuss our findings for Medicare beneficiaries in the Beneficiary Access to Care section later in this notice.
Under its authority at § 424.570(a)(2)(i) and (a)(2)(iv), CMS is implementing a nationwide temporary moratorium on the Medicare enrollment of HHAs nationwide. In this section, we explain the rationale for and scope of this moratorium.
As previously alluded to, HHA fraud, waste, and abuse has been a severe problem for over two decades. Based on our experience, low start-up costs and the home-based nature of the services—with little direct supervision of the persons performing them—help make the HHA arena ripe for fraud. Indeed, HHAs have long been among the highest-risk Medicare provider/supplier types in terms of program integrity, with the OIG stating in 2018: “Home health has long been recognized by OIG and CMS as a program area vulnerable to fraud, waste, and abuse.”
One involves capitalization. Under § 489.28(a), newly enrolling HHAs must have available sufficient funds (known as “initial reserve operating funds”) at the time of application submission and at all times during the enrollment process up to the expiration of the 3-month period following enrollment. The purpose is to ensure that the HHA is a viable and financially stable business, for an underfunded entity could skimp on patient care to save money or engage in fraud to improve its finances. HHAs are the only Medicare provider/supplier type that have minimum capitalization requirements as a condition of enrollment; this underscores the uniquely serious fraud, waste, and abuse threat HHAs pose.
Another involves risk designations. All providers/suppliers are assigned to an application screening level under § 424.518 of “limited,” “moderate,” or “high.” Those in the “high” category receive the strictest scrutiny; when initially enrolling in Medicare or undergoing an ownership change, they receive a site visit and must have their 5 percent or greater owners be subject to fingerprinting for a criminal background check. HHAs are one of only six provider/supplier types in the “high” classification.
A third involves changes in majority ownership (CIMOs). We found in the mid-2000s that some HHAs were attempting to enter Medicare without
An additional initiative concerned provisional periods of enhanced oversight (PPEO). Section 1866(j)(3) of the Act permits the Secretary to establish a PPEO of between 30 days and 1 year during which new providers or suppliers (including categories thereof) would be subject to enhanced oversight, such as prepayment review and payment caps. Consistent therewith—and in light of the HHA payment safeguard threats we have observed—we implemented a PPEO in 2019 on new HHAs nationwide regarding their requests for anticipated payments (RAPs). Specifically, HHAs would not receive upfront payments prior to the provision of services stemming from their RAPs.
Most pertinent to the current notice and as already mentioned, we also imposed and extended several HHA enrollment moratoria from 2013 through 2019. Although the particular circumstances involving each affected county and State varied somewhat, they all shared a common characteristic: a significant potential for HHA fraud, waste, and abuse. This was reflected in, for instance: (1) an abnormally high number of HHAs vis-à-vis the location's beneficiary population (that is, market oversaturation); and (2) heavy law enforcement activity as reflected in part by criminal convictions of HHA owners and operators.
We believe these and other provider enrollment measures have to some degree helped reduce the amount of HHA fraud, waste, and abuse. These measures also show our ongoing commitment to addressing this dilemma and our recognition of our obligation to do everything possible to protect Medicare beneficiaries, the Medicare Trust Funds, and the American taxpayers.
Despite all these initiatives, HHA program integrity risks are still among the highest of any provider/supplier type. Our actions might have lessened the degree of HHA fraud, waste, and abuse, but certainly not to the extent that CMS need no longer undertake additional initiatives. It should not be assumed that the expiration of the prior HHA moratoria and PPEO signified a massive reduction in the scope of the HHA risk. As the examples below demonstrate, hundreds of millions of taxpayer dollars remain under threat from fraudulent parties, and we must always consider further means of addressing this continuing problem, particularly as new threats arise.
One such threat involves the Los Angeles region, which has seen unusual and highly disturbing trends in HHA enrollment. CMS data indicates that the number of HHAs in Los Angeles County between 2019 and 2023 rose more than 40 percent. Well over 1,000new HHAs have enrolled in the county since 2019, and the county currently has roughly 12-15 percent of all HHAs
There have also been a considerable number of criminal convictions and other findings over the last several years involving home health fraud. These included, but were not limited to, the following:
• The owner of a Pennsylvania home care agency was sentenced to prison in June 2025 and ordered to pay over $235,000 in restitution. The provider had been reimbursed by Medicaid for services that were not provided and for claims containing false representations. The investigation revealed that some of the submitted claims pertained to: (1) patients who never signed up for or received care from the provider; or (2) employees who were not aware that the owner had submitted false claims for hours they allegedly worked.
• Two Illinois home health care company owners were sentenced to prison in September 2022 and ordered to pay more than $8 million as part of a home health care fraud scheme. According to court documents, the two owned and operated three home health companies in Illinois and Indiana. From approximately January 2009 to June 2018, the pair secretly paid bribes and kickbacks to patient marketers in exchange for referring Medicare beneficiaries to the companies. One of the two maintained relationships with marketers and signed sham contracts with patient marketers on behalf of the companies, while the other facilitated kickback payments to marketers by writing checks to himself and agency employees; the latter would then convert the checks to cash that was used to pay kickbacks to marketers. Also, the former individual caused fraudulent claims to be submitted to Medicare for home health services that falsely represented that she, as a registered nurse, performed assessments of patients on dates when she was out of the country.
• A part-owner of a Massachusetts home health provider in January 2025 was sentenced in Federal court to 12 years in prison and ordered to pay almost $100 million in restitution for her role in a home health care fraud scheme. (A co-defendant, who was a nurse at the home health agency, had previously been sentenced to prison for her involvement in the scheme.)
• A home health care owner was sentenced in April 2025 to 42 months in prison for committing Medicaid fraud and was ordered to pay $5.7 million in restitution to Medicaid. According to court documents and trial testimony, the defendant owned and operated three home health care businesses in Ohio. She lived in California for the majority of the time she owned the businesses, and despite not being involved in the businesses' daily operations, she did all the Medicaid billing for nursing services. In doing so, she: (1) inflated the hours of services provided; (2) billed for registered nurses when licensed practical nurses completed the care; and (3) billed for care for patients who were either deceased or ineligible to receive Medicaid.
• The State of Massachusetts in December 2020 reached a $10 million settlement with a Massachusetts-based home health care company and its owner to resolve allegations that they falsely billed the State's Medicaid program for unauthorized services. According to the State's Attorney General, the State since 2016 had returned “more than $40 million to [the State's Medicaid program] by going after fraud in the home health industry.”
• A San Francisco Bay Area doctor was convicted in Federal court in November 2023 of charges that included: (1) accepting kickbacks for patient referrals to HHAs; (2) health care fraud; and (3) false statements relating to a health care matter. One of the schemes the physician engaged in involved referring patients to an HHA in exchange for illegal kickback payments. Regarding the HHA itself, employees thereof and the chief executive officer (CEO) conspired to pay the physician regular and recurring amounts to ensure that he referred Medicare patients to the HHA. The CEO pled guilty to charges of conspiracy to pay kickbacks for the referrals of Medicare beneficiaries on August 5, 2022.
• In November 2024, a Michigan HHA owner and operator was sentenced to prison for his role in a health care fraud conspiracy that resulted in almost $7.9 million in false and fraudulent claims for home health care services paid by Medicare. According to court documents, the individual—together with three doctors and two other home health care company owners—offered kickbacks, bribes, and other inducements to beneficiary recruiters in exchange for Medicare beneficiary information. They then used this information to bill Medicare for services that were medically unnecessary and not provided.
• A New Hampshire man pleaded guilty in July 2021 to two counts of Medicaid fraud. The individual owned a company licensed to provide in-home personal care services to Medicaid beneficiaries. He submitted claims for reimbursement for such services that: (1) were never actually provided; and (2) included periods when the company's patients were not at home but instead were in hospitals or nursing homes.
• A Texas man in August 2025 was sentenced to 75 months in Federal prison for leading a Medicare fraud scheme. The individual owned and operated an HHA. He or others at his direction forged signatures of doctors and nurses; specifically, they cut out old signatures and taped them onto newly created doctors' orders, nursing notes, and nursing assessments. The defendant submitted these falsified documents in response to a request for records from Medicare. He also: (1) continued using the signature of a nurse who had departed the HHA on nursing notes and assessments; (2) per witness testimony, bribed a doctor in exchange for approving home health services; and (3) billed Medicare for over $400,000 in HHA claims but did not maintain the documentation for many of them and later falsified records to support the claims.
• A Michigan man was convicted in September 2023 for orchestrating a $2.8 million health care fraud and wire fraud conspiracy, and engaging in money laundering, aggravated identity theft, and witness tampering. Despite being excluded from billing Medicare, the individual purchased an HHA using the names, signatures, and personal identifying information of others to conceal his ownership of the company. In a 2-month period, he and his co-conspirators billed and were paid nearly $2.8 million by Medicare for services that were never provided. He then transferred these funds through bank accounts belonging to shell corporations and eventually into his accounts in another country. Too, on the eve of trial—and using a pseudonym—he wrote false and malicious emails to various federal government agencies alleging a government witness had
• An Oklahoma-based home health provider in January 2026 agreed to pay $34 million to resolve its civil liability under the False Claims Act for billing medically unnecessary home health claims to Medicare and providing financial benefits to physicians in exchange for referrals.
• In another Oklahoma case in October 2022, an Oklahoma-based home health provider, its affiliates, and their president and chief operations officer agreed to pay nearly $7.2 million to resolve allegations that they violated the False Claims Act by billing the Medicare program for medically unnecessary therapy provided to patients in Florida. Specifically, the home health provider allegedly billed the Medicare program knowingly and improperly for home healthcare to patients in Florida based on therapy provided without regard to medical necessity and overbilled for therapy by upcoding patients' diagnoses.
The foregoing information plainly shows a significant potential for fraud, waste or abuse with respect to HHAs nationwide. Several other observations can be made about this data.
First, while Los Angeles County has been the focus of much recent attention regarding HHA fraud, this does not mean an HHA enrollment moratorium should be limited to that area. HHA fraud can and does happen in numerous geographic regions—even those that might not be traditionally considered very high risk, such as Massachusetts, Ohio, and Oklahoma. Indeed, quick and dramatic spikes in fraud can occur anywhere and at any time. Los Angeles County, for instance, had not been included in any of our previous HHA moratoria because the risk that existed there between 2013 and 2019 was deemed less than that posed by HHAs in other areas like Houston and the South Florida region. Yet a rapid, unexpected, and very substantial increase in the number of HHAs occurred in said county. Too, the aforementioned Ohio situation involving dozens of HHAs took place suddenly in the Columbus region, which had never before been a major hotspot for HHA fraud. The point is that the Los Angeles County situation—rather than militating against a nationwide moratorium—in our view bolsters the case for it, for fraud schemes can be highly migratory. As we stated in a previous HHA moratorium notice: “The HHS-OIG and CMS have learned that some fraud schemes are viral, meaning they replicate rapidly within communities, and that health care fraud also migrates—as law enforcement cracks down on a particular scheme, the criminals may redesign the scheme or relocate to a new geographic area.”
Second, and in a similar vein, the fact that some of the home health fraud is occurring strictly in Medicaid (as shown in several of the previously noted cases) does not diminish the need for a Medicare moratorium. To the contrary, it shows that such fraud takes place across different Federal and State programs. It is the fraud activity itself and its widespread nature—not the specific health care program in which it happens—that is the critical consideration when establishing anti-fraud measures. This is particularly true given that many HHAs are enrolled in both Medicaid and Medicare, meaning behavior in one program could be repeated in another.
Third, we recognize that the overall nationwide number of non-California enrolled HHAs has decreased somewhat in recent years. On the surface at least, this might weigh against a moratorium, since the problem of large numbers of new enrollments is not present outside of Los Angeles County. However, we reiterate that the principal test under § 424.570 for a moratorium is whether a “significant potential for fraud, waste, or abuse” exists. Although a dramatic spike in enrollments is often indicative of potential fraud, it is not a prerequisite for it. Other data can also show this potential. For example, the aforementioned criminal and other cases and the clusters of co-located HHAs reveal that home health fraud is taking place even in areas that have seen reductions in the number of enrolled HHAs, such as Michigan and Texas.
CMS must be aggressive in halting fraud before it begins; proactivity is a far better anti-fraud approach than a reactive, “pay-and-chase” one. We found our previous HHA moratoria beneficial in this regard, which is largely why we extended and expanded them over a 5-year period. The HHA moratoria's lapse in 2019 did not signify a lack of their success but instead our view that it had achieved the desired goal of keeping potentially fraudulent parties in certain areas from enrolling in Medicare. However, given the serious problems in Los Angeles County and elsewhere, we believe that our current HHA anti-fraud measures have not by themselves dramatically reduced HHA fraud. HHA program integrity requires a holistic effort on our part. We cannot impose only one measure at a time and then wait indefinitely to see if it works before attempting another. Such has been the magnitude of HHA fraud for so long that more measures are needed to supplement our existing ones—and we believe that by applying an HHA moratorium nationwide, we could experience the success of our prior localized moratoria on a much broader geographic scale.
In light of the foregoing concerns, and pursuant to our consultation with OIG, CMS has concluded that HHAs present significant potential for fraud, waste or abuse. To prevent potentially fraudulent HHAs from enrolling in Medicare, we have determined to impose a nationwide moratorium on the enrollment of all HHAs. Beginning on the effective date of this notice, no new HHAs or HHA branches or practice locations will be enrolled into Medicare unless the HHA's enrollment application was received by the applicable Medicare contractor prior to this notice's effective date. Geographically, the moratorium applies to HHAs seeking to enroll anywhere in the United States, including all States, territories, and the District of Columbia.
As previously mentioned, our prior HHA moratoria included the establishment of HHA subunits and branches. In 2013, a “subunit' of an HHA, like the HHA itself, was required under 42 CFR part 484 to independently meet the HHA conditions of participation (CoPs) in 42 CFR part 484, sign a separate provider agreement, and separately enroll in Medicare; the only material distinction between an independent HHA and a subunit was that they could share the same governing body, administrator, and group of professional personnel.
We also note § 424.550(b), which, as already mentioned, requires an HHA undergoing a non-exempt CIMO within 36 months of its initial enrollment (or within 36 months of its most recent CIMO) to enroll in Medicare as a brand new HHA and undergo a State survey or accreditation. The HHA's current enrollment and provider agreement are terminated in these situations. This means that the HHA's new enrollment is an initial enrollment no less than if the HHA had never enrolled in Medicare before. Hence, our moratorium would prohibit an HHA undergoing a non-exempt CIMO from reenrolling in Medicare because, again, it would constitute an initial enrollment; the HHA is “new”.
As already mentioned, section 1866(j)(7) of the Act authorizes imposition of a temporary enrollment moratorium for Medicare, Medicaid or CHIP if the Secretary determines such moratorium is necessary to prevent or combat fraud, waste, or abuse. The Secretary is not required to impose a particular moratorium on all three programs but may do so on any combination of the three programs or one program alone.
At this time, we believe it is in Medicaid and CHIP beneficiaries' best interests to allow each State to decide whether some form of a home health provider moratorium is appropriate for their respective Medicaid and CHIP programs, and the scope of any such moratorium. Each State has greater expertise and experience with their pool of home health provider types—including the requirements for each type of home health provider—than CMS. Nevertheless, CMS encourages each State to, as appropriate, implement a home health provider moratorium tailored to the specifics of their beneficiary population as well as any geographic considerations (in accordance with 42 CFR 455.470(b)). Additionally, CMS is offering every State and territory the opportunity to consult with CMS on the prospect of implementing a Medicaid- or CHIP-based (or both) home health moratorium in their jurisdictions.
Although there has been a slight decline in the number of Medicare-enrolled non-California HHAs since 2019, there remain over 11,500 HHAs nationwide. We have not seen evidence of a present nationwide shortage of HHAs or of access-to-care issues for beneficiaries in Medicare either nationally, in particular geographic areas, or rural regions. We are also not aware of similar concerns in Medicaid or CHIP. We therefore do not believe that a national moratorium will threaten beneficiaries' ability to receive home health services in any of these programs. However, we will monitor this matter for any access issues—including in rural areas—that arise.
In accordance with section 1866(j)(7)(B) of the Act, there is no judicial review under sections 1869 and 1878 of the Act, or otherwise, of the decision to impose a temporary enrollment moratorium. Under §§ 424.530(a)(10) and 424.570(c), CMS denies the enrollment application of a provider or supplier if the provider or supplier is subject to a moratorium. In addition, § 424.514(d)(2)(v)(C) states that if the provider or supplier was required to pay an application fee, the application fee will be refunded if the application was denied because of the imposition of a temporary moratorium.
A provider or supplier that is impacted by a moratorium may use the existing appeal procedures at 42 CFR part 498 to administratively appeal a denial of billing privileges based on the imposition of a temporary moratorium. The scope of any such appeal, though, would be limited solely to assessing whether the temporary moratorium applies to the provider or supplier appealing the denial (see 42 CFR 498.5(l)(4)).
This document does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
This notice is necessary to help reduce the prevalence of Medicare fraud, waste, and abuse among HHAs.
We have examined the impacts of this notice as required by E.O. 12866, “Regulatory Planning and Review”; E.O. 13132, “Federalism; E. O. 13563, “Improving Regulation and Regulatory Review”; E.O. 14192, “Unleashing Prosperity Through Deregulation”; and the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 through 612; section 1102(b) of the Social Security Act; and section
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select those regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; and distributive impacts). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as any regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the Executive Order itself.
An RIA must be prepared for a regulatory action that is significant under section 3(f)(1) of Executive Order 12866. Based on our analysis, the Office of Information and Regulatory Affairs (OIRA) has determined that this notice is not significant pursuant to section 3(f)(1) of Executive Order 12866. In accordance with Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act), OIRA has also determined that this notice does not meet the criteria for a major rule as defined in 5 U.S.C. 804(2). Accordingly, we have not prepared a regulatory impact analysis.
In addition, section 1102(b) of the Act requires us to prepare an RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the RFA provisions at 5 U.S.C. 604. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. This notice is primarily applicable to HHAs suppliers, not rural hospitals. Therefore, the Secretary has certified that this notice will not have a significant economic impact on the operations of small rural hospitals.
We note that we expect savings to the Medicare program from the reduction in the number of newly enrolling HHAs. However, we do not have data upon which to base an estimate of the amount of savings.
The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organization, and small governmental jurisdictions. Most entities and most other providers and suppliers are small entities, either by nonprofit status or by having revenues less than $19 million to $41 million in any 1 year. Individuals and States are not included in the definition of a small entity.
We do not believe that this HHA moratorium notice will have a significant economic impact on a substantial number of small businesses. Between 2023 and today in States other than California, the combined annual number of newly enrolling HHA has generally been less than 400 (or an average of roughly 150 to 200 over a 6-month period). If we assumed that a roughly similar number would seek to enroll during the moratorium but would be prohibited from doing so, this is a miniscule percentage when compared to the well over 2 million providers and suppliers currently enrolled in Medicare. The same would hold true if several hundred HHA branches could not be added as practice locations during the moratorium. Moreover—and excluding their ability to add branches to their enrollments—the moratorium would not impact the roughly 11,500 currently enrolled HHAs, which could continue furnishing services (assuming they remain compliant with all Medicare requirements). Accordingly, we expect few small businesses to be affected by the moratorium. Even conceding the impact on newly enrolling HHAs and prospective HHA branches, we believe that the risk that HHA fraud, waste, and abuse poses to the Trust Funds, Medicare beneficiaries, and the taxpayers far exceeds this and thus justifies our measure.
There are two principal alternatives we considered in preparing this notice. First, we considered forgoing a moratorium entirely. Yet as already mentioned, the longstanding fraud, waste, and abuse problems require fraud, waste, and abuse prevention measures beyond those described earlier in this notice, such as capitalization requirements. Helpful though the latter have been, more is needed. Second, we contemplated limiting the moratorium to southern California. We believe, though, that the problems the moratorium seeks to address are nationwide rather than restricted to particular geographic areas. As we also stated earlier, the transient nature of fraud schemes—as shown in, for instance, the sudden upswing in new HHAs in Los Angeles County and the tens of HHAs in Ohio operating out of single site—require nationwide (rather than localized) proactivity to prevent these schemes from developing in the first place. Third, we contemplated requiring States to implement an HHA moratorium, but, as noted, we believe States are in the best position to determine whether a moratorium is appropriate for their jurisdictions and beneficiary populations.
Section 202 of UMRA of 1995 UMRA also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2026, that threshold is approximately $193 million. This notice will not impose a mandate that will result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of more than $193 million in any 1 year. UMRA only applies in situations where an agency engages in notice-and-comment rulemaking. It does not apply to this notice.
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed regulatory action (and subsequent final action) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. Since this notice does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable.
In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget.
The Administrator of the Centers for Medicare & Medicaid Services (CMS), Dr. Mehmet Oz, having reviewed and approved this document, authorizes Chyana Woodyard, who is the Federal Register Liaison, to electronically sign
Centers for Medicare & Medicaid Services, Health and Human Services (HHS).
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments must be received by July 14, 2026.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2. By
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, please access the CMS PRA website by copying and pasting the following web address into your web browser:
William N. Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
The information collections associated with the 2019 final regulations are related to the substantiation requirements for individual coverage HRAs (45 CFR 146.123(c)(5)), the notice requirement for individual coverage HRAs (45 CFR 146.123(c)(6)), and notification of termination of coverage (45 CFR 146.123(c)(1)(iii)). Under final regulations issued by HHS on May 14, 2020, titled “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2021; Notice Requirement for Non-federal Governmental Plans” (85 FR 29164), under 45 CFR 146.145(b)(3)(viii)(E), excepted benefit HRAs offered by non-Federal governmental plan sponsors are required to provide a notice that describes conditions pertaining to eligibility to receive benefits, annual or lifetime caps or other limits on benefits under the excepted benefit HRA, and a description or summary of the benefits. This notice must be provided no later than 90 days after the employee becomes a participant in the excepted benefit HRA and annually thereafter.
Office of Child Care, Administration for Children and Families, U.S. Department of Health and Human Services.
Request for public comments.
The Office of Child Care, Administration for Children and Families (ACF), U.S. Department of Health and Human Services, is requesting a 3-year extension of the Child Care and Development Fund (CCDF) Consumer Education website and Reports of Serious Injuries and Death (Office of Management and Budget)#: 0970-0473, expiration date: May 31, 2026). There are no changes requested to the reporting requirements. Burden estimates have been adjusted.
The public may view and comment on this information collection request at:
The
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or the Agency) is issuing an order under the Federal Food, Drug, and Cosmetic Act (FD&C Act) debarring Oscar Bobo for a period of 5 years from importing or offering for import any drug into the United States. FDA bases this order on a finding that Mr. Bobo engaged in a pattern of importing or offering for import misbranded drugs (
This order is applicable May 15, 2026.
Any application by Mr. Bobo for termination of debarment under section 306(d)(1) of the FD&C Act (21 U.S.C. 335a(d)(1)) may be submitted at any time as follows:
•
• If you want to submit an application with confidential information that you do not wish to be made available to the public, submit the application as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
•
• For a written/paper application submitted to the Dockets Management Staff, FDA will post your application, as well as any attachments, except for information submitted, marked, and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit an application with confidential information that you do not wish to be made publicly available, submit your application only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of your application. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Jaime Espinosa, Division of Field Enforcement, Office of Field Regulatory Operations, Office of Inspections and Investigations, Food and Drug Administration, at 240-402-8743, or
Section 306(b)(1)(D) of the FD&C Act permits debarment of an individual from importing or offering for import any drug into the United States if FDA finds, as required by section 306(b)(3)(D) of the FD&C Act, that the individual has engaged in a pattern of importing or offering for import (
After an investigation, FDA discovered that Mr. Bobo had engaged in numerous instances of importing or offering for import misbranded drugs. Specifically, between April 5, 2019, and September 3, 2024, Mr. Bobo imported or offered for import 8 parcels containing a total of 10 products (5,970 tablets) that contained tadalafil and sildenafil. FDA determined that these drugs were misbranded because their labeling lacked adequate directions for use, as required by section 502(f)(1) of the FD&C Act (21 U.S.C. 352(f)(1)), and/or because the drugs were prescription drugs and their labels failed to bear the symbol “Rx only” as required by section 503(b)(4)(A) of the FD&C Act (21 U.S.C. 353(b)(4)(A)). All the parcels containing the misbranded drugs serving as the basis for this action were intercepted by FDA at the John F. Kennedy International Mail Facility and were addressed to Mr. Bobo at an address connected to him.
As a result of this pattern of importing or offering for import (
In proposing a debarment period, FDA weighed the considerations set forth in section 306(c)(3) of the FD&C Act that the Agency considered applicable to Mr. Bobo's pattern of conduct and concluded that his conduct warranted the imposition of a 5-year period of debarment. The proposal informed Mr. Bobo of the proposed debarment and offered him an opportunity to request a hearing, providing him 30 days from the date of receipt of the letter in which to file the request, and advised him that failure to request a hearing constituted a waiver of the opportunity for a hearing and of any contentions concerning this action. Mr. Bobo received the proposal and notice
Therefore, the Division of Field Enforcement Director, Office of Inspections and Investigations, under section 306(b)(3)(D) of the FD&C Act, under authority delegated to the Director, Division of Enforcement, finds that Mr. Oscar Bobo has engaged in a pattern of importing or offering for import (
As a result of the foregoing finding, Mr. Bobo is debarred for a period of 5 years from importing or offering for import any drug into the United States, effective (see
Health Resources and Services Administration (HRSA), Department of Health and Human Services (HHS).
Notice.
In compliance with the requirement for opportunity for public comment on proposed data collection projects of the Paperwork Reduction Act of 1995, HRSA announces plans to submit an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). Prior to submitting the ICR to OMB, HRSA seeks comments from the public regarding the burden estimate, below, or any other aspect of the ICR.
Comments on this ICR should be received no later than July 14, 2026.
Submit your comments to
To request more information on the proposed project or to obtain a copy of the data collection plans and draft instruments, email
When submitting comments or requesting information, please include the ICR title for reference.
This is a request to revise the current OPTN data collection which includes time-sensitive, life-critical data on transplant candidates and potential organ donors, the organ matching process, histocompatibility results, organ labeling and packaging, and pre-and post-transplantation data on recipients and donors. This revision also includes OPTN BOD-approved changes to the existing OMB data collection forms. The OPTN collects these specific data elements from transplant hospitals, organ procurement organizations, and histocompatibility laboratories.
HRSA and the OPTN use this information to (1) facilitate organ placement and match donor organs with recipients; (2) monitor compliance of member organizations with federal laws and regulations and with OPTN requirements; (3) review and report periodically to the public on the status of organ donation, procurement, and transplantation in the United States; (4) provide data to researchers and government agencies to study the scientific and clinical status of organ transplantation; and (5) perform transplantation-related public health surveillance, including the possible transmission of donor disease.
HRSA requests making the following changes to improve the OPTN organ matching and allocation process and improve OPTN member compliance with OPTN requirements:
1. Add two data collection forms from the OPTN Computer System (UNet platform) to the existing OMB-approved information collection.
a. The Patient Safety Contact Management form is used by OPTN members to identify the OPTN member organization's primary and secondary patient safety contact who fulfills the duties as outlined in OPTN policy 15.1.
b. The Patient Transfer form is used by transplant centers to facilitate the transfer of patients to another transplant center after transplant and throughout the annual follow-up periods.
2. Remove vascularized composite allografts (VCA) Transplant Candidate Registration. With the implementation of new VCA waitlist registration forms in the OPTN Waiting List system (in UNet), OPTN members will no longer need to validate the data on the form. The form is now read only. All changes and validations will be performed directly on the new waitlist registration forms.
3. The OPTN BOD-approved additional revisions to existing data collection forms to improve organ matching, allocation, and OPTN policy compliance.
The total burden hours in the OMB inventory increased by 58,975.02 hours from the previously OMB-approved data collection package. This increase included 3,310.46 hours from the addition of two new data collection forms, an increase of 1,031.03 hours due to OPTN BOD-approved data collection changes, and an increase of 54,633.53 hours from updating the number of respondents and total responses using actual OPTN data from 2025.
HRSA specifically requests comments on (1) the necessity and utility of the proposed information collection for the proper performance of the agency's functions; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.
National Institutes of Health, HHS.
Notice.
The National Cancer Institute (NCI) seeks research co-development partners and/or licensees to develop hetIL-15 in combination with other agents, such as PPARa agonists (Fenofibrate), FLT3 inhibitors (quizartinib), IL-12, or chemotherapy into a therapeutic for cancer.
Inquiries related to this license opportunity should be directed to: Rose Freel, Ph.D., Unit Supervisor, NCI, Technology Transfer Center, Email:
Immunotherapy has emerged as a promising treatment strategy for many types of cancer. However, a major challenge is “exhausted” tumor-infiltrating immune cells, which lose their ability to effectively eliminate cancer cells. To address this issue, researchers are exploring ways to reverse immune exhaustion and improve treatment outcomes. One potential approach involves interleukin-15 (IL-15), a cytokine that promotes the growth and killing ability of tumor-specific CD8+ T cells and NK cells. IL-15, either alone or in combination with other agents, has shown some promise in clinical trials. However, its use is hindered by toxicity at effective doses. Therefore, there is a critical need for safer and more effective combinations to improve patient outcomes.
Inventors at the NCI previously developed heterodimeric IL-15 (hetIL-15), composed of IL-15 and IL-15 receptor alpha (NIH Reference #E-254-2005, E-257-2009, E-141-2008, E-054-2013, and E-070-2015). The inventors now demonstrate novel combinations of hetIL-15 with other active agents to enhance the metabolic fitness of intratumoral lymphocytes to provide therapeutic improvement. Specifically, the combination of hetIL-15 and Fenofibrate, a cholesterol-lowering drug, increased cytotoxic T cell activity and provided an almost complete eradication of triple negative breast cancer tumors, including metastatic lesions. Similar results occurred in a mouse pancreatic cancer model. Using a mouse orthotopic breast cancer model, hetIL-15 combined with quizartinib—a potent Fms-like tyrosine kinase 3 (Flt3) inhibitor—resulted in a significant tumor growth delay and complete eradication of tumors in 50% of mice after 16 days of treatment. Additionally, the inventors constructed a fusion protein of IL-15 and IL-12 that controls metastatic disease in a mouse melanoma model. These novel combinations would be particularly useful for the treatment of triple negative breast or pancreatic cancer.
This Notice is in accordance with 37 CFR 404.4—Authority to grant licenses.
• Treatment for triple negative breast cancer.
• Treatment for pancreatic cancer.
• Treatment of solid tumors for which cellular immunotherapy outcomes are diminished due to T or NK cell exhaustion.
• Treatment of solid tumors for which IL-15-based therapy is diminished due to toxicity at clinically relevant doses.
• Novel combination showing improved therapeutic potential in
• Combination of hetIL-15 with agents already approved (Fenofibrate, Flt-3) decreases regulatory risk and thus expedites commercialization.
• Overcoming IL-15 toxicity at clinically relevant doses.
Office of the Secretary, Department of Homeland Security.
Notice of determination.
The Secretary of Homeland Security has determined, pursuant to law, that it is necessary to waive certain laws, regulations, and other legal requirements in order to ensure the expeditious construction of barriers and roads in the vicinity of the international land border in the state of Texas.
This determination takes effect on May 15, 2026.
Important mission requirements of the Department of Homeland Security (“DHS”) include border security and the detection and prevention of illegal entry into the United States. Border security is critical to the nation's national security. Recognizing the critical importance of border security, Congress has mandated DHS to achieve and maintain operational control of the international land border. Secure Fence Act of 2006, Public Law 109-367, section 2, 120 Stat. 2638 (Oct. 26, 2006) (8 U.S.C. 1701 note). Congress defined “operational control” as the prevention of all unlawful entries into the United States, including entries by terrorists, other unlawful aliens, instruments of terrorism, narcotics, and other contraband.
Congress has provided to the Secretary of Homeland Security a number of authorities necessary to carry out DHS's border security mission. One of those authorities is found at section 102 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, as amended (“IIRIRA”). Public Law 104-208, Div. C, Tit. I, section 102, 110 Stat. 3009-546, 3009-554 (8 U.S.C 1103 note), as amended by the REAL ID Act of 2005, Public Law 109-13, Div. B, Tit. I, section 102, 119 Stat. 302, 306 (8 U.S.C. 1103 note), as amended by the Secure Fence Act of 2006, Public Law 109-367, section 3, 120 Stat. 2638 (8 U.S.C. 1103 note), as amended by the Department of Homeland Security Appropriations Act, 2008, Public Law 110-161, Div. E, Tit. V, section 564, 121 Stat. 2042, 2090. In section 102(a) of IIRIRA, Congress provided that the Secretary of Homeland Security shall take such actions as may be necessary to install additional physical barriers and roads (including the removal of obstacles to detection of illegal entrants) in the vicinity of the United States border to deter illegal crossings in areas of high illegal entry into the United States. In section 102(b) of IIRIRA, Congress mandated that in carrying out the authority of section 102(a), I provide for the installation of additional fencing, barriers, roads, lighting, cameras, and sensors to achieve and maintain operational control of the border. Finally, in section 102(c) of IIRIRA, Congress granted to the Secretary of Homeland Security the authority to waive all legal requirements that I, in my sole discretion, determine necessary to ensure the expeditious construction of barriers and roads authorized by section 102 of IIRIRA.
The United States Border Patrol Big Bend Sector is an area of high illegal entry. Between fiscal year 2021 and fiscal year 2025, Border Patrol apprehended over 89,000 illegal aliens attempting to enter the United States between border crossings in the Big Bend Sector. In that same time period Border Patrol seized over 87,574 pounds of marijuana, over 867 pounds of cocaine, over 1,156 pounds of methamphetamine, over 12 pounds of heroin, and over 94 pounds of fentanyl.
Since the President took office, DHS has delivered the most secure border in history. More can and must be done, however. As the statistics cited above demonstrate, the Big Bend Sector is an area of high illegal entry where illegal aliens regularly attempt to enter the United States and smuggle illicit drugs, and given my mandate to achieve and maintain operational control of the border, I must use my authority under section 102 of IIRIRA to install additional barriers and roads in the Big Bend Sector. Therefore, DHS will take immediate action to construct additional barriers and roads in a segment of the border in the Big Bend Sector. The segment where such construction will occur is referred to herein as the “project area,” which is more specifically described in Section 2 below.
I determine that the following area in the vicinity of the United States border, located in the state of Texas within the U. S. Border Patrol Big Bend Sector is an area of high illegal entry (the “project area”): Starting at approximately GPS point 29.7275568-101.6848011 and extending east to approximately GPS point 29.727557-102.684802.
There is presently an acute and immediate need to construct additional physical barriers and roads in the vicinity of the border of the United States in order to prevent unlawful entries into the United States in the project area pursuant to section 102(a) and 102(b) of IIRIRA. In order to ensure the expeditious construction of additional physical barriers and roads in the project area, I have determined that it is necessary that I exercise the authority that is vested in me by section 102(c) of IIRIRA.
Accordingly, pursuant to section 102(c) of IIRIRA, I hereby waive in their entirety, with respect to the construction of physical barriers and roads (including, but not limited to, accessing the project areas, creating and using staging areas, the conduct of earthwork, excavation, fill, and site preparation, and installation and upkeep of physical barriers, roads, supporting elements, drainage, erosion controls, safety features, lighting, cameras, and sensors) in the project area, all of the following statutes, including all federal, state, or other laws, regulations, and legal requirements of, deriving from, or related to the subject of, the following statutes, as amended: The National Environmental Policy Act (Pub. L. 91-190, 83 Stat. 852 (42 U.S.C. 4321
This waiver does not revoke or supersede any other waiver determination made pursuant to section 102(c) of IIRIRA. Such waivers shall remain in full force and effect in accordance with their terms. I reserve the authority to execute further waivers from time to time as I may determine to be necessary under section 102 of IIRIRA.
Office of the Assistant Secretary for Public and Indian Housing (PIH), HUD.
Notice.
HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comments from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 60 days of public comment.
Interested persons are invited to submit comments regarding this proposal. Written comments and recommendations for the proposed information collection can be sent within 60 days of publication of this notice to
Dawn Martin, Office of Public and Indian Housing, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; email
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the renewed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) Ways to minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comments in response to these questions.
Section 2 of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507.
Office of the Assistant Secretary for Public and Indian Housing (PIH), HUD.
Notice.
HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comments from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 60 days of public comment.
Interested persons are invited to submit comments regarding this proposal. Written comments and recommendations for the proposed information collection can be sent within 60 days of publication of this notice to
Dawn Martin, Office of Public and Indian Housing, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; email to
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) Ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comments in response to these questions.
Section 2 of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507.
Fish and Wildlife Service, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, we, the U.S. Fish and Wildlife Service (Service), are proposing to renew a currently approved information collection without change.
Interested persons are invited to submit comments on or before June 15, 2026.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Madonna L. Baucum, Service Information Collection Clearance Officer, by email at
In accordance with the Paperwork Reduction Act (PRA; 44 U.S.C. 3501
On December 23, 2025, we published in the
As part of our continuing effort to reduce paperwork and respondent burdens, we are again inviting the public and other Federal agencies to comment on new, proposed, revised, and continuing collections of information. This helps us assess the impact of our information collection requirements and minimize the public's reporting burden. It also helps the public understand our information collection requirements and provide the requested data in the desired format.
We are especially interested in public comment addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this collection of information, including the validity of the methodology and assumptions used;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. Before including your address, phone number, email address, or other personally identifiable information in your comment, you should be aware that your entire comment—including your personally identifiable information—may be publicly available at any time. While you can ask us in your comment to withhold your personally identifiable information from public review, we cannot guarantee that we will be able to do so.
The Wild Bird Conservation Act (WBCA; 16 U.S.C. 4901-4916) and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES; 27 U.S.T. 1087, March 3, 1973) mandate a system of permits and certificates to help ensure that international trade is legal and does not threaten the survival of wildlife or plant species in the wild. Permits under the U.S. Endangered Species Act (ESA; 16 U.S.C. 1531
Prior to the import or export of species listed under the MBTA, MMPA, BGEPA, Lacey Act, WBCA, ESA, and/or CITES, the Management Authority and Scientific Authority must make appropriate determinations and issue the appropriate documents. Section 8A of the ESA designates the Secretary as the U.S. Management Authority and U.S. Scientific Authority for CITES. The Secretary in turn delegated these authorities to the Service.
Before a country can issue an export permit for CITES appendix I or II specimens, the CITES Scientific Authority of the exporting country must determine that the export will not be detrimental to the survival of the species, and the Management Authority must be satisfied that the specimens were acquired legally. For the export of appendix III specimens, the Management Authority must be satisfied that the specimens were acquired legally (CITES does not require findings from the Scientific Authority). Prior to the importation of appendix I specimens, both the Scientific Authority and the Management Authority of the importing country must make required findings. The Scientific Authority must also monitor trade of all species to ensure that the level of trade is sustainable.
Article VIII(3) of the CITES treaty states that participating parties should make efforts to ensure that CITES specimens are traded with a minimum of delay. Section XIII of Resolution Conf. 12.3 (Rev. CoP19) recommends use of simplified procedures for issuing CITES documents to expedite trade that will have no impact, or a negligible impact, on conservation of the species involved.
All Service permit applications and reports are in the 3-200 series of forms, each tailored to a specific activity based on the requirements for specific types of permits. In accordance with Federal regulations at 50 CFR 13.12, we collect standard identifier information for all permit applications, such as:
• Applicant's full name, whether an individual or business, and address (street address, city, county, State, and zip code; and mailing address, if different from street address); main and alternate telephone numbers; and an email address (required if filing electronically, optional for a mail-in application); and
• Location where the requested permitted activity is to occur or be conducted;
• Reference to the part(s) and section(s) of 50 CFR subchapter B as listed in 50 CFR 13.11(b) under which the application is made for a permit or permits, together with any additional justification, including supporting documentation as required by the referenced part(s) and section(s);
• If the requested permitted activity involves the import or re-export of wildlife or plants from or to any foreign country, and the country of origin, or the country of export or re-export restricts the taking, possession,
• Certification containing the following language:
• Desired effective date of permit (except where issuance date is fixed by the part under which the permit is issued);
• Signature date;
• Signature of the applicant;
• Such other information as the Director determines relevant to the processing of the application; and
• Additional information required on applications for other types of permits may be found by referring to table 1 in paragraph (b) in 50 CFR 13.12.
Standardization of general information common to the forms makes the filing of applications easier for the public, as well as expediting our review of applications. The information that we collect on applications and reports is the minimum necessary for us to determine if the applicant meets/continues to meet issuance requirements for the particular activity.
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The public may access the currently approved versions of all forms contained in this information collection at
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Fish and Wildlife Service, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995 (PRA), we, the U.S. Fish and Wildlife Service (Service), are proposing to renew a currently approved information collection without change.
Interested persons are invited to submit comments on or before June 15, 2026.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Madonna L. Baucum, Service Information Collection Clearance Officer, by email at
In accordance with the Paperwork Reduction Act (PRA; 44 U.S.C. 3501
On February 11, 2026, we published in the
“Expand coastwide tagging studies to better define movement (extent of range), population mixing among regions (including greater tag and recapture effort in the Gulf of Mexico), mortality and maximum age. Mortality estimates from tagging are particularly important when other estimates are not available, and they should be emphasized in future assessments. These data will support use of the MARK and JSC models outside of Delaware Bay and inform applicability of management zones.”
As part of our continuing effort to reduce paperwork and respondent burdens, we are again soliciting comments from the public and other Federal agencies on the proposed ICR that is described below. We are especially interested in public comments addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether or not the information will have practical utility;
(2) The accuracy of our estimate of the burden for this collection of information, including the validity of the methodology and assumptions used;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) How might the agency minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. Before including your address, phone number, email address, or other personally identifiable information in your comment, you should be aware that your entire comment—including your personally identifiable information—may be publicly available at any time. While you can ask us in your comment to withhold your personally identifiable information from public review, we cannot guarantee that we will be able to do so.
Horseshoe crabs play a vital role commercially, biomedically, and ecologically along the Atlantic coast. Horseshoe crabs are commercially harvested and used as bait in eel and conch fisheries. Biomedical companies along the coast also collect and bleed horseshoe crabs at their facilities. Limulus amebocyte lysate, derived from horseshoe crab blood, is used by pharmaceutical companies to test sterility of products. Finally, migratory shorebirds also depend on the eggs of horseshoe crabs to refuel on their migrations from South America to the Arctic. One bird in particular, the rufa red knot (
In 1998, the Atlantic States Marine Fisheries Commission (ASMFC), a management organization with representatives from each State on the Atlantic coast, developed a horseshoe crab management plan. The ASMFC plan and its subsequent addenda established mandatory State-by-State harvest quotas and created the 1,500-square-mile Carl N. Shuster, Jr., Horseshoe Crab Sanctuary off the mouth of Delaware Bay.
Restrictive measures have been taken in recent years; however, populations are increasing slowly. Because horseshoe crabs do not breed until they are 9 years or older, it may take some time before the population measurably increases. Federal and State agencies, universities, and biomedical companies participate in a Horseshoe Crab Cooperative Tagging Program. The Service's MDFWCO maintains the information collected under this program and uses it to evaluate migratory patterns, survival, and abundance of horseshoe crabs.
Members of the public who recover tagged crabs provide the following information using Form 3-2310 (Horseshoe Crab Recapture Report):
• Tag number;
• Whether or not tag was removed;
• Condition of crab;
• Date captured/found;
• Crab fate;
• Finder type;
• Capture method;
• Capture location;
• Reporter information; and
• Comments.
Agencies that tag and release the crabs complete Form 3-2311 (Horseshoe Crab Tagging) and provide the Service with:
• Organization name;
• Contact person name;
• Tag number;
• Sex of crab;
• Prosomal width; and
• Capture site, latitude, longitude, waterbody, State, and date.
At the request of the public participant reporting the tagged crab, we send data pertaining to the tagging program and tag and release information on the horseshoe crab tag that was found.
Fish will be tagged with an external tag containing a toll-free number for the Service's MDFWCO. Tagged species of fish include striped bass (
• Form 3-2493, “American Shad Recapture Report”;
• Form 3-2494, “Snakehead Recapture Report”;
• Form 3-2495, “Striped Bass Recapture Report”; and
• Form 3-2496, “Sturgeon Recapture Report.”
American shad are tagged by the New York State Department of Environmental Conservation (NYS DEC), which retains all fish tagging information. The public reports tags to the Service's MDFWCO, who provides information on tag returns to NYS DEC. Tag return data are used to monitor migration and abundance of shad along the Atlantic coast.
Northern snakehead is an invasive species found in many watersheds
Striped bass are cooperatively managed by Federal and State agencies through the ASMFC. The ASMFC uses fish tag return data to conduct stock assessments for striped bass. The database and collection are housed within the Service's MDFWCO, while the tagging is conducted by State agencies participating in striped bass management. Without this data collection, striped bass management would likely suffer from a lack of quality data. As required by Congress under the Atlantic Striped Bass Conservation Act (16 U.S.C. 5151-5158), striped bass tagging data is used to manage the coast-wide stock.
Sturgeon are tagged by Federal, State, and university biologists and nongovernmental organizations along the U.S. east coast and into Canada, and throughout the United States and Canada. Local populations of Atlantic sturgeon have been listed as either threatened or endangered since 2012, and shortnose populations have been listed since 1973. The information collected provides data on tag retention and sturgeon movement along the east coast. The data are also used to address some of the management and research needs identified by amendment 1 to the ASMFC's Atlantic Sturgeon Fishery Management Plan.
Data collected across these tagging programs are similar in nature, including:
• Tag number;
• Date of capture;
• Waterbody of capture;
• Capture method;
• Fish length, weight, and fate (whether released or killed); and
• Fisher type (
In addition, if the tag reporter desires more information on their tagged fish or wants the modest reward that comes with reporting a tag, we ask for their address so that we can mail them the information.
The public may request a copy of any form contained in this information collection by sending a request to the Service Information Collection Clearance Officer (see
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Fish and Wildlife Service, Interior.
Notice of receipt of permit applications; request for comments.
We, the U.S. Fish and Wildlife Service (Service), invite the public to comment on applications to conduct certain activities with foreign species that are listed as endangered under the Endangered Species Act (ESA). With some exceptions, the ESA prohibits activities with listed species unless Federal authorization is issued that allows such activities. The ESA also requires that we invite public comment before issuing permits for any activity otherwise prohibited by the ESA with respect to any endangered species.
Comments will be accepted on or before June 15, 2026. Comments submitted electronically using the Federal eRulemaking Portal (see
To ensure your comment is received and considered, you must submit it using one of the methods identified in the
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Comments submitted through any method not authorized in this document, or sent to an address not listed here, will not be considered. We will not accept comments via email, fax, or hand delivery. We are not required to consider comments that are submitted after the comment period ends or that are submitted via a method outside of these instructions. Comments containing profanity, vulgarity, threats, or other inappropriate content will not be considered.
We will post all comments at
Timothy MacDonald, by phone at 703-358-2185 or via email at
We invite the public and local, State, Tribal, and Federal agencies to comment on these applications. Before issuing any of the requested permits, we will take into consideration any information that we receive during the public comment period.
You may submit your comments and materials by one of the methods in
When submitting comments, please specify the name of the applicant and the permit number at the beginning of your comment. Provide sufficient information to allow us to authenticate any scientific or commercial data you include. The comments and recommendations that will be most useful and likely to influence agency decisions are: (1) Those supported by quantitative information or studies; and (2) those that include citations to, and analyses of, the applicable laws and regulations.
You may view and comment on others' public comments at
If you submit a comment at
To help us carry out our conservation responsibilities for affected species, and in consideration of section 10(c) of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
We invite comments on the following applications.
The applicant requests authorization to import up to 25 live, captive-bred larvae of Poweshiek skipperling (
The applicant requests authorization to import up to 25 live, captive-bred larvae of Poweshiek skipperling (
The applicant requests a permit to export one live, captive-bred female African slender-snouted crocodile (
The applicant requests a permit to export two live, captive-bred male African slender-snouted crocodile (
The applicant requests a permit to export one live, captive-bred male golden lion tamarin (
The applicant requests authorization to import, annually, biological samples derived from up to 1,500 individuals, wild or captive-born, of Testudines species, including those that are listed under the Endangered Species Act, from each country within their native range for the purpose of scientific research. This notification covers activities to be conducted by the applicant over a 5-year period.
The applicant requests a captive-bred wildlife registration under 50 CFR 17.21(g) for the Galapagos tortoise (
The applicant requests authorization to export and re-import nonliving museum specimens of endangered
The following applicants request permits to import sport-hunted trophies of male bontebok (
After the comment period closes, we will make decisions regarding permit issuance. If we issue permits to any of the applicants listed in this notice, we will publish a notice in the
We issue this notice under the authority of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
U.S. Geological Survey, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act (PRA) of 1995, the U.S. Geological Survey (USGS) is proposing to renew an information collection.
Interested persons are invited to submit comments on or before June 15, 2026.
You may submit comments by one of the following methods:
Matthew Neilson by email at
In accordance with the PRA of 1995 (44 U.S.C. 3501
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As part of our continuing effort to reduce paperwork and respondent burdens, we are again soliciting comments from the public and other Federal agencies on the proposed ICR that is described below. We are especially interested in public comments addressing the following:
(1) Whether or not the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility.
(2) The accuracy of our estimate of the burden for this collection of information, including the validity of the methodology and assumptions used.
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) How the agency might minimize the burden of the collection of information on those who are to respond, including using appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments that you submit in response to this notice are a matter of public record. Before including your address, phone number, email address, or other personally identifiable information (PII) in your comment, you should be aware that your entire comment—including your PII—may be made publicly available at any time. While you can ask us in your comment to withhold your PII from public review, we cannot guarantee that we will be able to do so.
Through its Invasive Species Program (
As part of the USGS Invasive Species Program, the Nonindigenous Aquatic Species (NAS) database (
The NAS website also allows users to sign up for email alert notifications of new species observations of interest matching several taxonomic or geographic filters through an alert registration form. The information collected includes a name, email address, a user-specific password, and notification preferences.
An agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the PRA of 1995 (44 U.S.C. 3501
Bureau of Indian Affairs, Interior.
Notice.
The Assistant Secretary—Indian Affairs approved the Buena Vista Rancheria of Me-Wuk Indians of California Leasing Ordinance under the Helping Expedite and Advance Responsible Tribal Homeownership Act of 2012 (HEARTH Act). With this approval, the Tribe is authorized to enter into leases without further Secretary of the Interior approval.
The Assistant Secretary Indian Affairs issued the approval on May 11, 2026.
Ms. Carla Clark, Bureau of Indian Affairs, Division of Real Estate Services, 1001 Indian School Road NW, Albuquerque, NM 87104,
The HEARTH Act makes a voluntary, alternative land leasing process available to Tribes, by amending the Indian Long-Term Leasing Act of 1955, 25 U.S.C. 415. The HEARTH Act authorizes Tribes to negotiate and enter into leases of Tribal trust lands, for various uses, for a primary term of 25 years and, in some cases, up to two renewal terms of 25 years each, without the approval of the Secretary of the Interior (Secretary). The HEARTH Act also authorizes Tribes to enter into leases for residential, recreational, religious or educational purposes for a primary term of up to 75 years without the approval of the Secretary. Participating Tribes develop Tribal Leasing regulations, including an environmental review process, and then must obtain the Secretary's approval of those regulations prior to entering into leases. The HEARTH Act requires the Secretary to approve Tribal regulations if the Tribal regulations are consistent with the Department of the Interior's (Department) leasing regulations at 25 CFR part 162 and provide for an environmental review process that meets requirements set forth in the HEARTH Act. This notice announces that the Secretary, through the Assistant Secretary—Indian Affairs, has approved the Tribal regulations for Buena Vista Rancheria of Me-Wuk Indians of California.
The Department's regulations governing the surface leasing of trust and restricted Indian lands specify that, subject to applicable Federal law, permanent improvements on leased land, leasehold or possessory interests, and activities under the lease are not subject to State and local taxation and may be subject to taxation by the Indian Tribe with jurisdiction.
Section 5 of the Indian Reorganization Act, 25 U.S.C. 5108, preempts State and local taxation of permanent improvements on trust land.
The strong Federal and Tribal interests against State and local taxation of improvements, leaseholds, and activities on land leased under the Department's leasing regulations apply equally to improvements, leaseholds, and activities on land leased pursuant to Tribal leasing regulations approved under the HEARTH Act. Congress's overarching intent was to “allow Tribes to exercise greater control over their own land, support self-determination, and eliminate bureaucratic delays that stand in the way of homeownership and economic development in Tribal communities.” 158 Cong. Rec. H. 2682 (May 15, 2012). The HEARTH Act was intended to afford Tribes “flexibility to adapt lease terms to suit [their] business and cultural needs” and to “enable [Tribes] to approve leases quickly and efficiently.” H. Rep. 112-427 at 6 (2012).
Assessment of State and local taxes would obstruct these express Federal policies supporting Tribal economic development and self-determination, and also threaten substantial Tribal interests in effective Tribal government, economic self-sufficiency, and territorial autonomy.
Similar to BIA's surface leasing regulations, Tribal regulations under the HEARTH Act pervasively cover all aspects of leasing.
Accordingly, the Federal and Tribal interests weigh heavily in favor of preemption of State and local taxes on lease-related activities and interests, regardless of whether the lease is governed by Tribal leasing regulations or 25 CFR part 162. Improvements, activities, and leasehold or possessory interests may be subject to taxation by Buena Vista Rancheria of Me-Wuk Indians of California.
Bureau of Ocean Energy Management, Interior.
Notice of information collection; request for comment.
In accordance with the Paperwork Reduction Act of 1995, the Bureau of Ocean Energy Management (BOEM) proposes this information collection request (ICR) to revise Office of Management and Budget (OMB) control number 1010-0106.
Comments must be received by BOEM no later than July 14, 2026.
Send written comments on this ICR by mail to the BOEM Information Collection Clearance Officer, Anna Atkinson, Bureau of Ocean Energy Management, 45600 Woodland Road, Sterling, Virginia 20166; or by email to
Anna Atkinson by email at
In accordance with the Paperwork Reduction Act of 1995, BOEM provides the general public and other Federal agencies with an opportunity to comment on new, proposed, revised, and continuing collections of information. This helps BOEM assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand BOEM's information collection requirements and provide the requested data in the desired format.
BOEM is soliciting comments on the proposed ICR described below. BOEM is
Comments that you submit in response to this notice are a matter of public record. BOEM will include or summarize each comment in its ICR to OMB for approval of this information collection. You should be aware that your entire comment—including your address, phone number, email address, or other personally identifiable information included in your comment—may be made publicly available at any time. Even if BOEM withholds your personally identifiable information in the context of this ICR, your comment is subject to the Freedom of Information Act (FOIA) (5 U.S.C. 552). Your information will only be withheld if a determination is made that one of the FOIA exemptions to disclosure applies. Such a determination will be made in accordance with the Department of the Interior's (DOI) FOIA implementing regulations (43 CFR part 2) and applicable law.
In order for BOEM to consider withholding from disclosure your personally identifiable information, you must identify, in a cover letter, any information contained in the submittal of your comments that, if released, would constitute a clearly unwarranted invasion of your personal privacy. You must also briefly describe any possible harmful consequences of the disclosure of information, such as embarrassment, injury, or other harm. Note that BOEM will make available for public inspection, in their entirety, all comments submitted by organizations and businesses, or by individuals identifying themselves as representatives of organizations or businesses.
BOEM protects proprietary information in accordance with FOIA, DOI's implementing regulations at 43 CFR part 2, and 30 CFR 580.70, promulgated pursuant to the Outer Continental Shelf Lands Act (OCS Lands Act) (43 U.S.C. 1352(c)).
This information collection request addresses the regulations at 30 CFR 553, Oil Spill Financial Responsibility for Offshore Facilities. BOEM collects the information to ensure proper and efficient administration of its oil spill financial responsibility requirements. BOEM collects this information to:
• Provide a standard method for establishing whether a party is required to demonstrate oil spill financial responsibility for offshore facilities;
• Identify and maintain a record of those offshore facilities that have a potential oil spill liability requiring the demonstration of oil spill financial responsibility;
• Establish and maintain a continuous record of evidence of oil spill financial responsibility to assure payment of claims for oil spill cleanup and damages resulting from operations conducted on covered offshore facilities and from the transportation of oil from covered offshore facilities;
• Establish and maintain a continuous record of responsible parties, as defined in Title I of the Oil Pollution Act of 1990, and their agents or authorized representatives for oil spill financial responsibility for covered offshore facilities; and
• Establish and maintain a continuous record of persons to contact and U.S. agents for service of process for claims associated with oil spills from covered offshore facilities.
BOEM uses the information collected under 30 CFR part 553 to verify compliance with section 1016 of OPA. This information is necessary to confirm that designated applicants can cover cleanup costs and damages resulting from hydrocarbon discharges originating from offshore facilities. BOEM uses these forms to ensure the effective and efficient administration of oil spill financial responsibility requirements.
BOEM is revising Forms BOEM-1019 (Insurance Certificate), BOEM-1020 (Surety Bond), and BOEM-1023 (Financial Guarantee) to reflect updated requirements for oil spill financial responsibility, expressly tying the applicable coverage period to when an incident begins. The revisions align the forms with BOEM's updated policy that OSFR providers going forward are responsible only for claims arising from incidents that occur on or after the effective date of the applicable OSFR instrument and before its termination. These changes do not apply retroactively to OSFR providers on earlier iterations of the forms.
The current annual burden for this collection is 34,695 hours. BOEM proposes reducing the burden to 28,245 hours due to faster OSFR demonstration methods, such as increased use of self-insurance and financial guarantees, and a decrease in the number of companies maintaining OSFR coverage.
The following table details the regulatory sections containing information collections and their respective hour burden estimates. In the table, the term “oil spill financial responsibility” has been shortened to “OSFR.” In calculating the burdens, we assumed the respondents perform
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
The authority for this action is the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Office of Adjudication, Recruitment and Management, Justice Management Division, Department of Justice.
60-Day notice.
The Office of Adjudication, Recruitment and Management, Department of Justice (DOJ), will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 60 days until July 14, 2026.
If you have additional comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Deana Willis, Assistant Director, Office of Adjudication, Recruitment and Management, c/o Deana Willis, 450 5th Street NW, Suite 10200, Washington, DC, 20530, 202-514-8900,
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
The Department of Justice developed an in-house electronic application managed by the Office of Chief Information Office (OCIO) Service Delivery Staff (SDS) Application Services Branch (ASB) to replace one previously managed by contract with an outside vendor. There is no impact on the public burden.
The questions presented to applicants are unchanged except for the following deletions:
• Questions relating to geographic preference;
• A checklist of practice area interests;
• Two “check the box” questions about undergraduate awards;
• A “yes/no” question presented only to SLIP-Pathways applicants asking whether the law school transcript listed failing grades;
• Voluntary demographic questions.
The estimate of annualized cost to the federal government is $71,429.00.
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If additional information is required contact: Darwin Arceo, Department Clearance Officer, United States Department of Justice, Justice Management Division, Enterprise Portfolio Management, Two Constitution Square, 145 N Street NE, 4W-218, Washington, DC.
On May 12, 2026, the Department of Justice lodged a proposed Consent Decree Modification with the United States District Court for the Western District of Michigan in the lawsuit entitled
The proposed Modification makes certain changes to a 1999 Consent Decree between the parties. That Decree required the defendant (“Bosch”) to pay a portion of the United States' response costs incurred responding to the release or threat of release of hazardous substances at the Bendix Corp./Allied Automotive Superfund Site in St. Joseph, Michigan and to perform the remedial action that EPA selected for the Site. The Decree capped Bosch's liability for reimbursement of EPA's future oversight costs. The proposed Consent Decree Modification removes the Decree's cap on Bosch's future oversight cost liability and recovers a portion of past response costs incurred by EPA at the Site. In return, the United States agrees not to assess stipulated or civil penalties for Bosch's alleged violations of the Decree.
The publication of this notice opens a period for public comment on the Consent Decree Modification. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, and should refer to
Any comments submitted in writing may be filed by the United States in whole or in part on the public court docket without notice to the commenter.
During the public comment period, the Consent Decree Modification may be downloaded and examined from this Justice Department website:
Bureau of Justice Statistics, Department of Justice.
30-Day notice.
The Bureau of Justice Statistics (BJS), Department of Justice (DOJ), will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 30 days until June 15, 2026.
If you have comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Danielle Kaeble, Bureau of Justice Statistics, 999 N Capitol St. NE, 8th Floor, Washington, DC 20531,
The proposed information collection was previously published in the
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
Written comments and recommendations for this information collection should be submitted within 30 days of the publication of this notice on the following website
DOJ seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOJ notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
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If additional information is required contact: Darwin Arceo, Department Clearance Officer, United States Department of Justice, Justice Management Division, Enterprise Portfolio Management, Two Constitution Square, 145 N Street NE, 4W-218, Washington, DC 20530.
Notice of availability; request for comments.
The Department of Labor (DOL) is submitting this Mine Safety & Health Administration (MSHA)-sponsored information collection request (ICR) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995 (PRA). Public comments on the ICR are invited.
The OMB will consider all written comments that the agency receives on or before June 15, 2026.
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Nicole Bouchet by telephone at 202-693-0213, or by email at
The respondents for the paperwork provisions of this rule are underground mine operators. The records will be used by mine operators, supervisors, and employees, and State and Federal mine inspectors to provide assurance that each mine operator and mine rescue team is prepared for a mine emergency. The records show that the mine rescue team equipment has been examined and tested and is in good working order. The training records show that the mine rescue team members and responsible persons at the mine are competent to respond to a mine emergency involving a fire, an explosion, or a gas or water inundation. The records greatly assist those who use them in making decisions that will ultimately affect the safety of all persons working underground. These information collection requirements help assure that properly trained mine rescue teams are readily available to save endangered miners in life-threatening situations. In addition, the training requirements in this information collection will help assure the safety of the mine rescue team itself. For additional substantive information about this ICR, see the related notice published in the
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless the OMB approves it and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid OMB Control Number.
DOL seeks PRA authorization for this information collection for three (3) years. OMB authorization for an ICR cannot be for more than three (3) years without renewal. The DOL notes that information collection requirements submitted to the OMB for existing ICRs receive a month-to-month extension while they undergo review.
Occupational Safety and Health Administration (OSHA), Labor.
Notice of public meeting.
This notice is to advise interested persons that OSHA will conduct two virtual public meetings in 2026 to address the United States Government positions on documents submitted for the sessions of the United Nations Sub-Committee of Experts on the Globally Harmonized System of Classification and Labelling of Chemicals (UNSCEGHS), each virtual meeting in advance of the in-person sessions of the UNSCEGHS.
The first OSHA virtual meeting in 2026 will be held in June in preparation for the in-person July 8-10, 2026, 49th session of the UNSCEGHS to be held in Geneva, Switzerland. The second OSHA virtual meeting in 2026 will be held in November in preparation for the in-person December 2-4, 2026, 50th session of the UNSCEGHS to be held in Geneva, Switzerland. OSHA, along with the U.S. Interagency Globally Harmonized System of Classification and Labelling of Chemicals (GHS) Coordinating Group, plans to consider the comments and information gathered at the June and November virtual public meetings when developing U.S. Government positions for the UNSCEGHS meetings in July and December 2026.
Specific information for the meeting will be posted when available on the OSHA website at
Please contact Ms. Janet Carter, OSHA Directorate of Standards and Guidance, Department of Labor, telephone: (202) 693-2370, email
OSHA will conduct two virtual public meetings in 2026; the first in June and the second in November to discuss the working and informal documents submitted for the in-person 49th and 50th sessions of the UNSCEGHS held in-person in Geneva, Switzerland on July 8-10, 2026, and December, 2-4, 2026, respectively. The exact dates and advance registration information for OSHA's virtual public meetings will be posted on the OSHA website at
OSHA will solicit public input on U.S. government positions regarding the proposals submitted to the UNSCEGHS. Written comments on these documents can be submitted to the OSHA docket (OSHA-2016-0005) at
David Keeling, Assistant Secretary of Labor for Occupational Safety and Health, U.S. Department of Labor, authorized the preparation of this notice under the authority granted by sections 4, 6, and 8 of the Occupational Safety and Health Act of 1970 (29 U.S.C. 653, 655, 657), and Secretary's Order 7-2025 (90 FR 27878) (June 30, 2025).
Nuclear Regulatory Commission.
Proposed state agreement; request for comment.
As required by Section 274e. of the Atomic Energy Act of 1954, as amended (AEA), the U.S. Nuclear Regulatory Commission (NRC or Commission) is publishing the proposed Agreement for public comment (Appendix A). The NRC is also publishing the summary of a draft
Submit comments by June 15, 2026. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
You may submit comments by any of the following methods; however, the NRC encourages electronic comment submission through the Federal Rulemaking website:
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Sherrie Flaherty, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-7288; email:
Please refer to Docket ID NRC-2026-1387 when contacting the NRC about the availability of information for this action. You may obtain publicly available information related to this action by any of the following methods:
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The NRC encourages electronic comment submission through the Federal Rulemaking website (
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
By letter received January 29, 2026, Governor Mike Braun of the State of Indiana requested that the NRC enter into an Agreement with the State of Indiana as authorized by Section 274b. of the AEA. Under the proposed Agreement, the Commission would discontinue, and the State of Indiana would assume, regulatory authority over certain types of byproduct materials as defined in the AEA, source material, and special nuclear material in quantities not sufficient to form a critical mass.
Under the proposed Agreement, the NRC would discontinue its authority over 213 licenses and would transfer its regulatory authority over those licenses to the State of Indiana. The NRC periodically reviews the performance of the Agreement States to assure compliance with the provisions of Section 274.
Section 274e. of the AEA requires that the terms of the proposed Agreement be published in the
(a) Section 274b. of the AEA provides the mechanism for a State to assume regulatory authority from the NRC over certain radioactive materials and activities that involve use of these materials. The radioactive materials, sometimes referred to as “Agreement materials,” are byproduct materials as defined in Sections 11e.(1), 11e.(2), 11e.(3), and 11e.(4) of the AEA; source material as defined in Section 11z. of the AEA; and special nuclear material as defined in Section 11aa. of the AEA, restricted to quantities not sufficient to form a critical mass.
The radioactive materials and activities (which together are usually referred to as the “categories of materials”) that the State of Indiana requests authority over are:
1. The possession and use of byproduct material as defined in Section 11e.(1) of the Act;
2. The possession and use of byproduct material as defined in Section 11e.(3) of the Act;
3. The possession and use of byproduct material as defined in Section 11e.(4) of the Act;
4. The possession and use of source material as defined in Section 11z. of the Act; and
5. The possession and use of special nuclear material as defined in Section 11aa. of the Act, in quantities not sufficient to form a critical mass.
(b) The proposed Agreement contains articles that:
(i) Specify the materials and activities over which authority is transferred;
(ii) Specify the materials and activities over which the Commission will retain regulatory authority;
(iii) Continue the authority of the Commission to safeguard special nuclear material, protect restricted data, and protect common defense and security;
(iv) Commit the State of Indiana and the NRC to exchange information as necessary to maintain coordinated and compatible programs;
(v) Provide for the reciprocal recognition of licenses;
(vi) Provide for the suspension or termination of the Agreement; and
(vii) Specify the effective date of the proposed Agreement.
The Commission reserves the option to modify the terms of the proposed Agreement in response to comments, to correct errors, and to make editorial changes. The final text of the proposed Agreement, with the effective date, will be published after the Agreement is approved by the Commission and signed by the NRC Chairman and the Governor of Indiana.
(c) The regulatory program is authorized by law under the Indiana Code (IC) Title 10, Article 19, Chapter 12, Section 11(a) (IC 10-19-12-11(a)), which provides the Governor with the authority to enter into an Agreement with the Commission. The State of Indiana law contains provisions for the orderly transfer of regulatory authority over affected licenses from the NRC to the State. In a letter received January 29, 2026, Governor Braun certified that the State of Indiana has a program for the control of radiation hazards that is adequate to protect public health and safety within the State of Indiana for the materials and activities specified in the proposed Agreement, and that the State desires to assume regulatory responsibility for these materials and activities. After the effective date of the Agreement, licenses issued by the NRC would continue in effect as State of Indiana licenses until the licenses expire or are replaced by State-issued licenses.
(d) The draft staff assessment finds that the Indiana Department of Homeland Security (IDHS) and Radioactive Materials Control Program (RMCP) is adequate to protect public health and safety and is compatible with the NRC's regulatory program for the regulation of Agreement materials. However, the NRC staff identified several limited, section-specific inconsistencies within the Indiana Radioactive Materials regulations that were not fully compatible with the corresponding NRC requirements. In communications dated January 21, 2026, and February 27, 2026, the State of Indiana committed to making the necessary compatibility changes in the next rulemaking.
The NRC staff has examined the State of Indiana's request for an Agreement with respect to the ability of the State's radiation control program to regulate Agreement materials. The examination was based on the Commission's Policy Statement, “Criteria for Guidance of States and NRC in Discontinuance of NRC Regulatory Authority and Assumption Thereof by States Through Agreement,” (46 FR 7540, January 23, 1981, as amended by Policy Statements published at 46 FR 36969, July 16, 1981, and at 48 FR 33376, July 21, 1983) (Policy Statement), and the Office of Nuclear Material Safety and Safeguards Procedure SA-700, “Processing an Agreement.” The Policy Statement has 28 criteria that serve as the basis for the NRC staff's assessment of the State of Indiana's request for an Agreement. The following section will reference the appropriate criteria numbers from the Policy Statement that apply to each section.
(a) Organization and Personnel. The NRC staff reviewed these areas under Criteria 1, 2, 20, and 24 in the draft staff assessment. The State of Indiana's proposed Agreement materials program for the regulation of radioactive materials is called the “Radioactive Materials Control Program” (RMCP) and will be located within the Radiation Programs section of the IDHS.
The educational requirements for the RMCP staff are specified in the State of Indiana's personnel position descriptions and meet the NRC criteria with respect to formal education or combined education and experience requirements. All current staff members meet the requirements of a bachelor's degree in the physical, life science or engineering; or an equivalent combination of education and experience has been substituted for the degree. All have training and work experience in radiation protection. Supervisory level staff each have at least five years of working experience in radiation protection.
The State of Indiana performed an analysis of the expected workload under the proposed Agreement. Based on the NRC staff review of the State of Indiana's analysis, the State has an adequate number of staff to regulate radioactive materials under the terms of the proposed Agreement. The State of Indiana will employ the equivalent of four full-time equivalent professional and technical staff to support the Radioactive Materials Program.
The State of Indiana has indicated that the RMCP has an adequate number of trained and qualified staff in place, and has developed qualification procedures for license reviewers and inspectors that are similar to the NRC's procedures. The RMCP staff has accompanied the NRC staff on inspections of NRC licensees in Indiana and participated in licensing training at NRC's Region III with Division of Radiological Safety and Security staff. The Radioactive Materials Program staff is also actively supplementing its experience through meetings, discussions, and facility visits with the NRC licensees in the State of Indiana and through self-study, in-house training, and formal training.
Overall, the NRC staff concluded that the RMCP staff identified by the State of Indiana to participate in the Agreement materials program has sufficient knowledge and experience in radiation protection, the use of radioactive materials, the standards for the evaluation of applications for licensing, and the techniques of inspecting licensed users of Agreement materials.
(b) Legislation and Regulations. The NRC staff reviewed these areas under Criteria 1-15, 17, 19, and 21-28 in the draft staff assessment. IC 10-19-12-11(a) provides the Governor of Indiana the authority to enter into the Agreement, and IC 10-19-12-5 establishes the IDHS as the lead agency for carrying out the duties of the State's Agreement state program. The IDHS has the requisite authority to promulgate regulations under the IC 10-19-12-5(c) and 10-19-12-14 for protection against radiation. IC 10-19-12-5(c)), IC 10-19-12-6, IC 10-19-12-9, and IC 10-19-12-18(a) provide the IDHS the authority to issue licenses and orders; conduct inspections; and enforce compliance with regulations, license conditions, and orders. IC 10-19-12-9 requires licensees to provide access to inspectors.
The NRC staff verified that the State of Indiana adopted by reference the relevant NRC regulations in parts 19, 20, 30, 31, 32, 33, 34, 35, 36, 37, 39, 40, 61, 70, 71, and 150 of title 10 of the
(c) Storage and Disposal. The NRC staff reviewed these areas under Criteria 8, 9a, and 11 in the draft staff assessment. The State of Indiana has adopted NRC compatible requirements for the handling and storage of radioactive material, including regulations equivalent to the applicable standards contained in 10 CFR part 20, which address the general requirements for waste disposal, and 10 CFR part 61, which addresses waste classification and form. These regulations are applicable to all licensees covered under this proposed Agreement.
(d) Transportation of Radioactive Material. The NRC staff reviewed this area under Criteria 10 in the draft staff assessment. The State of Indiana has adopted compatible regulations to the NRC regulations in 10 CFR part 71. Part 71 contains the requirements licensees must follow when preparing packages containing radioactive material for transport. Part 71 also contains requirements related to the licensing of packaging for use in transporting radioactive materials.
(e) Recordkeeping and Incident Reporting. The NRC staff reviewed this area under Criteria 1 and 11 in the draft staff assessment. The State of Indiana has adopted compatible regulations to the sections of the NRC regulations that specify requirements for licensees to keep records and to report incidents or accidents involving the State's regulated Agreement materials specified in the proposed Agreement.
(f) Evaluation of License Applications. The NRC staff reviewed this area under Criteria 1, 7, 8, 9a, 13, 14, 15, 20, 23, and 25 in the draft staff assessment. The State of Indiana has adopted compatible regulations to the NRC regulations that specify the requirements to obtain a license to possess or use radioactive materials. The State of Indiana has also developed licensing procedures and adopted NRC licensing guides for specific uses of radioactive material for use by the program staff when evaluating license applications.
(g) Inspections and Enforcement. The NRC staff reviewed these areas under Criteria 1, 16, 18, 19, and 23 in the draft staff assessment. The State of Indiana has adopted a schedule providing for the inspection of licensees as frequently as, or more frequently than, the inspection schedule used by the NRC. The State of Indiana's Radioactive Materials Control Program has adopted procedures for the conduct of inspections, reporting of inspection findings, and reporting inspection results to the licensees. Additionally, the State of Indiana has also adopted procedures for the enforcement of regulatory requirements.
(h) Regulatory Administration. The NRC staff reviewed this area under Criterion 23 in the draft staff assessment. The State of Indiana is bound by requirements specified in its State law for rulemaking, issuing licenses, and taking enforcement actions. The State of Indiana has also adopted administrative procedures to assure fair and impartial treatment of license applicants. The State of Indiana law prescribes standards of ethical conduct for State employees.
(i) Cooperation with Other Agencies. The NRC staff reviewed this area under Criteria 25, 26, and 27 in the draft staff assessment. The State of Indiana law provides for the recognition of existing NRC and Agreement State licenses and the State has a process in place for the transition of active NRC licenses. Upon the effective date of the Agreement, all active NRC radioactive materials licenses that are for materials covered by the proposed Agreement and were issued to facilities in the State of Indiana will be recognized as IDHS licenses.
The State of Indiana also provides for “timely renewal.” This provision affords the continuance of licenses for which an application for renewal has been filed more than 30 days prior to the date of expiration of the license. NRC licenses transferred while in timely renewal are done in a manner to minimize the effects of the transition on the licensee. The NRC and the State of Indiana will collaborate to ensure a seamless and successful transition of NRC licenses under timely renewal.
The State of Indiana regulations in Indiana Administrative Code, Title 290, Article 3, Standards for Protection Against Radiation, provide exemptions from the State's requirements for the NRC and the U.S. Department of Energy contractors or subcontractors. The proposed Agreement commits the State of Indiana to use its best efforts to cooperate with the NRC and the other Agreement States in the formulation of standards and regulatory programs for the protection against hazards of radiation, and to assure that the State's program will continue to be compatible with the Commission's program for the regulation of Agreement materials. The proposed Agreement specifies the desirability of reciprocal recognition of licenses and commits the Commission and the State of Indiana to use their best efforts to accord such reciprocity. Consistent with NRC requirements, the State of Indiana would be able to recognize the licenses of other jurisdictions by general license, as appropriate.
Section 274d. of the AEA provides that the Commission shall enter into an Agreement under Section 274b. with any State if:
(a) The Governor of that State certifies that the State has a program for the control of radiation hazards adequate to protect the public health and safety with respect to the Agreement materials within the State, and that the State desires to assume regulatory responsibility for the Agreement materials; and
(b) The Commission finds that the State program is in accordance with the requirements of Subsection 274o. and in all other respects compatible with the Commission's program for regulation of such materials, and that the State program is adequate to protect the public health and safety with respect to the materials covered by the proposed Agreement.
The NRC staff has reviewed the proposed Agreement, the certification of Indiana Governor Braun, and the supporting information provided by the RMCP of the IDHS. Based upon this review, the NRC staff concludes that the State of Indiana Radioactive Material Control Program satisfies the Section 274d. criteria as well as the criteria in the Commission's Policy Statement “Criteria for Guidance of States and NRC in Discontinuance of NRC Regulatory Authority and Assumption Thereof by States Through Agreement.” The NRC staff also concludes that the proposed State of Indiana program to regulate Agreement materials, as comprised of statutes, regulations, procedures, and staffing, is compatible with the Commission's program and is adequate to protect the public health and safety with respect to the materials covered by the proposed Agreement. Therefore, the proposed Agreement meets the requirements of Section 274 of the AEA.
The Office of Information and Regulatory Affairs has determined that this proposed agreement is not a significant regulatory action under E.O. 12866.
This action does not have federalism implications, as defined in E.O. 13132. It will not significantly limit the rights, roles, and responsibilities of State or local governments.
On May 23, 2025, President Donald J. Trump signed E.O. 14300, “Ordering the Reform of the Nuclear Regulatory Commission.” Section 5, “Reforming and Modernizing the NRC's Regulations,” requires the NRC to undertake a review and wholesale revision of its regulations and guidance documents as guided by the policies set forth in section 2 of the E.O. The NRC is currently in the process of implementing the direction in E.O. 14300. When the NRC finalizes its rules during the implementation of E.O. 14300, the Agreement States will need to update their own regulations, as necessary, to maintain compatibility with the NRC's program within a specific timeframe.
The documents identified in the following table are available to interested persons through one or more of the following methods, as indicated.
For the Nuclear Regulatory Commission.
Subject to the exceptions provided in Articles II, IV, and V, the Commission shall discontinue, as of the effective date of this Agreement, the regulatory authority of the Commission in the State under Chapters 6, 7 and 8, and Section 161 of the Act with respect to the following materials:
A. Byproduct material as defined in Section 11e.(1) of the Act;
B. Byproduct material as defined in Section 11e.(3) of the Act;
C. Byproduct materials as defined in Section 11e.(4) of the Act;
D. Source materials; and
E. Special nuclear materials, in quantities not sufficient to form a critical mass.
This Agreement does not provide for the discontinuance of any authority, and the Commission shall retain authority and responsibility, with respect to:
A. The regulation of the construction, operation, and decommissioning of any production or utilization facility or any uranium enrichment facility;
B. The regulation of byproduct material as defined in Section 11e.(2) of the Act;
C. The regulation of the export from or import into the United States of byproduct, source, or special nuclear material, or of any production or utilization facility;
D. The regulation of the disposal into the ocean or sea of byproduct, source, or special nuclear material waste as defined in regulations or orders of the Commission;
E. The regulation of the disposal of such other byproduct, source, or special nuclear material as the Commission determines by regulation or order should, because of the hazards or potential hazards thereof, not be so disposed without a license from the Commission;
F. The evaluation of radiation safety information on sealed sources or devices containing byproduct, source, or special nuclear material and the registration of the sealed sources or devices for distribution, as provided for in regulations or orders of the Commission;
G. The regulation of activities not exempt from Commission regulation as stated in 10 CFR part 150; and
H. The regulation of the land disposal of byproduct, source, or special nuclear material received from other persons;
With the exception of those activities identified in Article II, paragraphs A., C. through E. and G., this Agreement may be amended, upon application by the State and approval by the Commission, to include the additional areas specified in Article II, paragraphs B., F., and H., whereby the State may then exert regulatory authority and responsibility with respect to those activities.
Notwithstanding this Agreement, the Commission may from time to time by rule, regulation, or order, require that the manufacturer, processor, or producer of any equipment, device, commodity, or other product containing source, byproduct, or special nuclear material shall not transfer possession or control of such product except pursuant to a license or an exemption for licensing issued by the Commission.
This Agreement shall not affect the authority of the Commission under Subsection 161b. or 161i. of the Act to issue rules, regulations, or orders to promote the common defense and security, to protect restricted data, or to guard against the loss or diversion of special nuclear material.
The Commission will cooperate with the State and other Agreement States in the formulation of standards and regulatory programs of the State and the Commission for: (a) protection against hazards of radiation; and (b) to assure that Commission and State programs for protection against the hazards of radiation are coordinated and compatible.
The State agrees to cooperate with the Commission and other Agreement States in the formulation of standards and regulatory programs of the State and the Commission for: (a) protection against the hazards of radiation; and (b) to assure that the State's program will continue to be compatible with the program of the Commission for the regulation of materials covered by this Agreement.
The State and the Commission agree to keep each other informed of proposed changes in their respective rules and regulations, and to provide each other the opportunity for early and substantive contribution to the proposed changes.
The State and the Commission agree to keep each other informed of events, accidents, and licensee performance that may have generic implication or otherwise be of regulatory interest.
The Commission and the State agree that it is desirable to provide reciprocal recognition of licenses for the materials listed in Article I licensed by the other party or by any other Agreement State.
Accordingly, the Commission and the State agree to develop appropriate rules, regulations, and procedures by which reciprocity will be accorded.
The Commission, upon its own initiative after reasonable notice and opportunity for hearing to the State, or upon request of the Governor of Indiana, may terminate or suspend all or part of this Agreement and reassert the licensing and regulatory authority vested in it under the Act, if the Commission finds that (1) such termination or suspension is required to protect the public health and safety, or (2) the State has not complied with one or more of the requirements of Section 274 of the Act. Pursuant to Section 274j. of the Act, the Commission may, after notifying the Governor, temporarily suspend all or part of this Agreement without notice or hearing if, in the judgment of the Commission, an emergency situation exists with respect to any material covered by this agreement creating danger which requires immediate action to protect the health and safety of persons either within or outside the State and the State has failed to take steps necessary to contain or eliminate the cause of danger within a reasonable time after the situation arose. The Commission shall periodically review actions taken by the State under this Agreement to ensure compliance with Section 274 of the Act, which requires a State program to be adequate to protect the public health and safety with respect to the materials covered by this Agreement and to be compatible with the Commission's program.
This Agreement shall become effective on XXXXXXXX, 2026, and shall remain in effect unless and until such time as it is terminated pursuant to Article VIII.
Executed at Indianapolis, Indiana, this [date] day of [month], 2026.
For the United States Nuclear Regulatory Commission.
For the State of Indiana.
Pursuant to the Commission's regulations,
Constellation Energy Generation, LLC (CEG) has requested three amendments to Renewed Facility License No. DPR-50 to support the potential reauthorization of power operations at the Christopher M. Crane Clean Energy Center (CCEC), formerly Three Mile Island Nuclear Station, Unit 1, in Dauphin County, Pennsylvania. CEG seeks to resume power operations at CCEC through April 19, 2034.
In response to a notice filed in the
The Board is comprised of the following Administrative Judges:
All correspondence, documents, and other materials shall be filed in accordance with the NRC E-Filing rule.
Rockville, Maryland.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
Pursuant to 39 CFR 3041.405, the Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to Competitive negotiated service agreement(s). The request(s) may propose the addition of a negotiated service agreement from the Competitive product list or the modification of an existing product currently appearing on the Competitive product list.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
Section II identifies the docket number(s) associated with each Postal Service request, if any, that will be reviewed in a public proceeding as defined by 39 CFR 3010.101(p), the title of each such request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each such request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 and 39 CFR 3000.114 (Public Representative). The Public Representative does not represent any individual person, entity or particular point of view, and, when Commission attorneys are appointed, no attorney-client relationship is established. Section II also establishes comment deadline(s) pertaining to each such request.
The Commission invites comments on whether the Postal Service's request(s) identified in Section II, if any, are consistent with the policies of title 39. Applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3041. Comment deadline(s) for each such request, if any, appear in Section II.
Section III identifies the docket number(s) associated with each Postal Service request, if any, to add a standardized distinct product to the Competitive product list or to amend a standardized distinct product, the title of each such request, the request's acceptance date, and the authority cited by the Postal Service for each request. Standardized distinct products are negotiated service agreements that are variations of one or more Competitive products, and for which financial models, minimum rates, and classification criteria have undergone advance Commission review.
None.
1.
2.
This Notice will be published in the
Postal Regulatory Commission.
Notice.
The Commission is recognizing a recently filed Postal Service document with the Commission concerning changes in rates and classifications of general applicability for Competitive products. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On May 11, 2026, the Postal Service filed notice with the Commission concerning changes in rates and classifications of general applicability for Competitive products.
Attached to the Notice is Governors' Decision No. 26-2, which states the new prices are in accordance with 39 U.S.C. 3632 and 3633 and 39 CFR 3035.102.
The Notice also includes an application for non-public treatment of the FY 2027 projected volumes, revenues, attributable costs, contribution, and cost coverage data for each product in the unredacted version of the annex to the Governors' Decision, as well as supporting forecast data and price adjustment calculations for each affected product. Notice at 1.
Further classification changes are summarized as follows:
• The Postal Service proposes adding a HazMat Handling Fee for Priority Mail and Priority Mail Express
• The Postal Service proposes a classification change to lower the dimensional divisor involved in the dimensional weight calculation from 166 to 139 across all domestic Competitive products. The Postal Service states that this change brings the Postal Service's dimensional divisor in line with the current industry standard.
• The Postal Service proposes expanding the definition of Connect Local, to allow the use of USPS Smart Lockers as a pickup and drop-off location for customers. The Postal Service states that this will allow it to explore potential revenue opportunities through the use of USPS Smart Lockers at the destination delivery unit or equivalent facility.
• The Postal Service proposes to introduce Addresses Application Programming Interface (API) service and pricing under Address Enhancement Services in July. The Postal Service states that the proposed Addresses API service will validate and correct address information to improve package and mail delivery service. The Postal Service further states that “[w]hile the Addresses API service is similar to the existing [Address Matching System] API service, both offerings will continue for the foreseeable future.”
• The Postal Service proposes a minor change to the definition of Package Intercept service so that intercepted packages will use the original product and rate category chosen by the customer, rather than being forwarded or returned as Priority Mail.
Notice at 2-5; Attachment to Governors' Decision No. 26-2.
The Commission establishes Docket No. CP2026-8 for consideration of matters raised by the Notice. The Commission invites comments on whether the Postal Service's filing is consistent with 39 U.S.C. 3632, 3633, and 39 CFR 3035.105 and .107. Comments are due no later than June 5, 2026. The public portions of the filing can be accessed via the Commission's website (
Pursuant to 39 U.S.C. 505, Christopher Mohr is appointed to serve as Public Representative to represent the interests of the general public in this docket. The Public Representative does not represent any individual person, entity or particular point of view, and, when Commission attorneys are appointed, no attorney-client relationship is established.
It is ordered:
1. The Commission establishes Docket No. CP2026-8 for consideration of matters raised by the Postal Service's Notice.
2. Pursuant to 39 U.S.C. 505, the Commission appoints Christopher Mohr to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this docket.
3. Comments are due no later than June 5, 2026.
4. This Order shall be published in the
By the Commission.
Notice is hereby given in accordance with Public Law 92-463 that the Actuarial Advisory Committee will hold a virtual meeting on May 28, 2026, at 1:00 p.m. (Central Daylight Time) on the conduct of the 2026 Annual Report Required by the Railroad Retirement Act of 1974 and the Railroad Retirement Solvency Act of 1983. The agenda for this meeting will include a discussion of the results of the 2026 Annual Report. The text and tables that constitute the Annual Report will have been prepared in draft form for review and sent by the Chief Actuary to the Committee before the meeting.
The meeting will be open to the public. Persons wishing to submit written statements, make oral presentations, or attend the meeting should address their communications or notices to Patricia Pruitt (
On March 19, 2026, Nasdaq MRX, LLC (“MRX”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Section 19(b)(2) of the Act
The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On May 4, 2026, Nasdaq, Inc., on behalf of the following parties to the National Market System Plan to Address Extraordinary Market Volatility (“Plan” or “LULD Plan”):
The Twenty-Sixth Amendment proposes a non-substantive amendment to the Plan to reflect the name change of Nasdaq BX, Inc. to Nasdaq Texas LLC. A copy of the Plan, as proposed to be amended is attached as Exhibit A hereto. The Participants are filing the Twenty-Sixth Amendment for immediate effectiveness pursuant to Rule 608(b)(3)(iii) of Regulation NMS under the Exchange Act.
Set forth in this Section II is the statement of the purpose and summary of the Twenty-Sixth Amendment, along with the information required by Rule 608(a)(4) and (5) under the Exchange Act,
The purpose of this amendment is to implement a non-substantive change to the Plan to reflect the name change of Nasdaq BX, Inc. to Nasdaq Texas, LLC.
The governing documents of the Processor, as defined in Section I(P) of the Plan, will not be affected by the Amendment.
The Participants are filing this Twenty-Sixth Amendment for immediate effectiveness pursuant to Rule 608(b)(3)(iii) of Regulation NMS under the Exchange Act.
Not applicable.
The Participants believe that the proposed amendment does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act because it simply effectuates a change to the name of one of the Participants. The proposed amendment to the Plan would apply to all market participants equally and would not impose a competitive burden on one category of market participants in favor of another category of market participant. The proposed amendment would apply to trading on all Trading Centers and all NMS Stocks would be subject to the amended Plan's requirements. For the same reason, the Participants do not believe that the proposed amendment introduces terms that are unreasonably discriminatory for the purposes of Section 11A(c)(1)(D) of the Exchange Act.
Not applicable.
On April 15, 2026, the Operating Committee, duly constituted and chaired by Mr. Adrian Griffiths of MEMX LLC, voted unanimously to amend the Plan as set forth herein in accordance with Section III(C) of the Plan. The Plan Advisory Committee was notified in connection with the Twenty-Sixth Amendment and was in favor. Each of the Plan's Participants has executed a written amended Plan.
Not applicable.
Section II(C) of the Plan provides that any entity registered as a national securities exchange or national securities association under the Exchange Act may become a Participant by: (1) becoming a participant in the applicable Market Data Plans, as defined
Not applicable.
Not applicable.
Section III(C) of the Plan provides that each Participant shall designate an individual to represent the Participant as a member of an Operating Committee. No later than the initial date of the Plan, the Operating Committee shall designate one member of the Operating Committee to act as the Chair of the Operating Committee. Any recommendation for an amendment to the Plan from the Operating Committee that receives an affirmative vote of at least two-thirds of the Participants, but is less than unanimous, shall be submitted to the Commission as a request for an amendment to the Plan initiated by the Commission under Rule 608.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the amendment is consistent with the Exchange Act and the rules thereunder. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
(Additions are in
The parties to the Plan are as follows:
The Plan may be executed in any number of counterparts, no one of which need contain all signatures of all Participants, and as many of such counterparts as shall together contain all such signatures shall constitute one and the same instrument.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Rule 7.37E to specify the Exchange's source of data feeds from Texas Stock Exchange (“TXSE”) for purposes of order handling, order execution, order routing, and regulatory compliance. The Exchange also proposes to correct the alphabetization of the exchanges listed in Rule 7.37E(d). The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to update and amend the use of data feeds table in Rule 7.37E(d), which sets forth on a market-by-market basis the specific securities information processor (“SIP”) and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the regulatory compliance checks related to each of those functions. Specifically, in light of the fact that Texas Stock Exchange (“TXSE”) has announced that it will launch operations in July 2026,
The Exchange also proposes to correct the alphabetization of the exchanges listed in Rule 7.37E(d).
The Exchange proposes to make this change operative on the date that TXSE launches operations.
The proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes its proposal to add TXSE to the table in Rule 7.37E(d) will ensure that the Rule correctly identifies and publicly states on a market-by-market basis all of the specific SIP and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the regulatory compliance checks for each of those functions. The proposed rule change also removes impediments to and perfects the mechanism of a free and open market and protects investors and the public interest by providing additional specificity, clarity, and transparency in the Exchange's rules.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposal will enhance competition because providing the public and market participants with up-to-date information about the data feeds the Exchange will use for the handling, execution, and routing of orders, as well as for regulatory compliance would enhance transparency and enable investors to better assess the quality of the Exchange's execution and routing services. In addition, the proposed rule change would not impact competition between market participants because it will affect all market participants equally.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of such 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
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
SR-NYSEAMER-2026-35 on the subject line.
• 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-NYSEAMER-2026-35 and should be submitted on or before June 5, 2026.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Rule 7.37 to specify the Exchange's source of data feeds from Texas Stock Exchange (“TXSE”) for purposes of order handling, order execution, order routing, and regulatory compliance. The Exchange also proposes to correct the alphabetization of the exchanges listed in Rule 7.37(e). The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to update and amend the use of data feeds table in Rule 7.37(e), which sets forth on a market-by-market basis the specific securities information processor (“SIP”) and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the regulatory compliance checks related to each of those functions. Specifically, in light of the fact that Texas Stock Exchange (“TXSE”) has announced that it will launch operations in July 2026,
The Exchange also proposes to correct the alphabetization of the exchanges listed in Rule 7.37(e).
The Exchange proposes to make this change operative on the date that TXSE launches operations.
The proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes its proposal to add TXSE to the table in Rule 7.37(e) will ensure that the Rule correctly identifies and publicly states on a market-by-market basis all of the specific SIP and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposal will enhance competition because providing the public and market participants with up-to-date information about the data feeds the Exchange will use for the handling, execution, and routing of orders, as well as for regulatory compliance would enhance transparency and enable investors to better assess the quality of the Exchange's execution and routing services. In addition, the proposed rule change would not impact competition between market participants because it will affect all market participants equally.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B)
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
SR-NYSE-2026-22 on the subject line.
• 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-NYSE-2026-22 and should be submitted on or before June 5, 2026.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On March 20, 2026, National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR-NSCC-2026-005, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
NSCC is a central counterparty (“CCP”) and provider of clearance and settlement services for transactions in broker-to-broker equity, corporate and municipal bond, and unit investment trust transactions in the U.S. markets. As a CCP, NSCC novates transactions between counterparties, effectively becoming the buyer to every seller and the seller to every buyer, and guarantees settlement of the novated transactions. NSCC's CCP services are available to entities that are approved under the NSCC Rules to be direct NSCC Members and to other market participants through NSCC's indirect access models (
Securities Financing Transactions (commonly referred to as “securities lending transactions”) consist of a pair of transactions between two parties in which one party (“Transferor”) agrees to transfer securities in exchange for the other party's (“Transferee”) transfer of cash, and, when clearing such transactions at NSCC, the parties reverse those transfers on the following Business Day.
The Customer Clearing Service allows an Agent Clearing Member to act as agent and credit intermediary for its Customers in clearing SFTs at NSCC. An Agent Clearing Member acts solely as agent of its Customers in connection with the clearing of Agent Clearing Member Transactions; however, the Agent Clearing Member remains fully liable for the performance of all obligations to NSCC arising in connection with Agent Clearing Member Transactions. NSCC primarily designed the Customer Clearing Service to accommodate agent-style trading, in which agent lenders are typically approved to transact in securities lending transactions on behalf of their institutional firm clients. An Agent Clearing Member may establish one or more Agent Clearing Member Customer Omnibus Accounts at NSCC for its Customers' positions in the name of the Agent Clearing Member for the benefit of its Customers.
NSCC states that Members and other market participants have expressed interest in NSCC offering a net margin account option for SFT Members and their Customers that is similar to the Agent Clearing Service offered by NSCC's affiliate clearing agency, Fixed Income Clearing Corporation (“FICC”).
NSCC proposes to amend the NSCC Rules to adopt a new Agent Clearing Member “net margin” account option for Agent Clearing Members in the SFT Clearing Service (as proposed, the “Agent Clearing Member Customer Net Margin Account”), which would contain activity where the Agent Clearing Member may be acting on behalf of its Customers both as Transferor and Transferee. The proposed Agent Clearing Member Customer Net Margin Accounts would also be margined in accordance with Procedure XV and Section 12(b) of Rule 56 of the NSCC Rules. However, unlike the current Agent Clearing Member Customer Omnibus Accounts, the proposed Agent Clearing Member Customer Net Margin Accounts would allow for the offset and netting of positions for margin and Clearing Fund purposes, resulting in reduced margin requirements that would be more similar to the margin requirements of the SFT Accounts maintained by Members for their own proprietary activity. The Agent Clearing Member would, however, remain fully liable for the performance of all obligations to NSCC arising in connection with Agent Clearing Member Transactions as with the existing Agent Clearing Member Customer Omnibus Accounts.
The proposed Agent Clearing Member Customer Net Margin Accounts would be offered in addition to, but would not replace, NSCC's existing Agent Clearing Member Customer Omnibus Accounts, which do not allow for netting within or across accounts and are margined on a gross basis for margin and Clearing Fund purposes (hereinafter referred to as “Agent Clearing Member Customer Gross Margin Accounts”).
The Proposed Rule Change would make several revisions to the NSCC Rules regarding the SFT Clearing Service that are not exclusive to the new Agent Clearing Member Customer Net Margin Accounts. Specifically, the Proposed Rule Change would revise the NSCC Rules to clarify that an Agent Clearing Member (1) acts as agent on behalf of its Customer(s) when the Agent Clearing Member submits Agent Clearing Member Transactions to NSCC for novation, and (2) may elect to maintain one or more Agent Clearing Member Customer Omnibus Accounts. Additionally, the Proposed Rule Change would revise the NSCC Rules to clarify the existing requirement for submitted SFT transaction data to include a designated account in which the SFT shall be recorded, and that any such designation shall constitute a representation that the SFT is of a type that may be recorded in such account. NSCC states that these revisions are designed to provide additional clarity for market participants to better understand the requirements for submitting Agent Clearing Member Transaction data for Agent Clearing Member Customer Omnibus Accounts, including the new Agent Clearing Member Customer Net Margin Accounts and the existing Agent Clearing Member Customer Gross Margin Accounts.
The Proposed Rule Change would revise certain NSCC Rule provisions regarding netting, close-out, and default management within the SFT Clearing Service. Specifically, the Proposed Rule Change would revise the NSCC Rule provisions regarding the netting and close-out treatment of Agent Clearing Member Customer Omnibus Accounts in the event of an Agent Clearing Member Default. The revised NSCC Rules would provide that when NSCC ceases to act for an Agent Clearing Member, NSCC would terminate the ability of the Agent Clearing Member to submit Agent Clearing Member Transactions; however, NSCC would continue to process any Agent Clearing Member Transactions that NSCC has already novated. The revised NSCC Rules would further provide that in the event of a cease to act, NSCC would have the authority to determine whether to close-out open Agent Clearing Member Transactions or permit them to settle.
Additionally, the Proposed Rule Change would revise the NSCC Rule provisions regarding NSCC's cease to act procedures for SFT Members with open SFTs established in an Agent Clearing Member Customer Net Margin Account, Agent Clearing Member Customer Gross Margin Account, or Sponsored Member Sub-Account. Specifically, the revised NSCC Rules would clarify the netting treatment for closed-out SFT Positions in each type of account to correspond with the “gross” or “net” nature of the account. The revised NSCC Rules would also provide for NSCC's authority to close-out offsetting SFT Long and Short Positions in the same SFT Security without taking market action to close-out such positions. In such a situation, NSCC would be allowed to determine the loss or profit resulting from the close-out of such SFT Positions through its other market actions or by reference to market data, thereby avoiding the costs or risks of market action.
Finally, the Proposed Rule Change would make non-substantive drafting changes to Section 14 of NSCC Rule 56 to clarify (1) that any Sponsored Member Transactions or Agent Clearing Member Transactions for which the Defaulting SFT Member is the Sponsoring Member or Agent Clearing Member, and which have been novated to NSCC, shall continue to be processed by NSCC, and (2) NSCC's discretion to determine whether to close-out or settle the relevant SFT Positions in a Defaulting SFT Member's account(s).
Section 19(b)(2)(C) of the Act
Section 17A(b)(3)(F) of Act
As described above in section I.B.1, NSCC proposes to adopt a new account option for Agent Clearing Members in the SFT Clearing Service that would allow for the offset and netting of positions for margin and Clearing Fund purposes. Additionally, NSCC proposes changes to the NSCC Rules concerning the SFT Clearing Service in general, to (1) clarify certain requirements for the submission of Agent Clearing Member Transactions, as described above in section I.B.2, (2) provide updated default management provisions regarding Agent Clearing Member Customer Omnibus Accounts and Sponsored Member Sub-Accounts, as described above in section I.B.3, and (3) make non-substantive drafting changes to Section 14 of NSCC Rule 56, as described above in section I.B.4.
NSCC's proposed changes to establish Agent Clearing Member Customer Net Margin Accounts described above in
Additionally, the proposed changes described above in section I.B.2 to clarify the NSCC Rules regarding (1) an Agent Clearing Member's agent obligations, (2) the ability of an Agent Clearing Member to maintain one or more Agent Clearing Member Customer Omnibus Accounts, and (3) account designation when submitting SFT transaction data to NSCC, would also encourage participation in central clearing by improving market participants' understanding of their rights and obligations when participating in the SFT Clearing Service. Similarly, the proposed changes described above in section I.B.3 to adopt and clarify the relevant default management provisions in the NSCC Rules would encourage participation in central clearing by improving market participants' understanding of NSCC's default management procedures applicable to the SFT Clearing Service and should help market participants better evaluate whether and how the SFT Clearing Service fits their individual needs.
CCP rules that encourage market participants to centrally clear their securities transactions promote the prompt and accurate clearance and settlement of such transactions, providing benefits to the CCP, its participants, and the broader market. Greater participation in central clearing decreases the overall amount of counterparty credit risk in the securities markets because a CCP guarantees trade settlement in the event of a default and the CCP is able to centrally risk-manage more transactions, pursuant to risk management procedures that the Commission has reviewed and approved.
CCP rules that are clear and comprehensible encourage greater participation in central clearing by enabling market participants to better understand the rights and obligations of participating in the CCP. Encouraging greater participation in central clearing would extend the risk mitigation benefits of central clearing to more securities transactions. Therefore, clear and comprehensible CCP rules would promote the prompt and accurate clearance and settlement of securities transactions, and protect investors and the public interest. Moreover, CCP rules that are designed to increase the clarity of the CCP's default management procedures promote the prompt and accurate clearance and settlement of securities transactions, and protect investors and the public interest, by ensuring that the CCP and its participants can manage a default smoothly and with less risk to the market.
NSCC's proposals to (1) establish Agent Clearing Member Customer Net Margin Accounts, as described above in section I.B.1, (2) clarify the rights and obligations of Agent Clearing Members, as described above in section I.B.2, and (3) adopt relevant default management provisions in the NSCC Rules, as described above in section I.B.3 would promote the prompt and accurate clearance and settlement of securities transactions, and protect investors and the public interest, by encouraging greater participation in central clearing, thereby ensuring that a greater proportion of securities transactions are subject to the risk mitigation benefits of central clearing described above.
Finally, NSCC's proposal to adopt default management provisions relevant to the SFT Clearing Service in the NSCC Rules, as described in section I.B.3, would provide clarity to better prepare market participants to deal with a participant default, resulting in a more orderly management of such an event, minimizing default losses and reducing potential risk to NSCC and its non-defaulting participants. Accordingly, the proposed changes would ensure the safeguarding of securities and funds in NSCC's custody or control.
For the foregoing reasons, the Proposed Rule Change is consistent with promoting the prompt and accurate clearance and settlement of securities transactions, protecting investors and the public interest, and assuring the safeguarding of securities and funds which are in NSCC's custody or control, consistent with Section 17A(b)(3)(F) of the Act.
Rule 17ad-22(e)(6)(i)
As described above in section I.B.1, the Agent Clearing Member Transactions submitted within the new Agent Clearing Member Customer Net Margin Accounts would be margined in
Rule 17ad-22(e)(13)
As described above in section I.B.3, NSCC proposes to adopt and clarify the default management provisions in the NSCC Rules applicable to the SFT Clearing Service. Adopting and clarifying the relevant default management provisions in the NSCC Rules would improve market participants' understanding of NSCC's default management procedures. NSCC's proposals in this regard would better prepare market participants to deal with default scenarios, resulting in more orderly management of such events, minimizing default losses and reducing potential risk to NSCC and its non-defaulting participants.
Accordingly, the Proposed Rule Change is consistent with Rule 17ad-22(e)(13) because implementing rules that govern default management procedures would help ensure that NSCC has the authority and capacity to take timely action to contain losses and liquidity demands and continue to meet its obligations.
Rule 17ad-22(e)(19)
As described above in section I.B.3, NSCC proposes to adopt and clarify the default management provisions in the NSCC Rules applicable to the SFT Clearing Service that address default scenarios affecting, among others, NSCC's indirect participants (
Accordingly, the Proposed Rule Change is consistent with Rule 17ad-22(e)(19) because adopting and clarifying the NSCC Rules regarding the default management provisions affecting NSCC's indirect participants would better enable NSCC to manage the material risks arising from arrangements in which indirect participants rely on direct participants to access NSCC's payment, clearing, and settlement facilities.
Rule 17ad-22(e)(21)
As described above in section I.B.1, NSCC states that Members and other market participants have expressed interest in NSCC offering a net margin account option for SFT Members and their Customers. The Proposed Rule Change is consistent with Rule 17ad-22(e)(21) because establishing Agent Clearing Member Customer Net Margin Accounts is responsive to meeting the requirements of NSCC's participants and the SFT market.
On the basis of the foregoing, the Commission finds that the Proposed Rule Change is consistent with the requirements of the Act and the rules and regulations promulgated thereunder.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to adopt Rule 7.39 and amendments to Rules 1.1, 7.36, 7.37 and 7.41 to enable the trading of
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to adopt Rule 7.39 (Tokenized Securities) and amend Rule 1.1 (Definitions), Rule 7.36 (Order Ranking and Display), Rule 7.37 (Order Execution and Routing), and Rule 7.41 (Clearance and Settlement) to enable the trading of securities on the Exchange in tokenized form during the pendency of a pilot program to be operated by DTC pursuant to the terms of a December 11, 2025 Commission Staff no-action letter
The proposed rule change would establish that Exchange ETP Holders that are eligible to participate in the DTC Pilot Program (“DTC Eligible Participants”)
The Exchange's rules do not currently permit the trading of tokenized securities on the Exchange and, unless the Exchange adopts the proposed rules, the Exchange would lack a clear framework for DTC Eligible Participants to designate, at order entry, that a DTC Eligible Security be cleared and settled in tokenized form pursuant to the DTC Pilot Program.
The Exchange accordingly proposes to amend its rules to enable the trading of DTC Eligible Securities in tokenized form on the Exchange during the pendency of the DTC Pilot Program, subject to the same conditions and restrictions as the Nasdaq rule change approved by the Commission. The Exchange believes that the existing regulatory structure mandated by Congress applies to tokenized securities, regardless of whether such securities have certain unique properties like the ability to be settled on a blockchain, much like it did when the Commission allowed securities to be decimalized and electronified and when exchange traded funds and other novel securities were initially approved. The Exchange believes that no significant exemptions or parallel market structure constructs are needed for tokenized securities to trade alongside other securities, and that the markets can accommodate tokenization while continuing to provide the benefits and protections of the national market system.
To tackle the challenge of trading tokenized equities, the Exchange offers a simple proposal that accommodates an approach to tokenization that DTC is pursuing in the DTC Pilot Program. The Exchange believes that this approach will leverage existing structures, players, and rules in a way that is beneficial to investors and in the markets' best interests.
The proposed rules provide that the term “tokenized” refers to digital representations of paper securities that utilize digital ledger or blockchain technology, as opposed to “traditional” securities, which are also digital representations of paper securities, but do not utilize blockchain technology. As long as DTC Eligible Securities are fungible with, have the same CUSIP number and trading symbol as, and afford their holders the same rights and privileges as traditional securities of an equivalent class, the Exchange will trade DTC Eligible Securities in tokenized form together with traditional securities on the same order book and according to the same execution priority rules. A tokenized DTC Eligible Security would be deemed to provide the same rights and privileges as a traditional security if, among other things, it conveys an equity interest in an underlying company, a right to receive any dividends that the company issues to its shareholders, a right to exercise any voting rights that shareholders are due, and a right to receive a share of the residual assets of the company upon liquidation. The Exchange will not treat tokenized instruments as equivalent to their traditional counterparts if they do not convey such rights or share the same CUSIP and trading symbol; instead, the Exchange will treat these instruments as distinct (
As noted above, the Exchange proposes to trade DTC Eligible Securities within the confines of existing securities laws and rules. All existing Exchange rules that currently
To effectuate these changes, the Exchange proposes to adopt Rule 7.39 and amendments to Rules 1.1, 7.36, 7.37 and 7.41, as follows.
The Exchange proposes to amend the definition of “Security” in Rule 1.1 to add a clause similar to that in Equity 1, Nasdaq Section 1 providing that the definition of security encompasses securities that are either listed on the Exchange or traded on the Exchange pursuant to unlisted trading privileges. As amended, Rule 1.1 would provide as follows (proposed additions
The terms “Security” and “Securities” means any security as defined in [Rule]
The Exchange proposes a new Rule 7.39 titled “Tokenized Securities.”
In addition, proposed Rule 7.39 would provide that the Exchange would publish Trader Updates periodically to identify a current list of those DTC Eligible Securities that may trade in tokenized form on the Exchange.
Under proposed Rule 7.39, a share of a tokenized DTC Eligible Security will be tradable on the Exchange together with, and with the same execution priority as, its traditional counterpart, but only if the tokenized security is fungible with, shares the same CUSIP number and trading symbol, and affords its shareholders the same rights and privileges as does a share of an equivalent class of the traditional security. Except for internal rule cross-references to Exchange rules and minor grammatical differences, the proposed language is substantially the same as Nasdaq Equity 1, Section 1.
The Exchange proposes to amend Rule 7.36, which governs order ranking and display, to add a new Commentary .01 providing that the mere fact that an order contains tokenized securities or indicates a preference of a DTC Eligible Participant to clear and settle DTC Eligible Securities in tokenized form will not affect the priority in which the Exchange executes that order. Except for internal cross-references to Exchange rules and minor grammatical differences, the language of proposed Rule 7.36.01 is substantially the same as Equity 4, Nasdaq Rule 4757.
The Exchange proposes to amend Rule 7.37, which governs routing, to add a new subsection (b)(10) that would provide that when the Exchange routes orders in DTC Eligible Securities that DTC Eligible Participants have designated for clearing and settlement in tokenized form in accordance with proposed Rule 7.41, Commentary 01 [sic], the Exchange will communicate this tokenization instruction to DTC upon receiving an execution for an order that was routed to another trading venue. Except for certain non-substantive differences,
The Exchange proposes to add a new Commentary .20 to Rule 7.41, which governs clearance and settlement, describing how a DTC Eligible Participant can communicate its desire to clear and settle a DTC Eligible Security in tokenized form.
Proposed Commentary .20 to Rule 7.41 would provide that a DTC Eligible Participant (as defined in Rule 7.37(b)(10)) that wishes for its order in a DTC Eligible Security to clear and settle in tokenized form as part of the DTC Pilot Program must notate its preference upon entry of the order in the Exchange systems by selecting a tokenization flag that the Exchange designates for this purpose, in accordance with the Exchange's procedures. When a DTC Eligible Participant enters an order for a DTC Eligible Security with the tokenization flag selected, the Exchange will communicate the DTC Eligible Participant's tokenization preference to DTC on a post-trade basis. The flag will indicate the DTC Eligible Participant's preference as to what form the security will take (
Proposed Commentary .20 to Rule 7.41 further provides that Exchange systems will not determine whether an ETP Holder is a DTC Eligible Participant or whether a security is a DTC Eligible Security at the time of order entry and selection of the tokenization flag. The Exchange also will not determine whether DTC is able to execute a tokenization order for other reasons, including because the DTC Eligible Participant wishes to mint the token to a blockchain that is not compatible with the DTC Pilot Program or to a digital wallet that is not registered with DTC.
Additionally, the No-Action Letter states that DTC will not execute a tokenization instruction if a DTC Eligible Participant cannot pass DTC's risk management and compliance controls.
Again, except for certain non-substantive differences,
Other than as described above, from an Exchange system and matching engine perspective, the Exchange's trading procedures and behavior will be the same regardless of whether a DTC Eligible Participant opts to trade tokenized or traditional shares of a DTC Eligible Security.
• All Exchange order types and modifiers will be available for use with tokenized securities;
• All Exchange routing strategies will be available for orders in tokenized securities;
• Orders in tokenized securities may participate in all of the Exchange's trading sessions, subject to generally applicable eligibility criteria;
• ETP Holders may utilize their existing connectivity to enter orders in tokenized securities;
• The Exchange's fee schedule will not vary based upon whether shares that ETP Holders execute are tokenized or traditional in nature;
• Market data feeds will not differentiate between tokenized and traditional securities;
• The Exchange will comply with any Commission requirements to report tokenization data to the Consolidated Audit Trail;
• Market surveillance of tokenized and traditional securities will rely upon the same underlying data, which will continue to be accessible by the Exchange and the Financial Industry Regulatory Authority (“FINRA”);
• Trades in tokenized securities handled by DTC will continue to settle on a T+1 basis;
• The Exchange's clearly erroneous and risk management measures will cover tokenized securities; and
• Trading of tokenized securities under this proposal is not expected to alter the existing proxy distribution process.
This proposal to offer trading in tokenized securities will become effective once the requisite infrastructure and post-trade settlement services have been established by DTC. The Exchange understands that DTC is working to develop the necessary infrastructure, services, and procedures to facilitate such tokenization and the related post-trade settlement infrastructure and services.
Securities that are DTC Eligible Securities—meaning that they are eligible for tokenization and de-tokenization as part of the DTC tokenization pilot program—will be limited to the following, for purposes of this proposal: (i) securities in the Russell 1000 Index at the time the service launches as well as any additions to the index thereafter and notwithstanding the subsequent removal of any securities from the index; and (ii) exchange traded funds that track major indices. These categories of DTC Eligible Securities will be the only tokenized equities that are available to trade on the Exchange under this proposal.
The Exchange will alert its ETP Holders in a Trader Update at least 30 calendar days before the Exchange begins trading DTC Eligible Securities in tokenized form on its market.
DTC states that it will provide tokenization services on a pilot basis, as described above, for a period of three years after launch, after which time DTC will sunset the service.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change is consistent with the Act because it would enable the trading of tokenized securities within the existing framework of the national market system, without requiring wholesale exemptions from investor protections. The proposed amendments are narrowly tailored to accommodate the DTC Pilot Program while preserving the integrity, efficiency, and investor protections of the Exchange's existing trading rules. The Exchange believes that all existing Commission and Exchange rules that currently apply to non-tokenized securities will continue to apply, without modification, to the trading of tokenized securities, except as expressly provided herein. The Exchange also believes that the proposed rule change is not designed to permit unfair discrimination between customers, brokers and dealers, consistent with Section 6(b)(5) of the Act.
The Exchange further believes the proposed rule change furthers the objectives of Section 6(b)(5) of the Act in that it is designed to prevent fraudulent and manipulative acts and practices. The proposed rule change ensures that tokenized securities may only be traded on the Exchange if they are fungible with, share the same CUSIP number and trading symbol as, and afford their holders the same rights and privileges as, traditional securities of an equivalent class. By tethering tokenized securities to their traditional counterparts in this manner, the proposal eliminates the potential for price dislocation, manipulation, and investor confusion that could arise from the trading of tokenized instruments outside the national market system. In addition, all Exchange rules, including rules governing clearly erroneous transactions, short sales, risk management, and market surveillance will apply equally to tokenized and traditional securities. Market surveillance of tokenized and traditional securities will rely upon the same underlying data, which will continue to be accessible by the Exchange and FINRA. Trades in tokenized securities handled by DTC will continue to settle on a T+1 basis. The Exchange's clearly erroneous and risk management measures will cover tokenized securities.
The Exchange also believes the proposed rule change furthers the objectives of Section 6(b)(5) of the Act in that it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Commission has previously approved rules of another national securities exchange—Nasdaq—enabling the trading of tokenized securities. The Exchange's proposal to adopt comparable rules to allow DTC Eligible Participants to trade DTC Eligible Securities in tokenized form on the Exchange, subject to the same conditions and restrictions as approved for Nasdaq, promotes a fair, consistent, and interoperable national market system framework for tokenized securities trading. ETP Holders will be able to access tokenized securities trading across multiple exchanges on equivalent terms, promoting competition and efficient price discovery. The Exchange will comply with any Commission requirements to report tokenization data to the Consolidated Audit Trail, further supporting the integrity and transparency of the national market system.
In addition, the Exchange believes that the proposed rule change is not designed to permit unfair discrimination between customers, brokers and dealers, consistent with Section 6(b)(5) of the Act
Finally, the Exchange believes the proposed rule change is designed to foster cooperation and coordination with persons engaged in facilitating transactions in securities, consistent with Section 6(b)(5) of the Act. The Exchange's proposal is expressly designed to work in coordination with the DTC Pilot Program, pursuant to the No-Action Letter. The proposed rules establish a clear and workable framework for the Exchange, DTC, and Exchange ETP Holders to cooperate in enabling the clearing and settlement of tokenized securities through the existing post-trade infrastructure. This cooperative approach, leveraging DTC's established role as the nation's central securities depository, ensures that tokenized securities trading occurs within a safe, regulated, and transparent framework that protects investors and promotes the public interest.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change would enable the trading of tokenized securities on the Exchange in a manner that is consistent with the approved rules of another national securities exchange for the same purpose. Facilitating access to tokenized securities across multiple exchanges promotes competition and is in the interest of investors and the investing public. The proposed rule change does not impose any barriers to entry for ETP Holders and does not create any competitive disadvantages between and among market participants. The Exchange believes the proposed rule changes, taken together, will strengthen the Exchange's ability to carry out its role and responsibilities as a self-regulatory organization in connection with the trading of tokenized securities. As such, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange believes that its proposal will be particularly attractive because it will provide for the trading of tokenized DTC Eligible Securities in a manner that is familiar to market participants and investors and which is consistent with existing laws and rules. Under this proposal, the extent to which ETP Holders will need to modify their back-end systems and practices to accommodate tokenized securities trading should be minimal; those systems may simply need to account for the availability of the new flag and be set up to provide any information that the flag requires to the Exchange. The Exchange notes that ETP Holders on the Exchange will remain free to trade, clear and settle securities in traditional form, including both DTC Eligible Securities and other securities.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSENAT-2026-09 and should be submitted on or before June 5, 2026.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to establish fees for Industry Members
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2026-1 to recover the reasonably budgeted CAT costs for the period from May 1, 2026 through December 31, 2026 in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2026-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2026-1 (“Fee Rate 2026-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2026-1”) for the period from May 1, 2026 through December 31, 2026 (“CAT Fee 2026-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the eight-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2026-1. CAT LLC proposes to commence CAT Fee 2026-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2026-1 “would be calculated as described in paragraph (II)” of Section 11.3(a)(i)(A) of the CAT NMS Plan,
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2026 for CAT LLC (“Original 2026 CAT Budget”) on December 11, 2025.
As described in detail below, the Budgeted CAT Costs 2026-1 would be $15,149,648. CEBBs collectively will be responsible for one-third of the Budgeted CAT Costs 2026-1 (which is $5,049,882.67), and CEBSs collectively will be responsible for one-third of the Budgeted CAT Costs 2026-1 (which is $5,049,882.67).
The following describes in detail the Budgeted CAT Costs 2026-1 for CAT Fee 2026-1. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below is reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down the Budgeted CAT Costs 2026-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent
The following table compares the annual budgeted CAT costs as set forth in the updated annual CAT budget for 2025 approved by the Operating Committee in May 2025 (“May Updated 2025 CAT Budget”),
In addition, the following table compares the budgeted costs for January and February 2026 that were used in drafting the Original 2026 CAT Budget with the actual costs for January and February 2026 that were used in drafting the Updated 2026 CAT Budget. The Original 2026 CAT Budget includes budgeted costs for January and February 2026, whereas the Updated 2026 CAT Budget includes actual costs for January and February 2026. The variance from the budgeted costs for January and February 2026 to the actual costs for January and February 2026 are used in this filing in supporting the reasonableness of the estimates for each category of 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 $49,866,667 in technology costs for cloud hosting services for the CAT Fee 2026-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”) during the CAT Fee 2026-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. 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
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.
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2026-1 Period will be approximately $49,866,667.
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2026-1 Period based on an assumption of 35% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for the Reference Database. CAT LLC determined these growth assumptions in coordination with FCAT.
This process for estimating the budget for cloud hosting services costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the cloud hosting services costs for the Original 2026 CAT Budget.
The Original 2026 CAT Budget estimated a budget for cloud hosting services of $17,200,000 for January and February 2026. The actual costs for cloud hosting services for January and February 2026, which are set forth in the Updated 2026 CAT Budget, were $12,829,362. Therefore, the variance between budgeted and actual cloud hosting services costs for January and February 2026 was an approximate decrease of $4,370,638 as a result of lower volumes and a change in functionality.
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. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the cloud hosting services costs from the Original 2026 Budget.
The annual 2026 budgeted costs for cloud hosting services included in the Original 2026 CAT Budget were $81,900,006, and the annual 2026 budgeted costs for cloud hosting services included in the Updated 2026 CAT Budget are $77,529,362. Accordingly, budgeted annual costs for cloud hosting services decreased by $4,370,644 from the Original 2026 CAT Budget to the Updated 2026 CAT Budget, which is an approximate 5% reduction in cloud hosting services costs for the full year of 2026.
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 $19,691,953 in technology costs for operating fees for the CAT Fee 2026-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts, 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.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2026-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2026-1 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 2026-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for operating fees of $5,149,236 for January and February 2026, and the actual costs for operating fees for January and February 2026 were $5,127,057. Therefore, the variance between budgeted and actual operating fees for this period was small—$22,179.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the operating fees from the Original 2026 Budget. Specifically, the following describes the differences in the costs for operating fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted costs for operating fees included in the Original 2026 CAT Budget were $34,345,413, and the annual 2026 budgeted costs for operating fees included in the Updated 2026 CAT Budget are $29,845,524. Accordingly, budgeted annual costs for operating fees decreased by $4,499,889 from the Original 2026 CAT Budget to the Updated 2026 CAT Budget, which is an approximate 13% reduction in operating fees for the full year of 2026.
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 $14,179,060 in technology costs for CAIS operating fees for the CAT Fee 2026-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of the Reference Database (previously referred to as CAIS), and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2026-1 Period, it is anticipated that FCAT will provide services related to the Reference Database. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for services related to the Reference Database provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's services related to the Reference Database 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 2026-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of the Reference Database.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2026-1 Period will be approximately $14,179,060.
CAT LLC calculated the budget for FCAT's services related to the Reference Database for the CAT Fee 2026-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget of $3,544,764 for CAIS operating fees for January and February of 2026. The actual costs for CAIS operating fees for January and February of 2026, which are included in the Updated 2026 CAT Budget, were $3,544,764. There was no variance between budgeted and actual CAIS operating fees for the first two months of 2026.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the CAIS operating fees from the Original 2026 Budget. Specifically, the following describes the differences in the costs for CAIS operating fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
CAIS operating fees are based on a recurring monthly rate payable to FCAT and are unchanged from the Original 2026 CAT Budget to the Updated 2026 CAT Budget. The annual 2026 budgeted costs for CAIS operating fees included in the Original 2026 CAT Budget were $21,268,584, and the annual 2026 budgeted costs for CAIS operating fees included in the Updated 2026 CAT Budget are $21,268,590.
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 $0 in technology costs for change request fees for the CAT Fee 2026-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
The change request budget line is established to include expected costs to be incurred in which the nature of the costs (
CAT LLC estimates that the budget for change requests during the CAT Fee 2026-1 Period will be approximately $0.
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2026-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a change request budget of $0 for January and February of 2026. The actual costs for change requests for January and February of 2026, which are set forth in the Updated 2026 CAT Budget, were $0. There was no variance between budgeted and actual change request costs for January and February of 2026.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the change request fees from the Original 2026 Budget. Specifically, the following describes the differences (if any) in the costs for change request fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted costs for change requests included in the Original 2026 CAT Budget were $0, and the annual 2026 budgeted costs for change requests included in the Updated 2026 CAT Budget are $0.
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 $3,450,000 in technology costs for capitalized developed technology costs for the CAT Fee 2026-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for the Reference Database 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 related to the cost savings amendments
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2026-1 Period will be approximately $3,450,000.
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2026-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. This process for estimating the budget for capitalized developed technology costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the capitalized developed technology costs for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for capitalized developed technology costs of $671,472 for January and February 2026, and the actual costs for capitalized developed technology costs for January and February 2026 were $4,145,430.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the capitalized developed technology costs from the Original 2026 Budget. Specifically, the following describes the differences in the costs for capitalized developed technology costs as included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budget for capitalized developed technology costs included in the Original 2026 CAT Budget was $8,228,827, and the annual 2026 budget for capitalized developed technology costs included in the Updated 2026 CAT Budget are $8,378,964.
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 $5,670,452 in legal costs for the CAT Fee 2026-1 Period. This category of costs represents budgeted costs for legal services for this period. CAT LLC anticipates that it will receive legal services from two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Jenner & Block LLP (“Jenner”), during the CAT Fee 2026-1 Period.
During the CAT Fee 2026-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal 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 2026-1 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.
During the CAT Fee 2026-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against 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;
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2026-1 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.
CAT LLC estimated the budget for the legal services for the CAT Fee 2026-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues. This process for estimating the budget for the legal services for CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for legal costs of $1,424,166 for January and February of 2026. The actual costs for legal services for January and February 2026, which are included in the Updated 2026 Budget, were $1,838,617.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the legal costs from the Original 2026 Budget. Specifically, the following describes the differences in the legal costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted legal costs included in the Original 2026 CAT Budget were $8,485,000, and the annual 2026 budgeted legal costs included in the Updated 2026 CAT Budget are $8,939,184.
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 $1,025,957 in consulting costs for the CAT Fee 2026-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee
It is anticipated that the costs for CAT during the CAT Fee 2026-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2026-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2026-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee, which is paid by CAT LLC.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2026-1 Period will be approximately $1,025,957.
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2026-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, and discussions with Deloitte, as well as the compensation arrangement for the Chair. This process for estimating the budget for consulting costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the consulting costs for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for consulting services of $258,334 for January and February 2026, and the actual costs for consulting services for January and February 2026, which are included in the Updated 2026 CAT Budget, were $267,554.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the consulting costs from the Original 2026 Budget. Specifically, the following describes the differences (if any) in the consulting costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budget for consulting costs included in the Original 2026 CAT Budget was $1,550,000, and the annual 2026 budget for consulting costs included in the Updated 2026 CAT Budget is $1,550,000.
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 $852,768 in insurance costs for the CAT Fee 2026-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2026-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during the CAT Fee 2026-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2026-1 Period based on the insurance estimate from USI for 2026. The annual premiums would be paid by CAT LLC to USI.
The budgeted insurance costs for the CAT Fee 2026-1 Period are based on an insurance cost estimate from USI for 2026. Accordingly, CAT LLC believes that the process for estimating the budgeted insurance costs for the CAT Fee 2026-1 Period is reasonable.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the insurance costs from the Original 2026 Budget. Specifically, the following describes the differences in the insurance costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted insurance costs included in the Original 2026 CAT Budget were $1,505,625, and the annual 2026 budgeted insurance costs included
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 $749,151 in professional and administration costs for the CAT Fee 2026-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2026-1 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 and interim operating and financial budgets, including budget to actual and budget to budget fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee, Leadership Team 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.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the professional and administration costs from the Original 2026 Budget. Specifically, the following describes the differences in the professional and administration costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted professional and administration costs as included in the Original 2026 CAT Budget were $1,145,500, and the annual 2026 budgeted professional and administration costs included in the Updated 2026 CAT Budget are $1,085,500.
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 2026-1 Period. The public relations costs would 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 CAT Fee Period 2026-1, the budget for public relations costs for this period is $0.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the public relations costs from the Original 2026 Budget. Specifically, the following describes the differences (if any) in public relations costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual budgeted public relations costs for 2026 included in the Original 2026 CAT Budget were $0, and the annual budgeted public relations costs for 2026 included in the Updated 2026 CAT Budget are $0.
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to include “the sources of all revenues to cover costs.” Accordingly, the Updated 2026 CAT Budget includes a line item for interest income. Specifically, the Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,453,382 in interest income for the CAT Fee 2026-1 Period.
CAT LLC estimates the budget for the interest income for the CAT Fee 2026-1 Period based on the estimate of the funds held by CAT LLC and the expected interest rates on such funds. The Original 2026 CAT Budget estimated interest income of $758,343 for January and February 2026, and the actual interest income for January and February 2026, which are included in the Updated 2026 CAT Budget, were $757,527.
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 each line item from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in interest income from the Original 2026 CAT Budget. Specifically, the following describes the differences in the interest income included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted interest income as included in the Original 2026 CAT Budget was $1,995,958, and the annual 2026 budgeted interest income included in the Updated 2026 CAT Budget is $2,806,325.
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
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 the Updated 2026 CAT Budget (which does not include the reserve amount). Accordingly, the total 25% reserve of $23,508,157 was calculated by multiplying the total expenses set forth in the Updated 2026 CAT Budget (other than the reserve) by 25%.
The Updated 2026 CAT Budget estimates that CAT LLC will have $102,391,135 in reserve as of the beginning of the CAT Fee Period 2026-1. Such reserve is related, in part, to (i) the collection of CAT fees in excess of the budgeted CAT costs in light of the greater actual executed equivalent share volume than the projected executed equivalent share volume for prior CAT Fees, and (ii) a reduction in anticipated budgeted costs associated with the implementation of certain cost savings measures. This reserve balance of $102,391,135 would be used to offset a portion of CAT costs for CAT Fee Period 2026-1, thereby reducing the fee rate to be paid for CAT Fee 2026-1. Specifically, the total costs (including the 25% reserve) for CAT Fee 2026-1 of $117,540,783 would be reduced by the $102,391,135 in reserve. Therefore, the Total Budgeted CAT Costs 2026-1 would be $15,149,648.
Accordingly, the fee rate for CAT Fee 2026-1 is calculated based on this reduced amount of $15,149,648, resulting in a fee rate of $0.000001 per executed equivalent share. If the fee rate for CAT Fee 2026-1 were calculated solely based on the reasonably budgeted costs for CAT for May-December 2026, excluding the reduction in that amount due to the surplus reserve offset, the fee rate would be the higher rate of $0.000010.
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. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in reserve from the Original 2026 CAT Budget. Specifically, the following describes the differences in the reserve included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The accrued liquidity reserve balance at the beginning of the year included in the Original 2026 CAT Budget was $119,128,336. The Original 2026 CAT Budget contemplated using the reserve to pay CAT bills throughout the year as no CAT fee was in effect. The accrued liquidity reserve balance at the beginning of the year included in the Updated 2026 CAT Budget was $155,403,378. The increase in the accrued liquidity reserve balance at the beginning of the year from the Original 2026 CAT Budget to the Updated 2026 CAT Budget reflected the additional CAT Fees that had been received after the approval of the Original 2026 CAT Budget. In addition, the Updated 2026 CAT Budget not only reflected the use of the surplus reserve to pay CAT bills but also the accrual of additional reserve to establish a 25% reserve through CAT Fee 2026-1. Accordingly, the estimated liquidity reserve balance increased from a deficit of $37,304,661 included in the Original 2026 CAT Budget to a reserve balance of $23,508,157 included in the Updated 2026 CAT Budget for the full year of 2026.
The calculation of Fee Rate 2026-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2026-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the eight-month recovery period for CAT Fee 2026-1 by multiplying by 8/12ths the executed equivalent share volume for the 12-month period from March 2025 through February 2026. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for the eight-month recovery period for CAT Fee 2026-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2026-1 would be calculated by dividing the Budgeted CAT Costs 2026-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the eight-month recovery period for CAT Fee 2026-1, as described in detail above.
Fee Rate 2026-1 would be used to calculate the fee rate to be paid by CEBSs and CEBBs for CAT Fee 2026-1. Such fee rate is calculated by multiplying Fee Rate 2026-1 of $0.000003799483243631228 by one-third, and rounding the result to six decimal places.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2026-1 on a monthly basis for eight months, from July 2026 until January 2027. 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.
To implement CAT Fee 2026-1, the Exchange proposes to add a new paragraph to 24X Rule 4.18, to include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer in a transaction in Eligible Securities (“CAT Executing Broker for the Buyer” or “CEBB”) and each Industry Member that is the CAT Executing Broker for the seller in a transaction in Eligible Securities (“CAT Executing Broker for the Seller” or “CEBS”) will be required to pay a CAT Fee for each such transaction in Eligible Securities in the prior month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in Eligible Securities will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Fee Rate reasonably determined pursuant to paragraph (a)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(6) to 24X Rule 4.18. Proposed paragraph (a)(6) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2026-1 in June 2026, which shall set forth the CAT Fee 2026-1 fees calculated based on transactions in May 2026, and shall receive an invoice for CAT Fee 2026-1 for each month thereafter until January 2027.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2026-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000001 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2027 for CAT Fee 2026-1 in paragraph 6(A), CAT Fee 2026-1 shall continue in effect after January 2027, with each CAT Executing Broker receiving an invoice for CAT Fee 2026-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2026-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2026-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(6)(A) of 24X Rule 4.18 would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2026-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2026-1 in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in May 2026. 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 24X Rule 4.18.
Proposed paragraph (a)(6)(A) of 24X Rule 4.18 also would describe the monthly cadence of the invoices for CAT Fee 2026-1. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter until January 2027.
Proposed paragraph (a)(6)(B) of 24X Rule 4.18 would describe the invoices for CAT Fee 2026-1. Proposed paragraph (a)(6)(B) of 24X Rule 4.18 would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2026-1 on a monthly basis.” Proposed paragraph (a)(6)(B) of 24X Rule 4.18 also would describe the fees to be set forth in the invoices for CAT Fee 2026-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such
Since CAT Fee 2026-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2026-1 may collect more or less than two-thirds of the Budgeted CAT Costs 2026-1. To the extent that CAT Fee 2026-1 collects more than two-thirds of the Budgeted CAT Costs 2026-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2026-1 collects less than two-thirds of the Budgeted CAT Costs 2026-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(6)(C) of 24X Rule 4.18 would describe how long CAT Fee 2026-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2027 for CAT Fee 2026-1 in paragraph 6(A), CAT Fee 2026-1 shall continue in effect after January 2027, with each CAT Executing Broker receiving an invoice for CAT Fee 2026-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2026-1 will no longer be in effect.”
Finally, proposed paragraph (a)(6)(D) of 24X Rule 4.18 would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2026-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2026-1 in accordance with paragraph (b).”
Paragraph (b)(1) of the “Consolidated Audit Trail Funding Fees” section of 24X Rule 4.18 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.
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.
Paragraph (b)(2) of 24X Rule 4.18 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 2026-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed equivalent share volume and corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2026-1 is in effect as well as the total amount invoiced for CAT Fee 2026-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2026-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
[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.
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the CAT Fee 2026-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, and professional and administration costs.
The proposed CAT Fee 2026-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent
The SEC has determined that the CAT Funding Model 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, satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2026-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2026-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2026-1 is 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 is consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan to reduce costs, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates receiving certain market data from Algoseek during the CAT Fee 2026-1 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.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to include “the sources of all revenues to cover costs.” Accordingly, the Updated 2026 CAT Budget includes a line item for interest income. Specifically, the Updated 2026 CAT Budget includes $1,453,382 in interest income for the CAT Fee 2026-1 Period.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be appropriate for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is appropriate to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
As discussed further below,
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined that the projected total executed equivalent share volume for the eight months of the CAT Fee 2026-1 Period by multiplying by 8/12ths the executed equivalent share volume for the prior twelve months: 8/12 times 5,980,937,549,360.49 executed equivalent shares.
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that charging CAT Fee 2026-1 with a fee rate of $0.000001 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the Budgeted CAT Costs 2026-1. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is less than CAT Fee 2025-2 and is comparable to other transaction-based fees, including fees assessed pursuant to Section 31.
CAT Fee 2026-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the
CAT Fee 2026-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2026-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2026-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of the Budgeted CAT Costs 2026-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2026-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2026-1—the Budgeted CAT Costs 2026-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2026-1 Period—is reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2026-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2026-1 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 2026-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2026-1 and the resulting fee rate for CAT Fee 2026-1 is reasonable. Therefore, CAT Fee 2026-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the Exchange's rules. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2026-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2026-1 is reasonable and the resulting fee rate for CAT Fee 2026-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2026-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to 7.37-E to amend Rule 7.37-E to specify the Exchange's source of data feeds from Texas Stock Exchange (“TXSE”) for purposes of order handling, order execution, order routing, and regulatory compliance. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to update and amend the use of data feeds table in Rule 7.37-E(d), which sets forth on a market-by-market basis the specific securities information processor (“SIP”) and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the regulatory compliance checks related to each of those functions. Specifically, in light of the fact that Texas Stock Exchange (“TXSE”) has announced that it will launch operations in July 2026,
The Exchange proposes to make this change operative on the date that TXSE launches operations.
The proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes its proposal to add TXSE to the table in Rule 7.37-E(d) will ensure that the Rule correctly identifies and publicly states on a market-by-market basis all of the specific SIP and proprietary data feeds that the Exchange utilizes for the handling, execution, and routing of orders, and for performing the regulatory compliance checks for each of those functions. The proposed rule change also removes impediments to and perfects the mechanism of a free and open market and protects investors and the public interest by providing additional specificity, clarity, and transparency in the Exchange's rules.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the Exchange believes that the proposal will enhance competition because providing the public and market participants with up-to-date information about the data feeds the Exchange will use for the handling, execution, and routing of orders, as well as for regulatory compliance would enhance transparency and enable investors to better assess the quality of the Exchange's execution and routing services. In addition, the proposed rule change would not impact competition between market participants because it will affect all market participants equally.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b-4(f)(6)
At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B)
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
SR-NYSEARCA-2026-47 on the subject line.
• 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-NYSEARCA-2026-47 and should be submitted on or before June 5, 2026.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange is filing with the Commission a proposed rule change to establish fees for Industry Members
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2026-1 to recover the reasonably budgeted CAT costs for the period from May 1, 2026 through December 31, 2026 in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.' ”
CAT Fee 2026-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange:
In addition,
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2026-1 (“Fee Rate 2026-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2026-1”) for the period from May 1, 2026 through December 31, 2026 (“CAT Fee 2026-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the eight-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2026-1. CAT LLC proposes to commence CAT Fee 2026-1 during the year, rather than at the beginning of the year. Accordingly, CAT Fee 2026-1 “would be calculated as described in paragraph (II)” of Section 11.3(a)(i)(A) of the CAT NMS Plan,
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2026 for CAT LLC (“Original 2026 CAT Budget”) on December 11, 2025.
As described in detail below, the Budgeted CAT Costs 2026-1 would be $15,149,648. CEBBs collectively will be responsible for one-third of the Budgeted CAT Costs 2026-1 (which is $5,049,882.67), and CEBSs collectively will be responsible for one-third of the Budgeted CAT Costs 2026-1 (which is $5,049,882.67).
The following describes in detail the Budgeted CAT Costs 2026-1 for CAT Fee 2026-1. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below is reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down the Budgeted CAT Costs 2026-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period in which CAT Fee 2026-1 is in effect, CAT LLC will use the proceeds from CAT Fee 2026-1 and the related Participant CAT fees to repay such notes.
The following
In addition, the following table compares the budgeted costs for January and February 2026 that were used in drafting the Original 2026 CAT Budget with the actual costs for January and February 2026 that were used in drafting the Updated 2026 CAT Budget. The Original 2026 CAT Budget includes budgeted costs for January and February 2026, whereas the Updated 2026 CAT Budget includes actual costs for January and February 2026. The variance from the budgeted costs for January and February 2026 to the actual costs for January and February 2026 are used in this filing in supporting the reasonableness of the estimates for each category of 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 $49,866,667 in technology costs for cloud hosting services for the CAT Fee 2026-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”) during the CAT Fee 2026-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. 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 Reference Database (previously referred to as the Customer and Account Information System or (“CAIS”).
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.
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2026-1 Period will be approximately $49,866,667.
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2026-1 Period based on an assumption of 35% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for the Reference Database. CAT LLC determined these growth assumptions in coordination with FCAT.
This process for estimating the budget for cloud hosting services costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the cloud hosting services costs for the Original 2026 CAT Budget.
The Original 2026 CAT Budget estimated a budget for cloud hosting services of $17,200,000 for January and February 2026. The actual costs for cloud hosting services for January and February 2026, which are set forth in the Updated 2026 CAT Budget, were $12,829,362. Therefore, the variance between budgeted and actual cloud hosting services costs for January and February 2026 was an approximate decrease of $4,370,638 as a result of lower volumes and a change in functionality.
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. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the cloud hosting services costs from the Original 2026 Budget.
The annual 2026 budgeted costs for cloud hosting services included in the
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the 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 $19,691,953 in technology costs for operating fees for the CAT Fee 2026-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts, 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.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2026-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2026-1 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 2026-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for operating fees of $5,149,236 for January and February 2026, and the actual costs for operating fees for January and February 2026 were $5,127,057. Therefore, the variance between budgeted and actual operating fees for this period was small—$22,179.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the operating fees from the Original 2026 Budget. Specifically, the following describes the differences in the costs for operating fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted costs for operating fees included in the Original
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 $14,179,060 in technology costs for CAIS operating fees for the CAT Fee 2026-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of the Reference Database (previously referred to as CAIS), and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2026-1 Period, it is anticipated that FCAT will provide services related to the Reference Database. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for services related to the Reference Database provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's services related to the Reference Database 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 2026-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of the Reference Database.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2026-1 Period will be approximately $14,179,060.
CAT LLC calculated the budget for FCAT's services related to the Reference Database for the CAT Fee 2026-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget of $3,544,764 for CAIS operating fees for January and February of 2026. The actual costs for CAIS operating fees for January and February of 2026, which are included in the Updated 2026 CAT Budget, were $3,544,764. There was no variance between budgeted and actual CAIS operating fees for the first two months of 2026.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the CAIS operating fees from the Original 2026 Budget. Specifically, the following describes the differences in the costs for CAIS operating fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
CAIS operating fees are based on a recurring monthly rate payable to FCAT and are unchanged from the Original 2026 CAT Budget to the Updated 2026 CAT Budget. The annual 2026 budgeted costs for CAIS operating fees included in the Original 2026 CAT Budget were $21,268,584, and the annual 2026 budgeted costs for CAIS operating fees included in the Updated 2026 CAT Budget are $21,268,590.
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 $0 in technology costs for change request fees for the CAT Fee 2026-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
The change request budget line is established to include expected costs to be incurred in which the nature of the costs (
CAT LLC estimates that the budget for change requests during the CAT Fee 2026-1 Period will be approximately
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2026-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a change request budget of $0 for January and February of 2026. The actual costs for change requests for January and February of 2026, which are set forth in the Updated 2026 CAT Budget, were $0. There was no variance between budgeted and actual change request costs for January and February of 2026.
(a) 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. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the change request fees from the Original 2026 Budget. Specifically, the following describes the differences (if any) in the costs for change request fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted costs for change requests included in the Original 2026 CAT Budget were $0, and the annual 2026 budgeted costs for change requests included in the Updated 2026 CAT Budget are $0.
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 $3,450,000 in technology costs for capitalized developed technology costs for the CAT Fee 2026-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for the Reference Database 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 related to the cost savings amendments
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2026-1 Period will be approximately $3,450,000.
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2026-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. This process for estimating the budget for capitalized developed technology costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the capitalized developed technology costs for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for capitalized developed technology costs of $671,472 for January and February 2026, and the actual costs for capitalized developed technology costs for January and February 2026 were $4,145,430.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the capitalized developed technology costs from the Original 2026 Budget. Specifically, the following describes the differences in the costs for capitalized developed technology costs as included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budget for capitalized developed technology costs included in the Original 2026 CAT Budget was $8,228,827, and the annual 2026 budget for capitalized developed technology costs included in the Updated 2026 CAT Budget are $8,378,964.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a
During the CAT Fee 2026-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal 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 2026-1 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.
During the CAT Fee 2026-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against 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;
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2026-1 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.
CAT LLC estimated the budget for the legal services for the CAT Fee 2026-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues. This process for estimating the budget for the legal services for CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for legal costs of $1,424,166 for January and February of 2026. The actual costs for legal services for January and February 2026, which are included in the Updated 2026 Budget, were $1,838,617.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the legal costs from the Original 2026 Budget. Specifically, the following describes the differences in the legal costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted legal costs included in the Original 2026 CAT Budget were $8,485,000, and the annual 2026 budgeted legal costs included in the Updated 2026 CAT Budget are $8,939,184.
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 $1,025,957 in consulting costs for the CAT Fee 2026-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2026-1 Period. The services provided by Deloitte to the CAT include advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses. In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
It is anticipated that the costs for CAT during the CAT Fee 2026-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2026-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2026-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee, which is paid by CAT LLC.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2026-1 Period will be approximately $1,025,957.
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2026-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, and discussions with Deloitte, as well as the compensation arrangement for the Chair. This process for estimating the budget for consulting costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the consulting costs for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for consulting services of $258,334 for January and February 2026, and the actual costs for consulting services for January and February 2026, which are included in the Updated 2026 CAT Budget, were $267,554.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the consulting costs from the Original 2026 Budget. Specifically, the following describes the differences (if any) in the consulting costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budget for consulting costs included in the Original 2026 CAT Budget was $1,550,000, and the annual 2026 budget for consulting costs included in the Updated 2026 CAT Budget is $1,550,000.
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 $852,768 in insurance costs for the CAT Fee 2026-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2026-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during the CAT Fee 2026-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2026-1 Period based on the insurance estimate from USI for 2026. The annual premiums would be paid by CAT LLC to USI.
The budgeted insurance costs for the CAT Fee 2026-1 Period are based on an insurance cost estimate from USI for 2026. Accordingly, CAT LLC believes that the process for estimating the budgeted insurance costs for the CAT Fee 2026-1 Period is reasonable.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the insurance costs from the Original 2026 Budget. Specifically, the following describes the differences in the insurance costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted insurance costs included in the Original 2026 CAT Budget were $1,505,625, and the annual 2026 budgeted insurance costs included in the Updated 2026 CAT Budget are $1,254,070.
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 $749,151 in professional and administration costs for the CAT Fee 2026-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2026-1 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 and interim operating and financial budgets, including budget to actual and budget to budget fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee, Leadership Team 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.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the professional and administration costs from the Original 2026 Budget. Specifically, the following describes the differences in the professional and administration costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted professional and administration costs as included in the Original 2026 CAT Budget were $1,145,500, and the annual 2026 budgeted professional and administration costs included in the Updated 2026 CAT Budget are $1,085,500.
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 2026-1 Period. The public relations costs would 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 CAT Fee Period 2026-1, the budget for public relations costs for this period is $0.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the public relations costs from the Original 2026 Budget. Specifically, the following describes the differences (if any) in public relations costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual budgeted public relations costs for 2026 included in the Original 2026 CAT Budget were $0, and the annual budgeted public relations costs for 2026 included in the Updated 2026 CAT Budget are $0.
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to include “the sources of all revenues to cover costs.” Accordingly, the Updated 2026 CAT Budget includes a line item for interest income. Specifically, the Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,453,382 in interest income for the CAT Fee 2026-1 Period.
CAT LLC estimates the budget for the interest income for the CAT Fee 2026-1 Period based on the estimate of the funds held by CAT LLC and the expected interest rates on such funds. The Original 2026 CAT Budget estimated interest income of $758,343 for January and February 2026, and the actual interest income for January and February 2026, which are included in the Updated 2026 CAT Budget, were $757,527.
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 each line item from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in interest income from the Original 2026 CAT Budget. Specifically, the following describes the differences in the interest income included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted interest income as included in the Original 2026 CAT Budget was $1,995,958, and the annual 2026 budgeted interest income included in the Updated 2026 CAT Budget is $2,806,325.
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 2026. 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 the Updated 2026 CAT Budget (which does not include the reserve amount). Accordingly, the total 25% reserve of $23,508,157 was calculated by multiplying the total expenses set forth in the Updated 2026 CAT Budget (other than the reserve) by 25%.
The Updated 2026 CAT Budget estimates that CAT LLC will have $102,391,135 in reserve as of the beginning of the CAT Fee Period 2026-1. Such reserve is related, in part, to (i) the collection of CAT fees in excess of the budgeted CAT costs in light of the greater actual executed equivalent share volume than the projected executed equivalent share volume for prior CAT Fees, and (ii) a reduction in anticipated budgeted costs associated with the implementation of certain cost savings measures. This reserve balance of $102,391,135 would be used to offset a portion of CAT costs for CAT Fee Period 2026-1, thereby reducing the fee rate to be paid for CAT Fee 2026-1. Specifically, the total costs (including the 25% reserve) for CAT Fee 2026-1 of $117,540,783 would be reduced by the $102,391,135 in reserve. Therefore, the Total Budgeted CAT Costs 2026-1 would be $15,149,648.
Accordingly, the fee rate for CAT Fee 2026-1 is calculated based on this reduced amount of $15,149,648, resulting in a fee rate of $0.000001 per executed equivalent share. If the fee rate for CAT Fee 2026-1 were calculated solely based on the reasonably budgeted costs for CAT for May—December 2026, excluding the reduction in that amount due to the surplus reserve offset, the fee rate would be the higher rate of $0.000010.
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. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in reserve from the Original 2026 CAT Budget. Specifically, the following describes the differences in the reserve included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The accrued liquidity reserve balance at the beginning of the year included in the Original 2026 CAT Budget was $119,128,336. The Original 2026 CAT Budget contemplated using the reserve to pay CAT bills throughout the year as no CAT fee was in effect. The accrued liquidity reserve balance at the beginning of the year included in the Updated 2026 CAT Budget was $155,403,378. The increase in the accrued liquidity reserve balance at the beginning of the year from the Original 2026 CAT Budget to the Updated 2026 CAT Budget reflected the additional CAT Fees that had been received after the approval of the Original 2026 CAT Budget. In addition, the Updated 2026 CAT Budget not only reflected the use of the surplus reserve to pay CAT bills but also the accrual of additional reserve to establish a 25% reserve through CAT Fee 2026-1. Accordingly, the estimated liquidity reserve balance increased from a deficit of $37,304,661 included in the Original 2026 CAT Budget to a reserve balance of $23,508,157 included in the Updated 2026 CAT Budget for the full year of 2026.
The calculation of Fee Rate 2026-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2026-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the eight-month recovery period for CAT Fee 2026-1 by multiplying by 8/12ths the executed equivalent share volume for the 12-month period from March 2025 through February 2026. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for the eight-month recovery period for CAT Fee 2026-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2026-1 would be calculated by dividing the Budgeted CAT Costs 2026-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the eight-month recovery period for CAT Fee 2026-1, as described in detail above.
Fee Rate 2026-1 would be used to calculate the fee rate to be paid by CEBSs and CEBBs for CAT Fee 2026-1. Such fee rate is calculated by multiplying Fee Rate 2026-1 of $0.000003799483243631228 by one-third, and rounding the result to six decimal places.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2026-1 on a monthly basis for eight months, from July 2026 until January 2027. 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.
To implement CAT Fee 2026-1, 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.
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.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(6) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(6) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2026-1 in June 2026, which shall set forth the CAT Fee 2026-1 fees calculated based on transactions in May 2026, and shall receive an invoice for CAT Fee 2026-1 for each month thereafter until January 2027.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2026-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000001 per executed equivalent share.
(C) Notwithstanding the last invoice date of January 2027 for CAT Fee 2026-1 in paragraph 6(A), CAT Fee 2026-1 shall continue in effect after January 2027, with each CAT Executing Broker receiving an invoice for CAT Fee 2026-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2026-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2026-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by
The proposed language in paragraph (a)(6)(A) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2026-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2026-1 in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in May 2026. 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)(6)(A) of the fee schedule also would describe the monthly cadence of the invoices for CAT Fee 2026-1. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter until January 2027.
Proposed paragraph (a)(6)(B) of the fee schedule would describe the invoices for CAT Fee 2026-1. Proposed paragraph (a)(6)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2026-1 on a monthly basis.” Proposed paragraph (a)(6)(B) of the fee schedule also would describe the fees to be set forth in the invoices for CAT Fee 2026-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000001 per executed equivalent share.”
Since CAT Fee 2026-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2026-1 may collect more or less than two-thirds of the Budgeted CAT Costs 2026-1. To the extent that CAT Fee 2026-1 collects more than two-thirds of the Budgeted CAT Costs 2026-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2026-1 collects less than two-thirds of the Budgeted CAT Costs 2026-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(6)(C) of the fee schedule would describe how long CAT Fee 2026-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2027 for CAT Fee 2026-1 in paragraph 6(A), CAT Fee 2026-1 shall continue in effect after January 2027, with each CAT Executing Broker receiving an invoice for CAT Fee 2026-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2026-1 will no longer be in effect.”
Finally, proposed paragraph (a)(6)(D) of the fee schedule would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2026-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2026-1 in accordance with paragraph (b).”
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.
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.
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 2026-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the
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.”
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.”
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
[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.
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the
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 2026-1 fees to be collected are directly associated with the budgeted costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to technology, legal, consulting, insurance, and professional and administration costs.
The proposed CAT Fee 2026-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model 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, satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Budgeted CAT Costs 2026-1 for each of these categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the budget for the upcoming year, or part of year, as applicable, is reasonable and appropriate.” As discussed below, the Exchange believes that the budget for the CAT Fee 2026-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2026-1 is 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 is consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan to reduce costs, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates receiving certain market data from Algoseek during the CAT Fee 2026-1 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.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton were appropriate, as the accounting services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such accounting services were appropriate in light of the breadth of services provided by Grant Thornton. The services budgeted to be performed by Grant Thornton and the budgeted costs related to such services are described above.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted public relations costs as a part of CAT Fees.
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to include “the sources of all revenues to cover costs.” Accordingly, the Updated 2026 CAT Budget includes a line item for interest income. Specifically, the Updated 2026 CAT Budget includes $1,453,382 in interest income for the CAT Fee 2026-1 Period.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be appropriate for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is appropriate to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
As discussed further below,
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined that the projected total executed equivalent
As noted in the approval order for the CAT Funding Model, as a practical matter, the fee filing for a CAT Fee would provide the exact fee per executed equivalent share to be paid for each CAT Fee, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee rate.
The Exchange believes that charging CAT Fee 2026-1 with a fee rate of $0.000001 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the Budgeted CAT Costs 2026-1. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is less than CAT Fee 2025-2 and is comparable to other transaction-based fees, including fees assessed pursuant to Section 31.
CAT Fee 2026-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2026-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2026-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2026-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of the Budgeted CAT Costs 2026-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2026-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2026-1—the Budgeted CAT Costs 2026-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2026-1 Period—is reasonable. Moreover, these inputs lead to a reasonable fee rate for CAT Fee 2026-1 that is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2026-1 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 2026-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2026-1 and the resulting fee rate for CAT Fee 2026-1 is reasonable. Therefore, CAT Fee 2026-1 does not impose an unfairly discriminatory fee on Industry Members.
The Exchange believes the proposed fees established pursuant to the CAT Funding Model promote just and equitable principles of trade, and, in general, protect investors and the public interest, and are provided in a transparent manner and with specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2026-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2026-1 is reasonable and the resulting fee rate for CAT Fee 2026-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2026-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
Not applicable.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
Cboe BZX Exchange, Inc. (the “Exchange” or “BZX”) proposes to amend its Fees Schedule to adopt a new fee code for Market-Maker Complex orders executed on the complex order book that add liquidity in Penny Program Securities and to amend its Orders Submitted with a Designated Give Up program. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the Commission's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the
The Exchange proposes to modify its Fees Schedule, effective May 1, 2026.
First, the Exchange proposes to adopt a new fee code for Market-Maker Complex orders that trade on the BZX Options complex order book (“COB”). Currently the Exchange applies fee code ZF to all Non-Customer Complex orders executed on the COB that add liquidity in Penny Program Securities
As a result of the proposed change, the Exchange also proposes to amend the Complex order Non-Customer Penny Add Volume Tier set forth in Footnote 12. Under the Complex order Non-Customer Penny Add Volume Tier, currently applicable to qualifying Complex Non-Customer orders in Penny Program Securities that add liquidity yielding fee code ZF, the Exchange assesses a fee of $0.49 per contract for all qualifying orders yielding fee code ZF where a Member has (1) an ADV in Complex Customer orders ≥0.15% of average OCV; and (2) an ADAV in Market Maker orders ≥0.35% of average OCV. The Exchange proposes to amend the Complex order Non-Customer Penny Add Volume Tier to apply to qualifying Complex Market-Maker orders in Penny Program Securities that add liquidity yielding proposed fee code ZI.
The Exchange also proposes to amend fee code ZF, appended to all Non-Customer Complex orders executed on the COB that add liquidity in Penny Program Securities and assesses a fee of $0.50 per contract, to apply to all Non-Customer, Non-Market-Maker Complex orders executed on the COB that add liquidity in Penny Program Securities. There are no changes to the fee amount assessed to orders yielding fee code ZF as a result of the proposed change.
Finally, the Exchange proposes to amend Footnote 5, which provides that when a “Designated Give Up”, as defined in Rule 21.12(b)(1), is specified on an order, applicable rebates (
By way of background, Rule 21.12 provides that, in addition to its own Clearing Member
The Exchange proposes to amend Footnote 5
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange believes the proposed changes are reasonable and equitable. As noted above, the changes to apply fee code ZI to Market-Maker Complex orders executed on the COB that add
The Exchange believes the proposed changes to the Orders Submitted with a Designated Give Up program is reasonable and equitable. Because the Routing Firm is responsible for the decision to route orders yielding fee codes ZA, ZB, and ZF to the Exchange, the Exchange believes that such Member should be provided the rebate when such orders are executed, similar to other Non-Market-Maker orders that currently fall under the program (
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe the proposed changes related to the adoption of a new fee code for Market-Maker Complex orders executed on the COB that add liquidity in Penny Program Securities, separate from other Non-Customer, Non-Market-Maker Complex orders executed on the COB that add liquidity in Penny Program Securities will impose any burden on intramarket or intermarket competition. As noted above, the proposed changes are strictly administrative. There are no changes to the fees assessed to applicable orders, under standard transaction fees or under the Complex order Non-Customer Penny Add Volume Tier, as a result of the proposal. Further, the changes will apply equally to all Market-Maker Complex orders executed on the COB that add liquidity in Penny Program Securities, in that all orders will continue to be assessed a standard transaction of fee of $0.50 per contract and be eligible for the Complex order Non-Customer Penny Add Volume Tier. Similarly, all Non-Customer, Non-Market-Maker Complex orders executed on the COB that add liquidity in Penny Program Securities and yield fee code ZF will continue to be assessed a standard transaction of fee of $0.50 per contract and be eligible for the Complex order Non-Customer Penny Add Volume Tier.
The Exchange does not believe that the proposed changes to the Orders Submitted with a Designated Give Up program will impose any burden on intramarket competition. As noted above, because the Routing Firm is responsible for the decision to route orders yielding fee codes ZA, ZB, and ZF to the Exchange, the Exchange believes that such Member should be provided the rebate when such orders are executed, similar to other Non-Market-Maker orders that currently fall under the program. The proposed change would allow the Exchange, in the context of the its established give up procedure described above, to provide a rebate directly to the party making the routing decision to direct certain orders to the Exchange (
The Exchange also does not believe that the proposed changes to the Orders Submitted with a Designated Give Up program will impose any burden on intermarket competition. The Exchange notes that the U.S. options markets are highly competitive, and the proposed fee structure is intended to provide an incentive for Members to direct Complex orders to the Exchange. Additionally, Members may opt to disfavor the Exchange's pricing if they believe that alternatives offer them better value. The Exchange believes that its proposal to incentivize Routing Firms that are utilizing the new give up procedure to direct orders to the Exchange, and will enhance the Exchange's competitive position by resulting in increased liquidity on the Exchange, thereby providing more of an opportunity for customers to receive best executions.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to adopt Rule 7.39E and amendments to Rules 1.1, 7.36E, 7.37E and 7.41E to enable the trading of securities on the Exchange in tokenized form during the pendency of a pilot program to be operated by the Depository Trust Company (“DTC”) pursuant to the terms of a December 11, 2025 Securities and Exchange Commission (“Commission”) Staff no-action letter. The proposed rule change is available on the Exchange's website at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to adopt Rule 7.39E (Tokenized Securities) and amend Rule 1.1E (Definitions), Rule 7.36E (Order Ranking and Display), Rule 7.37E (Order Execution and Routing), and Rule 7.41E (Clearance and Settlement) to enable the trading of securities on the Exchange in tokenized form during the pendency of a pilot program to be operated by DTC pursuant to the terms of a December 11, 2025 Commission Staff no-action letter
The proposed rule change would establish that Exchange ETP Holders that are eligible to participate in the DTC Pilot Program (“DTC Eligible Participants”)
The Exchange's rules do not currently permit the trading of tokenized securities on the Exchange and, unless the Exchange adopts the proposed rules, the Exchange would lack a clear framework for DTC Eligible Participants to designate, at order entry, that a DTC Eligible Security be cleared and settled in tokenized form pursuant to the DTC Pilot Program.
The Exchange accordingly proposes to amend its rules to enable the trading of DTC Eligible Securities in tokenized form on the Exchange during the pendency of the DTC Pilot Program, subject to the same conditions and restrictions as the Nasdaq rule change approved by the Commission. The Exchange believes that the existing regulatory structure mandated by Congress applies to tokenized securities, regardless of whether such securities have certain unique properties like the ability to be settled on a blockchain, much like it did when the Commission allowed securities to be decimalized and electronified and when exchange traded funds and other novel securities were initially approved. The Exchange believes that no significant exemptions or parallel market structure constructs are needed for tokenized securities to trade alongside other securities, and that the markets can accommodate tokenization while continuing to provide the benefits and protections of the national market system.
To tackle the challenge of trading tokenized equities, the Exchange offers a simple proposal that accommodates an approach to tokenization that DTC is pursuing in the DTC Pilot Program. The Exchange believes that this approach will leverage existing structures, players, and rules in a way that is beneficial to investors and in the markets' best interests.
The proposed rules provide that the term “tokenized” refers to digital representations of paper securities that utilize digital ledger or blockchain technology, as opposed to “traditional” securities, which are also digital representations of paper securities, but do not utilize blockchain technology. As long as DTC Eligible Securities are fungible with, have the same CUSIP number and trading symbol as, and afford their holders the same rights and privileges as traditional securities of an equivalent class, the Exchange will trade DTC Eligible Securities in tokenized form together with traditional securities on the same order book and according to the same execution priority rules. A tokenized DTC Eligible Security would be deemed to provide the same rights and privileges as a traditional security if, among other things, it conveys an equity interest in an underlying company, a right to receive any dividends that the company issues to its shareholders, a right to exercise any voting rights that shareholders are due, and a right to receive a share of the residual assets of the company upon liquidation. The Exchange will not treat tokenized instruments as equivalent to their traditional counterparts if they do not convey such rights or share the same CUSIP and trading symbol; instead, the Exchange will treat these instruments as distinct (
As noted above, the Exchange proposes to trade DTC Eligible Securities within the confines of existing securities laws and rules. All existing Exchange rules that currently apply to non-tokenized securities will continue to apply, without modification, except as set forth below.
To effectuate these changes, the Exchange proposes to adopt Rule 7.39E and amendments to Rules 1.1E, 7.36E, 7.37E and 7.41E, as follows.
The Exchange proposes to amend the definition of “Security” in Rule 1.1E(rr) to add a clause similar to that in Equity 1, Nasdaq Section 1 providing that the definition of security encompasses securities that are either listed on the Exchange or traded on the Exchange pursuant to unlisted trading privileges. As amended, Rule 1.1E(rr) would provide as follows (proposed additions
The terms “security” and “securities” mean any security as defined in [Rule]
The Exchange proposes a new Rule 7.39E titled “Tokenized Securities.”
In addition, proposed Rule 7.39E would provide that the Exchange would publish Trader Updates periodically to identify a current list of those DTC Eligible Securities that may trade in tokenized form on the Exchange. The Exchange expects that such Trader Updates would be largely for DTC Eligible Participants.
Under proposed Rule 7.39E, a share of a tokenized DTC Eligible Security will be tradable on the Exchange together with, and with the same execution priority as, its traditional counterpart, but only if the tokenized security is fungible with, shares the same CUSIP number and trading symbol, and affords its shareholders the same rights and privileges as does a share of an equivalent class of the traditional security. Except for internal rule cross-references to Exchange rules and minor grammatical differences, the proposed language is substantially the same as Nasdaq Equity 1, Section 1.
The Exchange proposes to amend Rule 7.36E, which governs order ranking and display, to add a new Commentary .01 providing that the mere fact that an order contains tokenized securities or indicates a preference of a DTC Eligible Participant to clear and settle DTC Eligible Securities in tokenized form will not affect the priority in which the Exchange executes that order. Except for internal cross-references to Exchange rules and minor grammatical differences, the language of proposed Rule 7.36E.01 is substantially the same as Equity 4, Nasdaq Rule 4757.
The Exchange proposes to amend Rule 7.37E, which governs routing, to add a new subsection (b)(10) that would provide that when the Exchange routes orders in DTC Eligible Securities that DTC Eligible Participants have designated for clearing and settlement in tokenized form in accordance with proposed Rule 7.41E, Commentary 01 [sic], the Exchange will communicate this tokenization instruction to DTC upon receiving an execution for an order that was routed to another trading venue. Except for certain non-substantive differences,
The Exchange proposes to add a new Commentary .20 to Rule 7.41E, which governs clearance and settlement, describing how a DTC Eligible Participant can communicate its desire to clear and settle a DTC Eligible Security in tokenized form.
Proposed Commentary .20 to Rule 7.41E would provide that a DTC Eligible Participant (as defined in Rule 7.37E(b)(10)) that wishes for its order in a DTC Eligible Security to clear and settle in tokenized form as part of the DTC Pilot Program must notate its preference upon entry of the order in the Exchange systems by selecting a tokenization flag that the Exchange designates for this purpose, in accordance with the Exchange's procedures. When a DTC Eligible Participant enters an order for a DTC Eligible Security with the tokenization flag selected, the Exchange will communicate the DTC Eligible Participant's tokenization preference to DTC on a post-trade basis. The flag will indicate the DTC Eligible Participant's preference as to what form the security will take (
Proposed Commentary .20 to Rule 7.41E further provides that Exchange systems will not determine whether an ETP Holder is a DTC Eligible Participant or whether a security is a DTC Eligible Security at the time of order entry and selection of the tokenization flag. The Exchange also will not determine whether DTC is able to execute a tokenization order for other reasons, including because the DTC Eligible Participant wishes to mint the token to a blockchain that is not compatible with the DTC Pilot Program or to a digital wallet that is not registered with DTC.
Additionally, the No-Action Letter states that DTC will not execute a tokenization instruction if a DTC Eligible Participant cannot pass DTC's risk management and compliance controls.
Again, except for certain non-substantive differences,
Other than as described above, from an Exchange system and matching engine perspective, the Exchange's trading procedures and behavior will be the same regardless of whether a DTC Eligible Participant opts to trade tokenized or traditional shares of a DTC Eligible Security.
• All Exchange order types and modifiers will be available for use with tokenized securities;
• All Exchange routing strategies will be available for orders in tokenized securities;
• Orders in tokenized securities may participate in all of the Exchange's trading sessions, including Core Open Auctions and Closing Auctions (as defined in Rule 7.35E), subject to generally applicable eligibility criteria;
• ETP Holders may utilize their existing connectivity to enter orders in tokenized securities;
• The Exchange's fee schedule will not vary based upon whether shares that ETP Holders execute are tokenized or traditional in nature;
• Market data feeds will not differentiate between tokenized and traditional securities;
• The Exchange will comply with any Commission requirements to report tokenization data to the Consolidated Audit Trail;
• Market surveillance of tokenized and traditional securities will rely upon the same underlying data, which will
• Trades in tokenized securities handled by DTC will continue to settle on a T+1 basis;
• The Exchange's clearly erroneous and risk management measures will cover tokenized securities; and
• Trading of tokenized securities under this proposal is not expected to alter the existing proxy distribution process.
This proposal to offer trading in tokenized securities will become effective once the requisite infrastructure and post-trade settlement services have been established by DTC. The Exchange understands that DTC is working to develop the necessary infrastructure, services, and procedures to facilitate such tokenization and the related post-trade settlement infrastructure and services.
Securities that are DTC Eligible Securities—meaning that they are eligible for tokenization and de-tokenization as part of the DTC tokenization pilot program—will be limited to the following, for purposes of this proposal: (i) securities in the Russell 1000 Index at the time the service launches as well as any additions to the index thereafter and notwithstanding the subsequent removal of any securities from the index; and (ii) exchange traded funds that track major indices. These categories of DTC Eligible Securities will be the only tokenized equities that are available to trade on the Exchange under this proposal.
The Exchange will alert its ETP Holders in a Trader Update at least 30 calendar days before the Exchange begins trading DTC Eligible Securities in tokenized form on its market.
DTC states that it will provide tokenization services on a pilot basis, as described above, for a period of three years after launch, after which time DTC will sunset the service.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change is consistent with the Act because it would enable the trading of tokenized securities within the existing framework of the national market system, without requiring wholesale exemptions from investor protections. The proposed amendments are narrowly tailored to accommodate the DTC Pilot Program while preserving the integrity, efficiency, and investor protections of the Exchange's existing trading rules. The Exchange believes that all existing Commission and Exchange rules that currently apply to non-tokenized securities will continue to apply, without modification, to the trading of tokenized securities, except as expressly provided herein. The Exchange also believes that the proposed rule change is not designed to permit unfair discrimination between customers, brokers and dealers, consistent with Section 6(b)(5) of the Act.
The Exchange further believes the proposed rule change furthers the objectives of Section 6(b)(5) of the Act in that it is designed to prevent fraudulent and manipulative acts and practices. The proposed rule change ensures that tokenized securities may only be traded on the Exchange if they are fungible with, share the same CUSIP number and trading symbol as, and afford their holders the same rights and privileges as, traditional securities of an equivalent class. By tethering tokenized securities to their traditional counterparts in this manner, the proposal eliminates the potential for price dislocation, manipulation, and investor confusion that could arise from the trading of tokenized instruments outside the national market system. In addition, all Exchange rules, including rules governing clearly erroneous transactions, short sales, risk management, and market surveillance will apply equally to tokenized and traditional securities. Market surveillance of tokenized and traditional securities will rely upon the same underlying data, which will continue to be accessible by the Exchange and FINRA. Trades in tokenized securities handled by DTC will continue to settle on a T+1 basis. The Exchange's clearly erroneous and risk management measures will cover tokenized securities.
The Exchange also believes the proposed rule change furthers the objectives of Section 6(b)(5) of the Act in that it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Commission has previously approved rules of another national securities exchange—Nasdaq—enabling the trading of tokenized securities. The Exchange's proposal to adopt comparable rules to allow DTC Eligible Participants to trade DTC Eligible Securities in tokenized form on the Exchange, subject to the same conditions and restrictions as approved for Nasdaq, promotes a fair, consistent, and interoperable national market system framework for tokenized securities trading. ETP Holders will be able to access tokenized securities trading across multiple exchanges on equivalent terms, promoting competition and efficient price discovery. The Exchange will comply with any Commission requirements to report tokenization data to the Consolidated Audit Trail, further supporting the integrity and transparency of the national market system.
In addition, the Exchange believes that the proposed rule change is not designed to permit unfair discrimination between customers, brokers and dealers, consistent with
Finally, the Exchange believes the proposed rule change is designed to foster cooperation and coordination with persons engaged in facilitating transactions in securities, consistent with Section 6(b)(5) of the Act. The Exchange's proposal is expressly designed to work in coordination with the DTC Pilot Program, pursuant to the No-Action Letter. The proposed rules establish a clear and workable framework for the Exchange, DTC, and Exchange ETP Holders to cooperate in enabling the clearing and settlement of tokenized securities through the existing post-trade infrastructure. This cooperative approach, leveraging DTC's established role as the nation's central securities depository, ensures that tokenized securities trading occurs within a safe, regulated, and transparent framework that protects investors and promotes the public interest.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change would enable the trading of tokenized securities on the Exchange in a manner that is consistent with the approved rules of another national securities exchange for the same purpose. Facilitating access to tokenized securities across multiple exchanges promotes competition and is in the interest of investors and the investing public. The proposed rule change does not impose any barriers to entry for ETP Holders and does not create any competitive disadvantages between and among market participants. The Exchange believes the proposed rule changes, taken together, will strengthen the Exchange's ability to carry out its role and responsibilities as a self-regulatory organization in connection with the trading of tokenized securities. As such, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange believes that its proposal will be particularly attractive because it will provide for the trading of tokenized DTC Eligible Securities in a manner that is familiar to market participants and investors and which is consistent with existing laws and rules. Under this proposal, the extent to which ETP Holders will need to modify their back-end systems and practices to accommodate tokenized securities trading should be minimal; those systems may simply need to account for the availability of the new flag and be set up to provide any information that the flag requires to the Exchange. The Exchange notes that ETP Holders on the Exchange will remain free to trade, clear and settle securities in traditional form, including both DTC Eligible Securities and other securities.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
FINRA is proposing to amend FINRA Rule 6897 (Consolidated Audit Trail Funding Fees) to establish fees for Industry Members
The text of the proposed rule change is available on FINRA's website at
In its filing with the Commission, FINRA 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. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“CAT Fees”).
Under the CAT Funding Model, Participants, CEBBs and CEBSs are subject to fees designed to cover the ongoing budgeted costs of the CAT, as determined by the Operating Committee. “The Operating Committee will establish fees (`CAT Fees') to be payable by Participants and Industry Members with regard to CAT costs not previously paid by the Participants (`Prospective CAT Costs').”
The CAT Fees to be paid by CEBBs and CEBSs are designed to contribute toward the recovery of two-thirds of the budgeted CAT costs for the relevant period.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) CAT Fee 2026-1 to recover the reasonably budgeted CAT costs for the period from May 1, 2026 through December 31, 2026 in accordance with the CAT Funding Model. To implement this fee on behalf of CAT LLC, the CAT NMS Plan requires the Participants to “file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as `Consolidated Audit Trail Funding Fees.'”
CAT Fee 2026-1 will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
Fields Nos. 26 and 28 of the Participant Technical Specifications, listed below, indicate the CAT Executing Brokers for transactions executed otherwise than on an exchange:
The Operating Committee determined the Fee Rate to be used in calculating CAT Fee 2026-1 (“Fee Rate 2026-1”) by dividing the reasonably budgeted CAT costs (“Budgeted CAT Costs 2026-1”) for the period from May 1, 2026 through December 31, 2026 (“CAT Fee 2026-1 Period”) by the reasonably projected total executed share volume of all transactions in Eligible Securities for the eight-month recovery period, as discussed in detail below.
CAT LLC proposes to implement CAT Fee 2026-1. CAT LLC proposes to
Under the CAT NMS Plan, for purposes of calculating CAT Fees, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he budgeted CAT costs for the year shall be comprised of all reasonable fees, costs and expenses reasonably budgeted to be incurred by or for the Company in connection with the development, implementation and operation of the CAT as set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year by the Operating Committee.”
In accordance with the requirements under the CAT NMS Plan, the Operating Committee approved an annual budget for 2026 for CAT LLC (“Original 2026 CAT Budget”) on December 11, 2025.
As described in detail below, the Budgeted CAT Costs 2026-1 would be 15,149,648. CEBBs collectively will be responsible for one-third of the Budgeted CAT Costs 2026-1 (which is 5,049,882.67), and CEBSs collectively will be responsible for one-third of the Budgeted CAT Costs 2026-1 (which is 5,049,882.67).
The following describes in detail the Budgeted CAT Costs 2026-1 for CAT Fee 2026-1. The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing the following:
Each of the costs described below is reasonable, appropriate and necessary for the creation, implementation and maintenance of CAT.
The following table breaks down the Budgeted CAT Costs 2026-1 into the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS Plan.
To the extent that CAT LLC enters into notes with Participants or others to pay costs incurred during the period in which CAT Fee 2026-1 is in effect, CAT LLC will use the proceeds from CAT Fee 2026-1 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 2025 approved by the Operating Committee in May 2025 (“May Updated 2025 CAT Budget”),
In addition, the following table compares the budgeted costs for January and February 2026 that were used in drafting the Original 2026 CAT Budget with the actual costs for January and February 2026 that were used in drafting the Updated 2026 CAT Budget. The Original 2026 CAT Budget includes budgeted costs for January and February 2026, whereas the Updated 2026 CAT Budget includes actual costs for January and February 2026. The variance from the budgeted costs for January and February 2026 to the actual costs for January and February 2026 are used in this filing in supporting the reasonableness of the estimates for each category of 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 49,866,667 in technology costs for cloud hosting services for the CAT Fee 2026-1 Period. The technology costs for cloud hosting services represent costs reasonably budgeted to be incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”) during the CAT Fee 2026-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT (“Plan Processor Agreement”), FINRA CAT, LLC (“FCAT”), AWS was named as the subcontractor to provide cloud hosting services. Under the Plan Processor Agreement, CAT LLC is required to pay FCAT the fees incurred by the Plan Processor for cloud hosting services provided by AWS as FCAT's subcontractor on a monthly basis for the cloud hosting services, and FCAT, in turn, pays such fees to AWS. The fees for cloud hosting services were negotiated by FCAT on an arm's length basis with the goals of managing costs and receiving services required to comply with the CAT NMS Plan and Rule 613, taking into consideration a variety of factors, including the expected volume of data, the breadth of services provided and market rates for similar services. 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 Reference Database (previously referred to as the Customer and Account Information System, or “CAIS”).
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.
CAT LLC estimates that the budget for cloud hosting services costs during the CAT Fee 2026-1 Period will be approximately 49,866,667.
CAT LLC estimated the budget for the cost for cloud hosting services for the CAT Fee 2026-1 Period based on an assumption of 35% annual year-over-year volume growth for the transaction database and an assumption of 5% annual year-over-year volume growth for the Reference Database. CAT LLC determined these growth assumptions in coordination with FCAT.
This process for estimating the budget for cloud hosting services costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the cloud hosting services costs for the Original 2026 CAT Budget.
The Original 2026 CAT Budget estimated a budget for cloud hosting services of 17,200,000 for January and February 2026. The actual costs for cloud hosting services for January and February 2026, which are set forth in the Updated 2026 CAT Budget, were 12,829,362. Therefore, the variance between budgeted and actual cloud hosting services costs for January and February 2026 was an approximate decrease of 4,370,638 as a result of lower volumes and a change in functionality.
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. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the cloud hosting services costs from the Original 2026 Budget.
The annual 2026 budgeted costs for cloud hosting services included in the
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to provide a brief description of the 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 $19,691,953 in technology costs for operating fees for the CAT Fee 2026-1 Period. Operating fees are those fees paid by CAT LLC to FCAT as the Plan Processor to operate and maintain the CAT and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
• Provide the CAT-related functions and services as the Plan Processor as required by SEC Rule 613 and the CAT NMS Plan in connection with the operation and maintenance of the CAT;
• Address compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provide support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assist with interpretive efforts, 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.
CAT LLC calculated the budget for the FCAT technology costs for operating fees for the CAT Fee 2026-1 Period based on the recurring monthly operating fees under the Plan Processor Agreement.
As discussed above, CAT LLC estimated the budget for the operating fees during the CAT Fee 2026-1 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 2026-1 Period is the same process by which CAT LLC estimated the operating fees for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for operating fees of $5,149,236 for January and February 2026, and the actual costs for operating fees for January and February 2026 were $5,127,057. Therefore, the variance between budgeted and actual operating fees for this period was small—$22,179.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the operating fees from the Original 2026 Budget. Specifically, the following describes the differences in the costs for operating fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted costs for operating fees included in the Original
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 $14,179,060 in technology costs for CAIS operating fees for the CAT Fee 2026-1 Period. CAIS operating fees represent the fees paid to FCAT for services provided with regard to the operation and maintenance of the Reference Database (previously referred to as CAIS), and to perform the business operations related to the system, including compliance, security, testing, training, communications with the industry (
During the CAT Fee 2026-1 Period, it is anticipated that FCAT will provide services related to the Reference Database. Under the Plan Processor Agreement with FCAT, CAT LLC is required to pay FCAT for services related to the Reference Database provided by FCAT on a monthly basis. CAT LLC negotiated the fees for FCAT's services related to the Reference Database 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 2026-1 Period, it is anticipated that FCAT will continue to provide services relating to the ongoing operation, maintenance and support of the Reference Database.
CAT LLC estimates that the budget for CAIS operating fees during the CAT Fee 2026-1 Period will be approximately $14,179,060.
CAT LLC calculated the budget for FCAT's services related to the Reference Database for the CAT Fee 2026-1 Period based on the recurring monthly CAIS operating fees under the Plan Processor Agreement. This process for estimating the budget for the CAIS operating fees for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the CAIS operating fees for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget of $3,544,764 for CAIS operating fees for January and February of 2026. The actual costs for CAIS operating fees for January and February of 2026, which are included in the Updated 2026 CAT Budget, were $3,544,764. There was no variance between budgeted and actual CAIS operating fees for the first two months of 2026.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for CAIS operating fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the CAIS operating fees from the Original 2026 Budget. Specifically, the following describes the differences in the costs for CAIS operating fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
CAIS operating fees are based on a recurring monthly rate payable to FCAT and are unchanged from the Original 2026 CAT Budget to the Updated 2026 CAT Budget. The annual 2026 budgeted costs for CAIS operating fees included in the Original 2026 CAT Budget were $21,268,584, and the annual 2026 budgeted costs for CAIS operating fees included in the Updated 2026 CAT Budget are $21,268,590.
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 $0 in technology costs for change request fees for the CAT Fee 2026-1 Period. The technology costs related to change request fees include costs related to certain modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect operational changes, including changes related to new market developments, such as new market participants. In general, if CAT LLC determines that a modification, upgrade or other changes to the functionality or service is necessary and appropriate, CAT LLC will submit a request for such a change to the Plan Processor. The Plan Processor will then respond to the request with a proposal for implementing the change, including the cost (if any) of such a change. CAT LLC then determines whether to approve the proposed change.
The change request budget line is established to include expected costs to be incurred in which the nature of the costs (
CAT LLC estimates that the budget for change requests during the CAT Fee 2026-1 Period will be approximately
CAT LLC estimated the budget for the potential change requests for the CAT Fee 2026-1 Period based on, among other things, a review of past change requests and potential future change request needs, as well as discussions with FCAT. This process for estimating the budget for the change requests for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the change requests cost for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a change request budget of $0 for January and February of 2026. The actual costs for change requests for January and February of 2026, which are set forth in the Updated 2026 CAT Budget, were $0. There was no variance between budgeted and actual change request costs for January and February of 2026.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for change request fees from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the change request fees from the Original 2026 Budget. Specifically, the following describes the differences (if any) in the costs for change request fees included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted costs for change requests included in the Original 2026 CAT Budget were $0, and the annual 2026 budgeted costs for change requests included in the Updated 2026 CAT Budget are $0.
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 $3,450,000 in technology costs for capitalized developed technology costs for the CAT Fee 2026-1 Period. This category of costs includes the budget for capitalizable application development costs incurred in the development of the CAT. It is anticipated that such costs will include certain costs related to the software license fee for the Reference Database 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 related to the cost savings amendments
CAT LLC estimates that the budget for capitalized developed technology costs during the CAT Fee 2026-1 Period will be approximately $3,450,000.
CAT LLC estimated the budget for capitalized developed technology costs for the CAT Fee 2026-1 Period based on an analysis of a variety of factors, including information related to potential technology costs and related contractual and Plan requirements, and discussions with FCAT regarding such potential technology costs. This process for estimating the budget for capitalized developed technology costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the capitalized developed technology costs for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for capitalized developed technology costs of $671,472 for January and February 2026, and the actual costs for capitalized developed technology costs for January and February 2026 were $4,145,430.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for capitalized developed technology costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the capitalized developed technology costs from the Original 2026 Budget. Specifically, the following describes the differences in the costs for capitalized developed technology costs as included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budget for capitalized developed technology costs included in the Original 2026 CAT Budget was $8,228,827, and the annual 2026 budget for capitalized developed technology costs included in the Updated 2026 CAT Budget are $8,378,964.
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee filing for a
During the CAT Fee 2026-1 Period, it is anticipated that WilmerHale will provide legal services related to the following:
• Assist with CAT fee filings and related funding issues;
• Draft exemptive requests from CAT NMS Plan requirements and/or proposed amendments to the CAT NMS Plan;
• Provide legal 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 2026-1 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.
During the CAT Fee 2026-1 Period, it is anticipated that Jenner will continue to provide legal assistance to CAT LLC regarding certain litigation matters, including: (1) CAT LLC's defense against a lawsuit filed in the Western District of Texas against 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;
CAT LLC estimated the budget for the legal costs for Jenner for the CAT Fee 2026-1 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.
CAT LLC estimated the budget for the legal services for the CAT Fee 2026-1 Period based on an analysis of a variety of factors, including law firm fee rates, historical legal fees, and information related to pending legal issues and potential future legal issues. This process for estimating the budget for the legal services for CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the legal cost for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for legal costs of $1,424,166 for January and February of 2026. The actual costs for legal services for January and February 2026, which are included in the Updated 2026 Budget, were $1,838,617.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for legal costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the legal costs from the Original 2026 Budget. Specifically, the following describes the differences in the legal costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted legal costs included in the Original 2026 CAT Budget were $8,485,000, and the annual 2026 budgeted legal costs included in the Updated 2026 CAT Budget are $8,939,184.
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 $1,025,957 in consulting costs for the CAT Fee 2026-1 Period. The consulting costs represent the fees estimated to be paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the CAT Fee 2026-1 Period. The services provided by Deloitte to the CAT include advisory services related to the operation of the CAT, and meeting facilitation and communications coordination, vendor support and financial analyses. In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee.
It is anticipated that the costs for CAT during the CAT Fee 2026-1 Period will include costs related to consulting services performed by Deloitte. CAT LLC anticipates that it will continue to employ Deloitte during the CAT Fee 2026-1 Period based on, among other things, their expertise, long history with the project, and the recognition that it is anticipated that the consulting fees will remain in line with market rates for this type of specialized consulting work. Deloitte's fee rates are negotiated on an annual basis. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. The consulting fees will be paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of consulting services to the CAT during the CAT Fee 2026-1 Period, including the following:
• Implement program operations for the CAT project;
• Provide support to the Operating Committee, the Chair of the Operating Committee and the Leadership Team, including project management support, coordination and planning for meetings and communications, and interfacing with law firms and the SEC;
• Assist with cost and funding matters for the CAT, including assistance with loans and the CAT bank account for CAT funding;
• Provide support for updating the SEC on the progress of the development of the CAT; and
• Provide support for third party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the Chair of the CAT Operating Committee, which is paid by CAT LLC.
CAT LLC estimates that the budget for consulting costs during the CAT Fee 2026-1 Period will be approximately $1,025,957.
CAT LLC estimates the budget for the consulting costs for Deloitte for the CAT Fee 2026-1 Period based on the current statement of work with Deloitte, which took into consideration past consulting costs, potential future consulting needs, the proposed rates and other contractual issues, and discussions with Deloitte, as well as the compensation arrangement for the Chair. This process for estimating the budget for consulting costs for the CAT Fee 2026-1 Period is the same process by which CAT LLC estimated the consulting costs for the Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for consulting services of $258,334 for January and February 2026, and the actual costs for consulting services for January and February 2026, which are included in the Updated 2026 CAT Budget, were $267,554.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for consulting costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the consulting costs from the Original 2026 Budget. Specifically, the following describes the differences (if any) in the consulting costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budget for consulting costs included in the Original 2026 CAT Budget was $1,550,000, and the annual 2026 budget for consulting costs included in the Updated 2026 CAT Budget is $1,550,000.
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 $852,768 in insurance costs for the CAT Fee 2026-1 Period.
It is anticipated that the insurance costs for CAT during the CAT Fee 2026-1 Period will include costs related to cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance brokered by USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. CAT LLC anticipates that it will continue to maintain this insurance during the CAT Fee 2026-1 Period, and notes that the annual premiums for these policies were competitive for the coverage provided. CAT LLC estimated the budget for the insurance costs for the CAT Fee 2026-1 Period based on the insurance estimate from USI for 2026. The annual premiums would be paid by CAT LLC to USI.
The budgeted insurance costs for the CAT Fee 2026-1 Period are based on an insurance cost estimate from USI for 2026. Accordingly, CAT LLC believes that the process for estimating the budgeted insurance costs for the CAT Fee 2026-1 Period is reasonable.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for insurance costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the insurance costs from the Original 2026 Budget. Specifically, the following describes the differences in the insurance costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted insurance costs included in the Original 2026 CAT Budget were $1,505,625, and the annual 2026 budgeted insurance costs included in the Updated 2026 CAT Budget are $1,254,070.
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 $749,151 in professional and administration costs for the CAT Fee 2026-1 Period. In adopting the CAT NMS Plan, the Commission amended the Plan to add a requirement that CAT LLC's financial statements be prepared in compliance with GAAP, audited by an independent public accounting firm, and made publicly available.
It is anticipated that Anchin will provide a variety of services to the CAT during the CAT Fee 2026-1 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 and interim operating and financial budgets, including budget to actual and budget to budget fluctuation analyses;
• Support compliance with the CAT NMS Plan;
• Work with and provide support to the Operating Committee, Leadership Team 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.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for professional and administration costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the professional and administration costs from the Original 2026 Budget. Specifically, the following describes the differences in the professional and administration costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted professional and administration costs as included in the Original 2026 CAT Budget were $1,145,500, and the annual 2026 budgeted professional and administration costs included in the Updated 2026 CAT Budget are $1,085,500.
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 2026-1 Period. The public relations costs would 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 CAT Fee Period 2026-1, the budget for public relations costs for this period is $0.
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee filing for a Prospective CAT Fee to describe the reason for changes in the line item for public relations costs from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in the public relations costs from the Original 2026 Budget. Specifically, the following describes the differences (if any) in public relations costs included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual budgeted public relations costs for 2026 included in the Original 2026 CAT Budget were $0, and the annual budgeted public relations costs for 2026 included in the Updated 2026 CAT Budget are $0.
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to include “the sources of all revenues to cover costs.” Accordingly, the Updated 2026 CAT Budget includes a line item for interest income. Specifically, the Operating Committee approved an operating budget for the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included $1,453,382 in interest income for the CAT Fee 2026-1 Period.
CAT LLC estimates the budget for the interest income for the CAT Fee 2026-1 Period based on the estimate of the funds held by CAT LLC and the expected interest rates on such funds. The Original 2026 CAT Budget estimated interest income of $758,343 for January and February 2026, and the actual interest income for January and February 2026, which are included in the Updated 2026 CAT Budget, were $757,527.
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 each line item from the prior CAT Fee filing. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in interest income from the Original 2026 CAT Budget. Specifically, the following describes the differences in the interest income included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted interest income as included in the Original 2026 CAT Budget was $1,995,958, and the annual 2026 budgeted interest income included in the Updated 2026 CAT Budget is $2,806,325.
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 2026. 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 the Updated 2026 CAT Budget (which does not include the reserve amount). Accordingly, the total 25% reserve of $23,508,157 was calculated by multiplying the total expenses set forth in the Updated 2026 CAT Budget (other than the reserve) by 25%.
The Updated 2026 CAT Budget estimates that CAT LLC will have $102,391,135 in reserve as of the beginning of the CAT Fee Period 2026-1. Such reserve is related, in part, to (i) the collection of CAT fees in excess of the budgeted CAT costs in light of the greater actual executed equivalent share volume than the projected executed equivalent share volume for prior CAT Fees, and (ii) a reduction in anticipated budgeted costs associated with the implementation of certain cost savings measures. This reserve balance of $102,391,135 would be used to offset a portion of CAT costs for CAT Fee Period 2026-1, thereby reducing the fee rate to be paid for CAT Fee 2026-1. Specifically, the total costs (including the 25% reserve) for CAT Fee 2026-1 of $117,540,783 would be reduced by the $102,391,135 in reserve. Therefore, the Total Budgeted CAT Costs 2026-1 would be $15,149,648.
Accordingly, the fee rate for CAT Fee 2026-1 is calculated based on this reduced amount of $15,149,648, resulting in a fee rate of $0.000001 per executed equivalent share. If the fee rate for CAT Fee 2026-1 were calculated solely based on the reasonably budgeted costs for CAT for May-December 2026, excluding the reduction in that amount due to the surplus reserve offset, the fee rate would be the higher rate of $0.000010.
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. As this is the first Prospective CAT Fee filing under this CAT Funding Model, this filing describes the changes in reserve from the Original 2026 CAT Budget. Specifically, the following describes the differences in the reserve included in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any changes.
The accrued liquidity reserve balance at the beginning of the year included in the Original 2026 CAT Budget was $119,128,336. The Original 2026 CAT Budget contemplated using the reserve to pay CAT bills throughout the year as no CAT fee was in effect. The accrued liquidity reserve balance at the beginning of the year included in the Updated 2026 CAT Budget was $155,403,378. The increase in the accrued liquidity reserve balance at the beginning of the year from the Original 2026 CAT Budget to the Updated 2026 CAT Budget reflected the additional CAT Fees that had been received after the approval of the Original 2026 CAT Budget. In addition, the Updated 2026 CAT Budget not only reflected the use of the surplus reserve to pay CAT bills but also the accrual of additional reserve to establish a 25% reserve through CAT Fee 2026-1. Accordingly, the estimated liquidity reserve balance increased from a deficit of $37,304,661 included in the Original 2026 CAT Budget to a reserve balance of $23,508,157 included in the Updated 2026 CAT Budget for the full year of 2026.
The calculation of Fee Rate 2026-1 also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for the CAT Fee 2026-1 Period. Under the CAT NMS Plan, the Operating Committee is required to “reasonably determine the projected total executed equivalent share volume of all transactions in Eligible Securities for each relevant period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible
The projected total executed equivalent share volume of all transactions in Eligible Securities for the eight-month recovery period for CAT Fee 2026-1 and a description of the calculation of the projection is provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a CAT Fee.
Fee Rate 2026-1 would be calculated by dividing the Budgeted CAT Costs 2026-1 by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for the eight-month recovery period for CAT Fee 2026-1, as described in detail above.
Fee Rate 2026-1 would be used to calculate the fee rate to be paid by CEBSs and CEBBs for CAT Fee 2026-1. Such fee rate is calculated by multiplying Fee Rate 2026-1 of $0.000003799483243631228 by one-third, and rounding the result to six decimal places.
CEBBs and CEBSs would be required to pay fees for CAT Fee 2026-1 on a monthly basis for eight months, from July 2026 until January 2027. 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.
To implement CAT Fee 2026-1, FINRA proposes to add a new paragraph to the FINRA Rule 6897 (Consolidated Audit Trail Funding Fees), to include the proposed paragraphs described below.
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.
Accordingly, based on the factors discussed above, FINRA proposes to add paragraph (a)(1)(F) to FINRA Rule 6897, which would state that:
(i) Each CAT Executing Broker shall receive its first invoice for CAT Fee 2026-1 in June 2026, which shall set forth the CAT Fee 2026-1 fees calculated based on transactions in May 2026, and shall receive an invoice for CAT Fee 2026-1 for each month thereafter until January 2027.
(ii) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2026-1 on a monthly basis. Each month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (“CEBB”) and/or the CAT Executing Broker for the Seller (“CEBS”) (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000001 per executed equivalent share.
(iii) Notwithstanding the last invoice date of January 2027 for CAT Fee 2026-1 in paragraph (a)(1)(F)(i) of this Rule, CAT Fee 2026-1 shall continue in effect after January 2027, with each CAT Executing Broker receiving an invoice for CAT Fee 2026-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2026-1 will no longer be in effect.
(iv) Each CAT Executing Broker shall be required to pay each invoice for CAT Fee 2026-1 in accordance with paragraph (a)(2) of this Rule.
As noted in the Plan amendment for the CAT Funding Model, “[a]s a practical matter, the fee filing would provide the exact fee per executed equivalent share to be paid for the CAT Fees, by multiplying the Fee Rate by one-third and describing the relevant number of decimal places for the fee.”
The proposed language in paragraph (a)(1)(F)(i) of Rule 6897 would describe when CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2026-1. Specifically, CAT Executing Brokers would receive their first monthly invoice for CAT Fee 2026-1 in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in May 2026. 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 (a)(2)(B) of Rule 6897.
Proposed paragraph (a)(1)(F)(i) of Rule 6897 also would describe the monthly cadence of the invoices for CAT Fee 2026-1. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter until January 2027.
Proposed paragraph (a)(1)(F)(ii) of Rule 6897 would describe the invoices for CAT Fee 2026-1. Proposed paragraph (a)(1)(F)(ii) of Rule 6897 would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for CAT Fee 2026-1 on a monthly basis.” Proposed paragraph (a)(1)(F)(ii) of Rule 6897 also would describe the fees to be set forth in the invoices for CAT Fee 2026-1. Specifically, it would state that “[e]ach month, such invoices shall set forth a fee for each transaction in Eligible Securities executed by the CAT Executing Broker in its capacity as a CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing Broker for the Seller (`CEBS') (as applicable) from the prior month as set forth in CAT Data. The fee for each such transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by the fee rate of $0.000001 per executed equivalent share.”
Since CAT Fee 2026-1 is a monthly fee based on actual transaction volume from the prior month, CAT Fee 2026-1 may collect more or less than two-thirds of the Budgeted CAT Costs 2026-1. To the extent that CAT Fee 2026-1 collects more than two-thirds of the Budgeted CAT Costs 2026-1, any excess money collected will be used to offset future fees and/or to fund the reserve for the CAT. To the extent that CAT Fee 2026-1 collects less than two-thirds of the Budgeted CAT Costs 2026-1, the budget for the CAT in the ensuing months will reflect such shortfall.
Furthermore, proposed paragraph (a)(1)(F)(iii) of Rule 6897 would describe how long CAT Fee 2026-1 would remain in effect. It would state that “[n]otwithstanding the last invoice date of January 2027 for CAT Fee 2026-1 in paragraph (a)(1)(F)(i) of this Rule, CAT Fee 2026-1 shall continue in effect after January 2027, with each CAT Executing Broker receiving an invoice for CAT Fee 2026-1 each month, until a new subsequent CAT Fee is in effect with regard to Industry Members in accordance with Section 19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide notice when CAT Fee 2026-1 will no longer be in effect.”
Finally, proposed paragraph (a)(1)(F)(iv) of Rule 6897 would set forth the requirement for the CAT Executing Brokers to pay the invoices for CAT Fee 2026-1. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for CAT Fee 2026-1 in accordance with paragraph (a)(2) of this Rule.”
Paragraph (a)(2)(A) of Rule 6897 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)(1) of this Rule 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.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, Paragraph (a)(2)(B) of Rule 6897 states that:
Each CAT Executing Broker shall pay the CAT fees required pursuant to paragraph (a)(1) of this Rule within 30 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 (a)(2) would apply to CAT Fee 2026-1.
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing Broker's CAT Fees will be provided upon request to such Participant or CAT Executing Broker. At a minimum, such details would include each Participant or CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their CAT Fee.
In addition, CAT LLC will make certain aggregate statistics regarding CAT Fees publicly available. Specifically, the CAT NMS Plan states that, “[f]or each CAT Fee, at a minimum, CAT LLC will make publicly available the aggregate executed
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that CAT Fee 2026-1 is in effect as well as the total amount invoiced for CAT Fee 2026-1 for all months since its commencement. CAT LLC also will make publicly available on the CAT website the total costs to be collected from Industry Members for CAT Fee 2026-1.
The CAT NMS Plan states that “[n]o Participant will make a filing with the SEC pursuant to Section 19(b) of the Exchange Act regarding any CAT Fee related to Prospective CAT Costs until the Financial Accountability Milestone related to Period 4 described in Section 11.6 has been satisfied.”
While CAT Fees charged to Industry Members become effective in accordance with the requirements of Section 19(b) of the Exchange Act,
FINRA has filed the proposed rule change for immediate effectiveness. The effective date and the implementation date will be the date of filing.
FINRA believes that the proposed rule change is consistent with Section 15A(b)(6) of the Act,
FINRA believes that this proposed rule change is consistent with the Act because it implements provisions of the Plan and is designed to assist FINRA 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.”
FINRA also believes that the proposed fees to be paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory.
The proposed CAT Fee 2026-1 fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes. The proposed fees would not cover FINRA services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees.
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. Thus, FINRA believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, FINRA has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. FINRA believes that this proposed rule change 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 FINRA and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model 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, satisfies the Exchange Act.
The formula for calculating a Fee Rate requires the amount of Budgeted CAT Costs to be recovered. Specifically, Section 11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, FINRA has set forth the amount and type of Budgeted CAT Costs 2026-1 for each of the 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, FINRA believes that the budget for the CAT Fee 2026-1 Period is “reasonable and appropriate.” Each of the costs included in CAT Fee 2026-1 is 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 is consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover budgeted costs related to cloud hosting services as a part of CAT Fees.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and amendments to the CAT NMS Plan to reduce costs, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time, more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to operating fees as a part of CAT Fees.
The operating fees would include the negotiated fees paid by CAT LLC to the Plan Processor to operate and maintain the system for order-related information and to perform business operations related to the system, including compliance, security, testing, training, communications with the industry (
The operating costs also include costs related to the receipt of market data. CAT LLC anticipates receiving certain market data from Algoseek during the CAT Fee 2026-1 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.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to CAIS operating fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to change request fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to capitalized developed technology costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted costs related to legal fees as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted consulting costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted insurance costs as a part of CAT Fees.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted professional and administration costs as a part of CAT Fees.
CAT LLC anticipates continuing to make use of Anchin, a financial advisory firm, to assist with financial matters for the CAT. CAT LLC determined that the budgeted costs for Anchin were appropriate, as the financial advisory services were to be provided at reasonable market rates that were comparable to the rates charged by other such firms for similar work. Moreover, the total budgeted costs for such financial advisory services were appropriate in light of the breadth of services provided by Anchin. The services budgeted to be performed by Anchin and the budgeted costs related to such services are described above.
CAT LLC anticipates continuing to make use of Grant Thornton, an independent accounting firm, to complete the audit of CAT LLC's financial statements, in accordance with
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.
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to include “the sources of all revenues to cover costs.” Accordingly, the Updated 2026 CAT Budget includes a line item for interest income. Specifically, the Updated 2026 CAT Budget includes $1,453,382 in interest income for the CAT Fee 2026-1 Period.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover budgeted reserve costs as a part of CAT Fees.
In its approval order for the CAT Funding Model, the Commission stated that it would be appropriate for the annual operating budget for the CAT to “include a reserve of not more than 25% of the annual budget.”
Because the CAT is a critical regulatory tool/system, the CAT needs to have a stable funding source to build financial stability to support the Company as a going concern. Funding for the CAT, as noted in Section 11.1(b), is the responsibility of the Participants and the industry. Because CAT fees are charged based on the budget, which is based on anticipated volume, it is appropriate to have a reserve on hand to prevent a shortfall in the event there is an unexpectedly high volume in a given year. A reserve would help to assure that the CAT has sufficient resources to cover costs should there be unanticipated costs or costs that are higher than expected.
The SEC also recognized that a reserve would help address the difficulty in predicting certain variable CAT costs, like trading volume.
As discussed further below,
The CAT NMS Plan also requires fee filings for Prospective CAT Fees to include “a discussion of how the budget is reconciled to the collected fees.”
The total executed equivalent share volume of transactions in Eligible Securities for the period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. CAT LLC determined the total executed equivalent share volume for the prior twelve months by counting executed equivalent shares in the same manner as it counts executed equivalent shares for CAT billing purposes.
CAT LLC has determined that the projected total executed equivalent share volume for the eight months of the CAT Fee 2026-1 Period by multiplying by 8/12ths the executed equivalent share volume for the prior twelve months: 8/12 times 5,980,937,549,360.49 executed equivalent shares.
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
FINRA believes that charging CAT Fee 2026-1 with a fee rate of $0.000001 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the Budgeted CAT Costs 2026-1. Moreover, FINRA believes that the level of the fee rate is reasonable in that it is calculated in accordance with the SEC-approved CAT Funding Model, it is less than CAT Fee 2025-2 and is comparable to other transaction-based fees, including fees assessed pursuant to Section 31.
CAT Fee 2026-1 provides for an equitable allocation of fees, as it equitably allocates CAT costs between and among the Participants and Industry Members, in accordance with the SEC-approved CAT Funding Model. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act, including the formula for calculating CAT Fees as well as the Industry Members to be charged the CAT Fees.
CAT Fee 2026-1 provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. For example, as described above, the calculation of CAT Fee 2026-1 complies with the formula set forth in Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2026-1 would be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the CAT NMS Plan. Furthermore, the Participants would be charged for their designated share of the Budgeted CAT Costs 2026-1 through a fee implemented via the CAT NMS Plan, which would have the same fee rate as CAT Fee 2026-1.
In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2026-1—the Budgeted CAT Costs 2026-1, the count for the executed equivalent share volume for the prior 12 months, and the projected executed equivalent share volume for the CAT Fee 2026-1 Period—is reasonable. Moreover, these inputs lead to a fee rate for CAT Fee 2026-1 that is reasonable as it is consistent with the SEC-approved CAT Funding Model and is lower than other fee rates for transaction-based fees. A reasonable fee rate allocated in accordance with the requirements of the CAT Funding Model provides for an equitable allocation of fees.
CAT Fee 2026-1 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 2026-1 complies with the requirements regarding the calculation of CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of CAT Fee 2026-1 and the resulting fee rate for CAT Fee 2026-1 is reasonable, consistent with the SEC-approved CAT Funding Model. Therefore, CAT Fee 2026-1 does not impose an unfairly discriminatory fee on Industry Members.
FINRA 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 proposed paragraph (a)(1)(F) of Rule 6897. FINRA also believes that the proposed fees are reasonable in that they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on a fixed rate per executed equivalent share and are consistent with the SEC-approved CAT Funding Model. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Industry Members to reasonably predict their payment obligations for budgeting purposes.
FINRA 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.
Section 15A(b)(9) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce CAT Fee 2026-1 on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of CAT Fee 2026-1 is reasonable and the resulting fee rate for CAT Fee 2026-1 calculated in accordance with the CAT Funding Model is reasonable. Therefore, CAT Fee 2026-1 would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend The Nasdaq Options Market LLC (“NOM”) Pricing Schedule in connection with a technology migration.
While the changes proposed herein are effective upon filing, the Exchange has designated that the amendments will become operative on July 27, 2026.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
NOM proposes to amend Options 7, Section 1, General Provisions, to define the terms “Exposed Order” and “Lead Market Maker.” Both terms are being introduced into NOM's Rules in connection with a technology migration commencing July 27, 2026.
As part of this technology migration, NOM introduced the concept of an Exposed Order in Options 5, Section 4, Routing.
At this time, the Exchange proposes to amend Options 7, Section 1(c) to provide,
An “Exposed Order” is an order that is broadcast via an order exposure alert as described within Options 5, Section 4 (Order Routing). Unless otherwise noted in Options 7, Section 2 pricing, Exposed Orders will be assessed the applicable “Taker” Fee and any order or quote that executes against an Exposed Order during a Route Timer will be paid/assessed the applicable “Maker” Rebate/Fee.
As proposed, the defined term would apply a Taker Fee, where applicable, to an executed Exposed Order. If an order or quote is allocated against the Exposed Order during the Route Timer described in Options 5, Section 4, the Exchange would pay or assess the applicable Maker Rebate or Maker Fee. The Exchange believes that the proposal will provide increased opportunities for participation in executions on the Exchange, facilitate the Exchange's ability to bring together Participants, and encourage more robust competition for orders.
At this time, the Exchange also proposes to define a Lead Market Maker. The concept of a Lead Market Maker was introduced in a recent rule change.
The term “Lead Market Maker” or (“LMM”) applies to a registered NOM Market Maker that is approved pursuant to Options 2, Section 3 to be the LMM in an options class (options classes).
The Exchange is introducing this term at this time to distinguish between a Market Maker and Lead Market Maker for purposes of pricing that will be introduced in subsequent rule proposals.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The proposed changes to the Pricing Schedule are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for order flow, which constrains its pricing determinations. The fact that the market for order flow is competitive has long been recognized by the courts. In
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention to determine prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues, and also recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Congress directed the Commission to “rely on `competition, whenever possible, in meeting its regulatory responsibilities for overseeing the SROs and the national market system.' ”
The Exchange's proposal to define an Exposed Order for purposes of pricing in Options 7, Section 1(c) is reasonable because it will provide inform Participants how pricing will be applied to both the Exposed Order and any order or quote that allocates against the Exposed Order. As proposed, the applicable Taker Fee would apply to an executed Exposed Order, and the applicable Maker Rebate or Maker Fee would apply to an order or quote that is allocated against the Exposed Order during the Route Timer. The Exchange believes that the proposed pricing will provide increased opportunities for participation in executions on the Exchange, facilitate the Exchange's ability to bring together Participants, and encourage more robust competition for orders. Order exposure has the potential to result in more efficient executions for Participants, because responses to Exposed Orders may produce faster executions. Order exposure also ensures that Exposed Orders will receive executions only at a price at least as favorable as the price disseminated by the best away market at the time the order was received. Further, the Exchange believes that it is reasonable, equitable and not unfairly discriminatory to apply the Taker Fee to Exposed Orders and the Maker Rebate or Maker Fee to any order or quote that executes against an Exposed Order during a Route Timer. An Exposed Order that would route to an away market if not otherwise executed on NOM takes liquidity from the Exchange's order book while a quote or order that executes against the Exposed Order during the Route Timer is making liquidity in response to the notification sent to Participants indicating that the order is available for execution. Nasdaq Texas, LLC similarly assesses a Taker Fee on an exposed order and pays or
The Exchange's proposal to define an Exposed Order for purposes of pricing in Options 7, Section 1(c) is equitable and not unfairly discriminatory because the proposed pricing for Exposed Orders would be applied uniformly to all orders subject to the Exchange's Route Timer, as described in Options 5, Section 4.
The Exchange's proposal to define a Lead Market Maker at Options 7, Section 1(c) is reasonable because the defined term will distinguish a Market Maker from a Lead Market Maker for purposes of pricing.
The Exchange's proposal to define a Lead Market Maker for purposes of pricing in Options 7, Section 1(c) is equitable and not unfairly discriminatory because all Lead Market Makers would be uniformly subject to pricing applicable to Lead Market Makers which pricing may be distinguishable from the pricing applicable to Market Makers, as noted in the Pricing Schedule.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange believes its proposal remains competitive with other options markets and will offer market participants another choice of venue to transact options. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited.
The Exchange's proposal to define an Exposed Order for purposes of pricing in Options 7, Section 1(c) does not impose an undue burden on competition because the proposed pricing for Exposed Orders would be applied uniformly to all orders subject to the Exchange's Route Timer, as described in Options 5, Section 4.
The Exchange's proposal to define a Lead Market Maker for purposes of pricing in Options 7, Section 1(c) does not impose an undue burden on competition because all Lead Market Makers would be uniformly subject to pricing applicable to Lead Market Makers, which pricing may be distinguishable from the pricing applicable to Market Makers, as noted in the Pricing Schedule.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NASDAQ-2026-043 and should be submitted on or before June 5, 2026.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The title for the collection of information is “Form ADV” (17 CFR 279.1). Form ADV is the investment adviser registration form and exempt reporting adviser reporting form filed electronically with the Commission pursuant to rules 203-1 (17 CFR 275.203-1), 204-1 (17 CFR 275.204-1)
The information collected provides the Commission with knowledge about the adviser, its business, its conflicts of interest and personnel. The Commission uses the information to determine eligibility for registration with the Commission and to manage its regulatory, examination, and enforcement programs. Part 1 of Form ADV contains information used primarily by the Commission staff and Part 2 is the client brochure. Part 3 requires registered investment advisers that offer services to retail investors to prepare and file with the Commission a relationship summary.
The Commission recently updated the data sources and methodology that it generally uses for calculating occupational hourly rates that are used in estimating certain PRA burdens.
Respondents to this information collection are investment advisers registered with the Commission or applying for registration with the Commission and exempt reporting advisers. Our latest data indicate that there were approximately 16,442 advisers registered with the Commission, 6,389 exempt reporting advisers as of December 31, 2025. The Commission has estimated that the total annual reporting and recordkeeping burden of the collection of information for each respondent is 10.85 hours. Based on this figure, the Commission estimates a total annual burden of 251,851.53 hours for this collection of information.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB Control Number.
Please direct your written comments on this 60-Day Collection Notice to Austin Gerig, Director/Chief Data Officer, Securities and Exchange Commission, c/o Tanya Ruttenberg via email to
Notice of Department of State Sanctions Action Pursuant to the Executive Order Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation.
The U.S. Department of State is publishing the name of a person who has been removed from the Department of the Treasury's List of Specially Designated Nationals and Blocked Persons (SDN List), administered by the Office of Foreign Assets Control (OFAC).
This action was issued on January 8, 2026. See
Aaron P. Forsberg, Director, Office of Economic Sanctions Policy and Implementation, Bureau of Economic and Business Affairs, Department of State, Washington, DC 20520, tel.: (202) 647-7677, email:
The SDN List and additional information concerning sanctions programs are available on OFAC's website,
On January 8, 2026, the Department of State determined that the property and interests in property subject to U.S. jurisdiction of the following person are unblocked, and that person has been removed from the SDN List.
1. KAMPERI, Kyriaki Demetriou; (Greek: ΚΑΜΠΕΡΗ, Κυριακη Δημητριου) (a.k.a KAMPERI, Koulla Demetriou) (a.k.a KAMPERI, Kyriakou Demetriou), 35 Grosvenor Street, 1st Floor Offices, London W1K 4QX, United Kingdom; Ledra Business Centre, 1 Poseidonos Street, Egkomi Nicosias 2406, Cyprus; Ledra House, 15 Agiou Pavlou, Nicosia 1105, Cyprus; DOB 1 Jan 1971 to 31 Jan 1971; nationality Cyprus; Gender Female; Secondary sanctions risk: See
Notice is hereby given of the following determinations: I hereby determine that certain objects being imported from abroad pursuant to agreements with their foreign owners or custodians for temporary display in the exhibition “Tarot! Renaissance Roots, Modern Visions” at The Morgan Library & Museum, New York, New York, and at possible additional exhibitions or venues yet to be determined, are of cultural significance, and, further, that their temporary exhibition or display within the United States as aforementioned is in the national interest. I have ordered that Public Notice of these determinations be published in the
Reed Liriano, Program Coordinator, Office of the Legal Adviser, U.S. Department of State (telephone: 202-632-6471; email:
The foregoing determinations were made pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681,
Pursuant to the authority vested in the President under the Trade Act of 1974, as amended, Public Law 93-618, 88 Stat. 1978 (hereinafter “the Act”), and assigned to the Secretary of State by virtue of Section 1(a) of Executive Order 13346 of July 8, 2004, and delegated by Department of State Delegation of Authority 513, of April 7, 2021, I determine, pursuant to Section 402(d)(1) of the Act, 19 U.S.C. 2432(d)(1), that the further extension of the waiver authority granted by Section 402 of the Act will substantially promote the objectives of Section 402 of the Act. I further determine that continuation of the waiver applicable to Turkmenistan will substantially promote the objectives of Section 402 of the Act.
This Determination shall be published in the
Notice of Department of State Sanctions Action Pursuant to the Executive Order Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation.
The U.S. Department of State is publishing the name of one person who has been removed from the Department of the Treasury's List of Specially Designated Nationals and Blocked Persons (SDN List), administered by the Office of Foreign Assets Control (OFAC).
This action was issued on October 9, 2025. See
Aaron P. Forsberg, Director, Office of Economic Sanctions Policy and Implementation, Bureau of Economic and Business Affairs, Department of State, Washington, DC 20520, tel.: (202) 647-7677, email:
The SDN List and additional information concerning sanctions programs are available on OFAC's website,
On October 9, 2025, the Department of State determined that the property and interests in property subject to U.S. jurisdiction of the following person are unblocked, and that person has been removed from the SDN List.
1. KUZEY STAR SHIPYARD DENIZCILIK SANAYI VE TICARET ANONIM SIRKETI (a.k.a. KUZEY STAR SHIPYARD MARITIME INDUSTRY AND TRADE INC; a.k.a. “NORTH STAR SHIPYARD”), Tersaneler Caddesi No:14, Evliya Celebi Mahallesi, Istanbul 34944, Turkey; Secondary sanctions risk: See Section 11 of Executive Order 14024.; Organization Established Date 03 Sep 2013; Tax ID No. 6010476358 (Turkey); Registration Number 979160 (Turkey) [RUSSIA-EO14024] (Linked To: FEDERAL STATE UNITARY ENTERPRISE ATOMFLOT).
Department of State.
Notice.
The Directorate of Defense Trade Controls and the Department of State give notice that the attached Notifications of Proposed Commercial Export Licenses were submitted to Congress on the dates indicated.
The dates of notification to Congress are shown on each of the 10 Letters.
Ms. Paula C. Harrison, Directorate of Defense Trade Controls (DDTC), Department of State at (202) 663-3310; or access the DDTC website at
Section 36(f) of the Arms Export Control Act (22 U.S.C. 2776) requires that notifications to the Congress pursuant to sections 36(c) and 36(d) be published in the
The following comprise recent notifications and are published to give notice to the public.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(d) of the Arms Export Control Act, please find enclosed a certification of a proposed license amendment for the export of defense articles, including technical data, and defense services for the manufacture of significant military equipment abroad.
The transaction contained in the attached certification involves the export of defense articles, including technical data, and defense services to the United Kingdom to support the replication and incorporation of [. . .] electronic counter-counter measures into [. . .] radios for manufacturing and sales.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U. S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(c) of the Arms Export Control Act, please find enclosed a certification of a proposed license for the export of firearms, parts, and components controlled under Category I of the U.S. Munitions List in the amount of $1,000,000 or more.
The transaction contained in the attached certification involves the export of 5.56mm assault rifles to Mexico.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(c) of the Arms Export Control Act, please find enclosed a certification of a proposed license for the export of defense articles, including technical data, and defense services in the amount of $50,000,000 or more.
The transaction contained in the attached certification involves the proposed export of 155mm propulsion charges to Ukraine.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(c) of the Arms Export Control Act, please find enclosed a certification of a proposed license for the export of firearms, parts, and components controlled under Category I of the U.S. Munitions List in the amount of $1,000,000 or more.
The transaction contained in the attached certification involves the proposed export of 5.56mm select-fire carbines, 9mm select-fire submachine guns, and spare parts to Iraq.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Sections 36(c) and 36(d) of the Arms Export Control Act, please find enclosed a certification of a
The transaction contained in the attached certification involves the export of defense articles, including technical data, and defense services to the Republic of Korea to support the manufacture of a trainer aircraft.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(c) and 36(d) of the Arms Export Control Act, please find enclosed a certification of a proposed license amendment for the export of defense articles, including technical data, and defense services in the amount of $50,000,000 or more and the manufacture of significant military equipment abroad.
The transaction contained in the attached certification involves the export of defense articles, including technical data and defense services, to Poland to support the manufacture of helicopters.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(c) of the Arms Export Control Act, please find enclosed a certification of a proposed license for the export of defense articles, including technical data, and defense services in the amount of $50,000,000 or more.
The transaction contained in the attached certification involves the export of defense articles, including technical data, and defense services to Australia, Malaysia, and Singapore to support the testing, maintenance, and repair of parts and components for a gas turbine engine.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(c) of the Arms Export Control Act, please find enclosed a certification of a proposed license for the export of defense articles, including technical data, and defense services in the amount of $50,000,000 or more.
The transaction contained in the attached certification involves the export of defense articles, including technical data, and defense services to the Republic of Korea, to support the manufacture of a 30mm weapon system.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(d) of the Arms Export Control Act, please find enclosed a certification of a proposed license for the export of defense articles, including technical data, and defense services for the manufacture of significant military equipment abroad.
The transaction contained in the attached certification involves the export of defense articles, including technical data, and defense services to Canada to support the engineering, design, development, overhaul, production, manufacture, operation, maintenance, modification, upgrade, integration, installation, qualification, training, troubleshooting, testing, customer support, repair and rework of the program mission computer subsystems.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant,
Please find enclosed the following notification from the Department of State.
Pursuant to Section 36(c) of the Arms Export Control Act, please find enclosed a certification of a proposed license amendment for the export of defense articles, including technical data, and defense services in the amount of $100,000,000 or more.
The transaction contained in the attached certification involves the export of defense articles, including technical data, and defense services to Luxembourg to support the maintenance, update, upgrade, modification and enhancement activities for Unmanned Aerial Systems.
The U.S. government is prepared to license the export of these items having taken into account political, military, economic, human rights, and arms control considerations.
More detailed information is contained in the formal certification which, though unclassified, contains business information submitted to the Department of State by the applicant, publication of which could cause competitive harm to the U.S. firm concerned.
Northeast Atlanta Railroad, LLC (NEAR), a noncarrier,
According to the verified notice, NEAR and NSR have reached an agreement pursuant to which NEAR will lease and operate the Line.
This transaction is related to a concurrently filed verified notice of exemption in
NEAR certifies that its projected annual revenues from this transaction will not result in it becoming a Class I or Class II rail carrier and are not expected to exceed $5 million. NEAR also certifies that the agreement with NSR contains an interchange commitment that places monetary penalties on traffic interchanged by NEAR with a third-party carrier. NEAR has provided additional information regarding the interchange commitment, as required by 49 CFR 1150.33(h).
The transaction may be consummated on or after May 30, 2026, the effective date of the exemption (30 days after the verified notice was filed).
If the verified notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the effectiveness of the exemption. Petitions for stay must be filed by May 22, 2026.
All pleadings, referring to Docket No. FD 36916, must be filed with the Surface Transportation Board either via e-filing on the Board's website or in writing addressed to 395 E Street SW, Washington, DC 20423-0001. In addition, a copy of each pleading must be served on NEAR's representative, Stephen J. Foland, Fletcher & Sippel LLC, 29 North Wacker Drive, Suite 800, Chicago, IL 60606-3208.
According to NEAR, this action is categorically excluded from environmental review under 49 CFR 1105.6(c) and from historic preservation reporting requirements under 49 CFR 1105.8(b).
Board decisions and notices are available at
By the Board, Anika S. Cooper, Chief Counsel, Office of Chief Counsel.
OPSEU Pension Plan Trust Fund (OPTrust), Jaguar Transport Holdings, LLC (JTH), and Jaguar Rail Holdings, LLC (JRH, and collectively with OPTrust and JTH, Jaguar), each a noncarrier, have filed a verified notice of exemption under 49 CFR 1180.2(d)(2) to continue in control of Northeast Atlanta Railroad, LLC (NEAR), upon NEAR's becoming a Class III rail carrier. The verified notice states that NEAR is a directly controlled holding of JRH, which is directly controlled by JTH, which is indirectly controlled by OPTrust. Jaguar
This transaction is related to a concurrently filed verified notice of exemption in
Jaguar represents that its control of NEAR upon NEAR's becoming a rail common carrier is not a transaction where: (1) NEAR would connect with any other Jaguar railroads; (2) Jaguar plans to connect NEAR with any other Jaguar railroads; or (3) a Class I carrier is involved. Therefore, the transaction is exempt from the prior approval requirements of 49 U.S.C. 11323.
Under 49 U.S.C. 10502(g), the Board may not use its exemption authority to relieve a rail carrier of its statutory obligation to protect the interests of its employees. However, 49 U.S.C. 11326(c) does not provide for labor protection for transactions under 49 U.S.C. 11324 and 11325 that involve only Class III rail carriers. Accordingly, because this transaction involves Class III rail carriers only, the Board may not impose labor protective conditions here.
The earliest this transaction may be consummated is May 30, 2026, the effective date of the exemption (corresponding with the effective date of the related exemption in Docket No. FD 36916).
All pleadings, referring to Docket No. FD 36915, must be filed with the Surface Transportation Board either via e-filing on the Board's website or in writing addressed to 395 E Street SW, Washington, DC 20423-0001. In addition, a copy of each pleading must be served on Jaguar's representative, Stephen J. Foland, Fletcher & Sippel LLC, 29 North Wacker Drive, Suite 800, Chicago, IL 60606-3208.
According to Jaguar, this action is excluded from environmental review under 49 CFR 1105.6(c) and from historic preservation reporting requirements under 49 CFR 1105.8(b).
Board decisions and notices are available at
By the Board, Anika S. Cooper, Chief Counsel, Office of Chief Counsel.
Surface Transportation Board.
Notice tentatively approving and authorizing finance transaction.
On April 15, 2026, Student Transportation of America, Inc. (STA), a noncarrier, and its parent entities (collectively, Applicants) filed an application under 49 U.S.C. 14303 seeking authority for STA to acquire all voting securities of Tremblay's Bus Co., LLC (Tremblay's Bus). The Board is tentatively approving and authorizing the proposed acquisition of control. If no opposing comments are timely filed, this notice will be the final Board action.
Comments must be filed by June 29, 2026. If any comments are filed, Applicants may file a reply by July 14, 2026. If no opposing comments are filed by June 29, 2026, this notice shall be effective on June 30, 2026.
Comments, referring to Docket No. MCF 21147, may be filed with the Board either via e-filing on the Board's website or in writing addressed to: Surface Transportation Board, 395 E Street SW, Washington, DC 20423-0001. In addition, send one copy of comments to Applicants' representative: Mark J. Andrews, Clark Hill PLC, 1001 Pennsylvania Avenue NW, Suite 1300 South, Washington, DC 20004.
Jonathon Binet at (202) 915-4348. If you require accommodation under the Americans with Disabilities Act, please call (202) 245-0245.
The application states that STA, a noncarrier Delaware corporation based in Wall, N.J., controls multiple passenger motor carriers that hold operating authorities issued by the Federal Motor Carrier Safety Administration (FMCSA). (Appl. 2-3, Ex. A at 1.) STA is a subsidiary of Student Transportation of America Holdings, Inc. (STA Holdings), a Delaware corporation, which in turn is a subsidiary of Spinner Intermediate Holdings Inc. (Spinner Holdings), another Delaware corporation. (
According to the application, STA controls 55 passenger transportation subsidiaries operating in the United States, nine of which hold FMCSA operating authority, as well as 12 passenger transportation subsidiaries operating in Canada.
Applicants seek Board approval to acquire control of Tremblay's Bus and its non-real estate affiliates. (
In the proposed transaction, STA will acquire control of all voting securities of Tremblay's Bus pursuant to an agreement executed on April 13, 2026. (
Under 49 U.S.C. 14303(b), the Board must approve and authorize a transaction that it finds consistent with the public interest, taking into consideration at least (1) the effect of the proposed transaction on the adequacy of transportation to the public, (2) the total fixed charges resulting from the proposed transaction, and (3) the interest of affected carrier employees. Applicants have submitted the information required by 49 CFR 1182.2, including information demonstrating that the proposed transaction is consistent with the public interest under 49 U.S.C. 14303(b),
Applicants state that the contract-based nature of their business provides incentive for STA's operating subsidiaries and Tremblay's Bus to maintain and improve existing services in order to improve their chances of success when new opportunities arise and when existing contracts are re-competed. (
With respect to fixed charges, Applicants state that there are no current plans to finance the proposed acquisition in a manner that would affect fixed charges payable by STA or its affiliates. (
The Applicants state that it is highly unlikely that any Tremblay's Bus employees would be adversely affected to any significant degree by the proposed transaction. (
Based on their representations, the Board finds that Applicants' acquisition of control of Tremblay's Bus is consistent with the public interest. The application will be tentatively approved and authorized. If any opposing comments are timely filed, these findings will be deemed vacated, and, unless a final decision can be made on the record as developed, a procedural schedule will be adopted to reconsider the application.
This action is categorically excluded from environmental review under 49 CFR 1105.6(c).
Board decisions and notices are available at
1. The transaction is approved and authorized, subject to the filing of opposing comments.
2. If opposing comments are timely filed, the findings made in this notice will be deemed vacated.
3. This notice will be effective on June 30, 2026, unless opposing comments are filed by June 29, 2026. If any comments are filed, Applicants may file a reply by July 14, 2026.
4. A copy of this notice will be served on: (1) the U.S. Department of Transportation, Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue SE, Washington, DC 20590; (2) the U.S. Department of Justice, Antitrust Division, 10th Street & Pennsylvania Avenue NW, Washington, DC 20530; and (3) the U.S. Department of Transportation, Office of the General Counsel, 1200 New Jersey Avenue SE, Washington, DC 20590.
By the Board, Board Members Fuchs, Hedlund, and Schultz.
Office of the United States Trade Representative (USTR).
Request for comments and notice of public hearing.
On April 1, 2026, the United States International Trade Commission (USITC) determined that quartz surface products (QSP) are being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article that is like or directly competitive with the imported article. The Commissioners who voted in the affirmative are now conducting a process to recommend a safeguard measure for the President. The Office of the United States Trade Representative (USTR), on behalf of the Trade Policy Staff Committee (TPSC), is announcing a process so that, once the USITC makes its recommendation and issues its report to the President, domestic producers, importers, exporters, and other interested parties subsequently may submit their views and evidence on the appropriateness of the recommended safeguard measure. USTR also invites interested parties to participate in a public hearing regarding this matter.
USTR strongly prefers electronic submissions made through the Federal eRulemaking Portal:
Victor Mroczka, Office of WTO and Multilateral Affairs, at
On December 1, 2025, following receipt of a petition for import relief, as initially submitted on September 15, 2025, and as supplemented on September 23, 2025, and November 17, 2025, and deemed to be properly filed on November 17, 2025, the USITC instituted investigation No. TA-201-79 pursuant to section 202 of the Trade Act of 1974 (19 U.S.C. 2252) to determine whether QSP are being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to the domestic industry producing an article like or directly competitive with the imported article. The USITC notice of institution (90 FR 55165) identifies the scope of the products covered by this investigation.
On April 1, 2026, after receiving submissions from interested parties and holding a public hearing on serious injury on February 24, 2026, the USITC determined that the increased importation of QSP is a substantial cause of serious injury, or threat thereof, to the domestic industry. In line with domestic legal requirements, the USITC also found that neither QSP imports from Canada, nor QSP imports from Mexico, account for a substantial share of total imports or contribute importantly to the serious injury caused by imports. Finally, the USITC found that imports of QSP from every other free trade agreement partner country, when considered individually, are not a substantial cause of serious injury or threat thereof. The USITC determination and additional information about the investigation, including the administrative record consisting of briefs and other submissions, can be found in the Electronic Document Information System (EDIS) on the USITC website at
The USITC is now conducting the remedy phase of the investigation. By May 18, 2026, after the remedy hearing and consideration of submissions, the USITC will submit to the President a report with its injury determination, remedy recommendations, certain additional findings, and the basis for them. A public report concerning the investigation will be available on the USITC website at
Section 201 of the Trade Act of 1974 (19 U.S.C. 2251) authorizes the President, in the event of an affirmative serious injury determination by the USITC, to take all appropriate and feasible action within his power that he determines will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs. The statute provides for the President to take action within 60 days after receiving the USITC report, subject to any decision the President makes to request additional information from the USITC. The USITC is scheduled to transmit its report to the President by May 18, 2026. In accordance with section 203(a)(1)(C) of the Trade Act of 1974 (19 U.S.C. 2253(a)(1)(C)), the TPSC will make a recommendation to the President on what action the President should take. This recommendation will take into account the USITC recommendation and report, the extent to which workers and firms in the domestic industry will benefit from adjustment assistance, the efforts of the domestic industry to make positive adjustments, and other relevant considerations. The potential actions the President may take to provide a remedy in the form of a safeguard measure include:
• imposition, or increase, of a duty on the imported articles in question;
• use of a tariff-rate quota;
• modification or imposition of any quantitative restriction on the importation of the articles into the United States;
• a proposal to negotiate and carry out an agreement with foreign countries to limit the exportation from foreign countries and importation into the United States;
• procedures for the granting of import licenses;
• other negotiations to identify the underlying cause of the increased imports to alleviate the injury or threat thereof;
• legislative proposals that would facilitate a positive adjustment;
• other action consistent with the President's authority; or
• any combination of these actions.
USTR offers these potential remedies for further consideration by domestic producers, importers, exporters, and other interested parties, and invites
1. The appropriateness of any other proposed action and how it would be in the public interest.
2. The short- and long-term effects the proposed action is likely to have on the domestic QSP industry, its workers, and on other domestic industries and communities.
3. The short- and long-term effects that not taking the proposed action is likely to have on the domestic QSP industry, its workers, and on other domestic industries and communities.
The TPSC will convene a public hearing on June 16, 2026, in Rooms 1 and 2, 1724 F Street NW, Washington, DC. USTR will provide information about the format and schedule for the hearing to interested parties. Requests to appear at the hearing and testify must include the following information: (1) name, address, telephone number, email address, and firm or affiliation of the individual wishing to testify; and (2) a brief summary of the proposed oral presentation. Follow the instructions for submitting requests to appear at the hearing in Section IV below.
USTR seeks public comments with respect to the issues described in Section II. To be assured of consideration, you must submit written comments, requests to appear at the hearing, and summaries of testimony by 11:59 p.m. EST on June 1, 2026, and any written responses to those comments by 11:59 p.m. EST on June 8, 2026. The request to appear at the hearing must include a summary of testimony and may be accompanied by a prehearing submission. All comments must be in English and must identify on the reference line of the first page of the submission “Potential Action: Quartz Surface Products.” USTR invites small businesses (generally defined by the Small Business Administration as firms with fewer than 500 employees) or organizations representing small business members that submit comments to self-identify as such in their written comments and requests to appear at the hearing, so that we may be aware of issues of particular interest to small businesses.
USTR strongly encourages commenters to make online submissions, using
For further information on using
The
For any comments submitted electronically that contain business confidential information (BCI), the file name of the business confidential version should begin with the characters “BCI”. Any page containing business confidential information must be clearly marked “BUSINESS CONFIDENTIAL” on the top of that page and the submission should clearly indicate, via brackets, highlighting, or other means, the specific information that is business confidential. A filer requesting business confidential treatment must certify that the information is business confidential and would not customarily be released to the public by the submitter. Filers of submissions containing business confidential information also must submit a public version of their comments. The file name of the public version should begin with the character “P”. Follow the “BCI” and “P” with the name of the person or entity submitting the comments. Filers submitting comments containing no BCI should name their file using the name of the person or entity submitting the comments.
As noted, USTR strongly urge submitters to file comments through
You can find general information about USTR at
USTR will post comments in the docket for public inspection, except properly designated BCI. You can view comments on
Federal Highway Administration (FHWA), DOT.
Notice of limitation on claims for judicial review.
The FHWA, on behalf of the State Department of Transportation (FDOT), is issuing this notice to announce actions taken by FDOT and other Federal agencies that are final agency actions. These actions relate to the proposed Clearlake Road (State Road (S.R.) 501) Project Development and Environment (PD&E) Study from Michigan Avenue to Industry Road (Financial Project Identification 433605-1). The proposed improvements consist of widening the existing two-lane roadway to a four-lane divided urban roadway; replacing the existing 90-degree roadway curve with a roundabout; and constructing shared-use paths on both sides of S.R. 501.
By this notice, the FHWA, on behalf of FDOT, is advising the public of final agency actions subject to 23 U.S.C. 139(l)(1). A claim seeking judicial review of the Federal Agency actions on the listed highway project will be barred unless the claim is filed on or before October 13, 2026. If the Federal law that authorizes judicial review of a claim provides a time period of less than 150 days for filing such claim, then that shorter time period still applies.
The Type 2 Categorical Exclusion and additional project documents can be viewed and downloaded from the project website at:
Katasha Gruver, Director, Office of Environmental Management, FDOT; telephone (850) 414-5260; email:
Effective December 14, 2016, and as subsequently renewed on May 26, 2022, the FHWA assigned, and the FDOT assumed, environmental responsibilities for this project pursuant to 23 U.S.C. 327. Notice is hereby given that FDOT and other Federal agencies have taken final agency actions subject to 23 U.S.C. 139(l)(1) by issuing licenses, permits, or approvals for the proposed improvement highway project. The actions by FDOT and other Federal agencies on the project, and the laws under which such actions were taken are described in the Type 2 Categorical Exclusion approved on March 24, 2026, and in other project records for the listed project. The Type 2 Categorical Exclusion and other documents for the listed project are available by contacting FDOT at the address provided above.
The project subject to this notice is:
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Federal Highway Administration (FHWA), Department of Transportation.
Notice of limitation on claims for judicial review.
The FHWA, on behalf of the Utah Department of Transportation (UDOT), is issuing this notice to announce actions taken by UDOT and other Federal agencies that are final agency actions. These actions relate to the proposed transportation improvements on State Route 190 (SR-190) in Salt Lake County, Utah. The Proposed Action integrates enhanced bus service, improved bus stop facilities, a dedicated bus priority lane on Brighton Loop Road, and a congestion-based tolling system. Additional proposed infrastructure at the base of Big Cottonwood Canyon (BCC) includes the construction of a mobility hub parking facility, which will provide approximately 1,750 public parking spaces, on the eastern side of Wasatch Boulevard. To facilitate mobility hub access and transit efficiency, the project includes a new grade-separated interchange on Wasatch Boulevard and a new transitway to provide a dedicated route for buses to bypass congestion at the base of BCC.
By this notice, the FHWA, on behalf of UDOT, is advising the public of final agency actions subject to 23 U.S.C. 139(l)(1). A claim seeking judicial review of the Federal Agency actions on the listed highway project will be barred unless the claim is filed on or before October 13, 2026. If the Federal law that authorizes judicial review of a claim provides a time period of less than 150 days for filing such claim, then that shorter time period still applies.
The Environmental Assessment (EA), Finding of No Significant Impact (FONSI) and additional project documents can be viewed and downloaded from the project website at:
Carissa Watanabe, Environmental Program Manager, UDOT Division of Environmental Services; 503-939-3798;
Effective January 17, 2017, and as subsequently renewed on May 26, 2022, the FHWA assigned, and the UDOT assumed, environmental responsibilities for this project pursuant to 23 U.S.C. 327. Notice is hereby given that UDOT and other Federal agencies have taken final agency actions subject to 23 U.S.C. 139(l)(1) by issuing licenses, permits, or approvals for the proposed improvement highway project. The actions by UDOT and other Federal agencies on the project, and the laws under which such actions were taken are described in the FONSI approved on May 8, 2026, and in other project records for the listed project. The EA, the FONSI and other documents for the listed project are available by contacting UDOT at the address provided above.
The project subject to this notice is:
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Office of Foreign Assets Control, Treasury.
Notice.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of one or more persons that have been placed on OFAC's Specially Designated Nationals and Blocked Persons List (SDN List) based on OFAC's determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
These actions were issued on May 8, 2026 and May 11, 2026. See Supplementary Information for relevant dates.
OFAC: Associate Director for Global Targeting, 202-622-2420; Assistant Director for Licensing, 202-622-2480; Assistant Director for Sanctions Compliance, 202-622-2490; or
The SDN List and additional information concerning OFAC sanctions programs are available on OFAC's website:
On May 8, 2026 and May 11, 2026, OFAC determined that the property and interests in property subject to U.S. jurisdiction of the following persons are blocked under the relevant sanctions authorities listed below.
On May 8, 2026, OFAC published the following revised information for the entry on the SDN List for the following person blocked under the relevant sanctions authority authority listed below.
1. CENTER FOR INNOVATION AND TECHNOLOGY COOPERATION (a.k.a. CENTER FOR PROGRESS AND DEVELOPMENT OF IRAN; a.k.a. OFFICE OF SCIENTIFIC AND INDUSTRIAL STUDIES; a.k.a. OFFICE OF SCIENTIFIC AND TECHNICAL COOPERATION; a.k.a. OSIS; a.k.a. PRESIDENCY OFFICE OF SCIENTIFIC AND INDUSTRIAL STUDIES; a.k.a. TECHNOLOGY COOPERATION OFFICE; a.k.a. “CITC”; a.k.a. “CPDI”; a.k.a. “POSIS”; a.k.a. “TCO”), No 7 East Avesta Rd, Sheykh Bahaie Street, Sheykh Bahaie Sq, Tehran 1995859611, Iran; PO Box 141554671, Tehran, Iran; Additional Sanctions Information—Subject to Secondary Sanctions; Organization Established Date 01 Jan 1983 to 31 Dec 1984; Target Type Government Entity; National ID No. 14002821290 (Iran) [NPWMD] [IFSR].
Designated pursuant to section 1(a)(ii) of E.O. 13382 for having engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons), including any efforts to manufacture, acquire, possess, develop, transport, transfer or use such items, by any person or foreign country of proliferation concern.
Veterans Health Administration, Department of Veterans Affairs.
Notice.
Veterans Health Administration (VHA), Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish a notice in the
Comments must be received on or before July 14, 2026.
Comments must be submitted through
Under the PRA of 1995, Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, VHA invites comments on: (1) whether the proposed collection of information is necessary for the proper performance of VHA's functions, including whether the information will have practical utility; (2) the accuracy of VHA's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
1. Academic Verification, VA Form 10-0491.
2. Annual VA Employment or Deferment Verification, VA Form 10-0491c.
3. Obligated Service, VA Form 10-0491d.
4. Evaluation and Recommendation Form, VA Form 10-0491e.
5. Application, VA Form 10-0491g.
6. Notice of Expected Graduation, VA Form 10-0491h.
7. Notice of Change, VA Form 10-0491i.
8. Request for Deferment, VA Form 10-0491j.
9. VA Scholarship Offer Response, VA Form 10-0491k.
Each program uses the forms in this collection for the applications, verifications, recommendations, etc., necessary to meet scholarship award requirements. The forms have been updated to clarify instructions and add required PRA language. There is an overall increase in the estimated number of respondents (applicants) and burden hours based upon program data. However, two pilot scholarship programs and two associated forms have been removed from the collection, as the pilot programs have ended since the last PRA clearance.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (“Act”),
The Exchange is filing with the Commission a proposed rule change to establish fees for Industry Members
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“Prospective CAT Costs” fees).
Under the CAT Funding Model, “[t]he Operating Committee will establish one or more fees (each a `Historical CAT Assessment') to be payable by Industry Members with regard to CAT costs previously paid by the Participants (`Past CAT Costs').”
Each Historical CAT Assessment to be paid by CEBBs and CEBSs is designed to contribute toward the recovery of two-thirds of the Historical CAT Costs. Because the Participants previously have paid Past CAT Costs via loans to the Company, the Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs will be paid by the cancellation of loans made by the Participants to the Company on a pro rata basis based on the outstanding loan amounts due under the loans, instead of through the payment of a CAT fee.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) Historical CAT Assessment 1A to recover certain historical CAT costs incurred prior to January 1, 2022, 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.' ”
The Exchange, along with the other Participants in the CAT, previously filed a fee filing to implement Historical CAT Assessment 1.
Historical CAT Assessment 1A will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange.
In addition,
The Operating Committee determined the fee rate to be used in calculating Historical CAT Assessment 1A based on the Historical CAT Costs for Historical CAT Assessment 1A and the projected total executed share volume of all transactions in Eligible Securities for the Historical Recovery Period for Historical CAT Assessment 1A (“Historical Recovery Period 1A”), as discussed in detail below. Based on this calculation, the Operating Committee has determined that the fee rate for Historical CAT Assessment 1A would be $0.000002, as discussed in detail below.
Under the CAT NMS Plan, for purposes of calculating each Historical CAT Assessment, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he Operating Committee will reasonably determine the Historical CAT Costs sought to be recovered by each Historical CAT Assessment, where the Historical CAT Costs will be Past CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT Costs by the Operating Committee. Each Historical CAT Assessment will seek to recover from CAT Executing Brokers two-thirds of Historical CAT Costs incurred during the period covered by the Historical CAT Assessment.”
The following describes in detail Historical CAT Costs 1 with regard to four separate historical time periods as well as Past CAT Costs excluded from Historical CAT Costs 1 (“Excluded Costs”). The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing “a brief description of the amount and type of Historical CAT Costs, including (1) the technology line items of cloud hosting
Historical CAT Costs 1 would include costs incurred by CAT prior to June 22, 2020 (“Pre-FAM Period”) and already funded by the Participants, excluding Excluded Costs (described further below). Historical CAT Costs 1 would include costs for the Pre-FAM Period of $124,290,730. The Participants would remain responsible for one-third of this cost (which they have previously paid) ($41,430,243.33), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($41,430,243.33) and CEBSs paying one-third ($41,430,243.33). These costs do not include Excluded Costs, as discussed further below. The following table breaks down Historical CAT Costs 1 for the Pre-FAM Period into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The Pre-FAM
The $10,268,840 in technology costs for cloud hosting services represent costs incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the Pre-FAM Period.
As part of its proposal for acting as the successor Plan Processor for the CAT, FCAT selected AWS as a subcontractor to provide cloud hosting services. In 2019, after reviewing the capabilities of other cloud services providers, FCAT determined that AWS was the only cloud services provider at that time sufficiently mature and capable of providing the full suite of necessary cloud services for the CAT, including, for example, the security, resiliency and complexity necessary for the CAT computing requirements. The use of cloud hosting services is standard for this type of high-volume data activity and reasonable and necessary for implementation of the CAT, particularly given the substantial data volumes associated with the CAT.
Under the Plan Processor Agreement with FCAT, 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 cost 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. The fees for cloud hosting services during the Pre-FAM Period were paid to FCAT by CAT NMS, LLC
AWS was engaged by FCAT to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools). AWS also was engaged to provide various environments for CAT, such as development, performance testing, test and production environments.
The cost for AWS services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to the CAT. During the Pre-FAM Period from the engagement of AWS in February 2019 through June 2020, AWS provided 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,”
The $21,085,485 in technology costs related to operating fees represent costs incurred with regard to activities of FCAT as the Plan Processor. 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 (
FCAT was selected to assume the role of the successor Plan Processor. Prior to this selection, the Participants engaged in discussions with two prior Bidders
The Selection Subcommittee considered factors including, but not limited to, the following, in recommending FINRA to the Operating Committee as the successor Plan Processor:
a. FINRA's specialized technical expertise and capabilities in the area of broker-dealer technology;
b. The need to appoint a successor Plan Processor with specialized expertise to develop, implement, and maintain the CAT System in accordance with the CAT NMS Plan and SEC Rule 613;
c. FINRA's detailed proposal in response to CATLLC's recent inquiries; and
d. FINRA's data query and analytics systems demonstration to the Participants.
Based on these and other factors, the Selection Subcommittee determined that FINRA was the most appropriate Bidder to become the successor Plan Processor.
On February 26, 2019, the Operating Committee (with FINRA recusing itself) voted to select FINRA as the successor Plan Processor pursuant to Section 6.1(t)
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. The operating fees during the Pre-FAM Period were paid to FCAT by CAT LLC.
From March 29, 2019 (the commencement of the Plan Processor Agreement with FCAT) through June 22, 2020 (the end of the Pre-FAM Period), the Plan Processor's activities with respect to the CAT included the following:
• Commenced user acceptance testing with market data provided by Exegy Incorporated (“Exegy”), a market data provider;
• Published Technical Specifications and related reporting scenarios documents for Phase 2a, 2b and 2c reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated testing for Phase 2a and 2b reporting for Industry Members;
• Began developing Technical Specifications and related reporting scenarios documents for Phase 2d reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published Central Repository Access Technical Specifications, and provided regulator access to test data from Industry Members;
• Facilitated Participant exchanges that support options market makers sending Quote Sent Time to the CAT;
• Facilitated the introduction of OPRA and Options NBBO Other Data to CAT;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing requirements under Regulation SCI;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants, the SEC and its staff;
• Operated the FINRA CAT Helpdesk, which is the primary source for answers to questions about CAT, including questions regarding: clock synchronization, firm reporting responsibilities, interpretive questions, technical specifications for reporting to CAT and more;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content;
• Provided 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.
The $2,072,908 in technology costs related to CAIS operating fees represent the fees paid for FCAT's subcontractor charged with the development and operation of CAT's Customer and Account Information System (“CAIS”). 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.
During the Pre-FAM Period, the CAIS-related services were provided by the Plan Processor through the Plan Processor's subcontractor, Kingland Systems Incorporation (“Kingland”). Kingland had experience operating in the securities regulatory technology space, and as a part of its proposal for acting as the Plan Processor for the CAT, FCAT selected Kingland as a subcontractor to provide certain CAIS-related services.
Under the Plan Processor Agreement with FCAT, CAT LLC was required to pay to the Plan Processor the fees incurred by FCAT for CAIS-related services provided by FCAT through Kingland on a monthly basis. FCAT negotiated the fees for Kingland'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. The fees for CAIS-related services during the Pre-FAM Period were paid by CAT LLC to FCAT. FCAT, in turn, paid Kingland.
During the Pre-FAM Period, Kingland began development of the CAIS Technical Specifications and the building of CAIS. In addition, Kingland also worked on the build related to the CCID Alternative, an alternative approach to customer information that was not included in the CAT NMS Plan as originally adopted.
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 change 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 costs were paid by CAT LLC to FCAT. During the Pre-FAM Period, CAT LLC incurred costs of $141,346 related to change requests implemented by FCAT. Such change requests related to a development fee regarding the OPRA and SIP data feeds, and the reprocessing of certain exchange data.
This category of costs includes capitalizable application development costs incurred in the development of the CAT. The capitalized developed technology costs for the Pre-FAM Period of $51,847,150 relate to technology provided by the Initial Plan Processor and the successor Plan Processor.
On January 17, 2017, the Selection Committee of the CAT NMS Plan selected the Initial Plan Processor, Thesys Technologies, LLC, for the CAT NMS Plan pursuant to Article V of the CAT NMS Plan.
From January 17, 2017 through January 30, 2019, the time in which Thesys CAT was engaged for the CAT, but excluding the period from November 15, 2017 through January 30, 2019, the Initial Plan Processor engaged in various activities with respect to the CAT, including preparing iterative drafts of Participant Technical Specifications, Industry Member Technical Specifications and the Central Repository Access Technical Specifications. In addition, Thesys CAT also developed CAT technology, addressed compliance items, including drafting CAT policies and procedures, addressing Regulation SCI requirements, establishing a CAT Compliance Officer and a Chief Information Security Officer, addressed security-related matters for the CAT, and worked towards the initiation of Participant reporting per the Participant Technical Specifications.
The legal costs of $19,674,463 represent the fees paid for legal services provided by two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), during the Pre-FAM Period. The legal costs exclude those costs incurred from November 15, 2017 through November 15, 2018.
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. WilmerHale's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading law firms for similar work.
The legal costs for WilmerHale during the Pre-FAM Period included costs incurred from 2013 until June 22, 2020 to address corporate and regulatory legal matters related to the CAT. The legal fees for this law firm during the period from February 2013 until the formation of the CAT NMS, LLC on November 15, 2016 were paid directly by the exchanges and FINRA to WilmerHale. After the formation of CAT NMS LLC, the legal fees were paid by CAT LLC to WilmerHale.
After WilmerHale was engaged in 2013 through the end of the Pre-FAM Period on June 22, 2020 (excluding the legal costs from November 15, 2017 through November 15, 2018), WilmerHale provided legal assistance to the CAT on a variety of matters, including with regard to the following:
• Analyzed various legal matters associated with the Selection Plan, and drafted an amendment to the Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the Development Advisory Group (“DAG”);
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan and related filings;
• Negotiated and drafted the plan processor agreements with the Initial Plan Processor and the successor Plan Processor;
• Provided assistance with compliance with Regulation SCI;
• Assisted with clock synchronization study;
• Provided assistance with respect to the establishment of CAT security;
• Drafted exemptive requests from CAT NMS Plan requirements, including with regard to options market maker quotes, Customer IDs, CAT Reporter IDs, linking allocations to executions, CAT reporting timeline, FDIDs, customer and account information, timestamp granularity, small industry members, data facility reporting and linkage, allocation reports, SRO-assigned market participant identifiers and cancelled trade indicators, thereby seeking to implement changes that would be cost effective and benefit Industry Members and Participants;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided advice regarding CAT policies and procedures;
• Analyzed the SEC's amendment of the CAT NMS Plan regarding financial accountability;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues; and
• Assisted with third-party vendor agreements.
The consulting costs of $17,013,414 represent the fees paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the Pre-FAM Period, from October 2012 until June 22, 2020. 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.
To help facilitate project management given the unprecedented complexity and scope of the CAT project, the Participants determined it was necessary to engage a consulting firm to assist with the CAT project in 2012, following the adoption of Rule 613. A variety of factors were considered in the analysis of prospective consulting firms, including (1) the firm's qualifications, resources, and expertise; (2) the firm's relevant experience and understanding of the regulatory issues raised by the CAT and in coordinating matters of similar scope; (3) the composition of the consulting team; and (4) professional fees. Following a series of interviews, the exchanges and FINRA as a consortium determined that Deloitte was well qualified given the balance of these considerations and engaged Deloitte on October 1, 2012.
Deloitte's fee rates are negotiated on an annual basis and are in line with market rates for this type of specialized consulting work. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. Deloitte's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading consulting firms for similar work.
The consulting costs for CAT during the period from 2012 until the formation of the CAT NMS, LLC were paid directly by the Participants to Deloitte. After the formation of CAT NMS, LLC, the consulting fees were paid by CAT LLC to Deloitte. CAT LLC reviewed the consulting fees each month and approved the invoices.
After Deloitte was hired in 2012 through the end of the Pre-FAM Period on June 22, 2020 (excluding the consulting costs from November 15, 2017 through November 15, 2018), Deloitte provided a variety of consulting services, including the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participant's independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Assisted with cost and funding-related activities for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided 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;
• Assisted with industry outreach and communications regarding the CAT, including assistance with industry outreach events, the development of the CAT website, frequently asked questions, and coordinating with the CAT LLC's public relations firm;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress;
• Coordinated efforts regarding the selection of the successor Plan Processor;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor, including support for the Operating Committee and successor Plan Processor for the new role; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $880,419 represent the cost incurred for insurance for CAT during the Pre-FAM Period. Commencing in 2020, CAT LLC performed an evaluation of various potential alternatives for CAT insurance policies, which included engaging in discussions with different insurance companies and conducting cost comparisons of various alternative approaches to insurance. Based on an analysis of a variety of factors, including coverage and premiums, CAT LLC determined to purchase cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance from USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
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.
After Anchin was hired in April 2018 through the end of the Pre-FAM Period on June 22, 2020 (excluding the period from April 2018 through November 15, 2018), Anchin provided a variety of services, including the following:
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial reporting matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy from July 2018 through March 2019. CAT LLC determined that, unlike certain other vendors, Exegy provided market data that included all data elements required by the CAT NMS Plan.
Upon the termination of the contract between CAT LLC and Exegy, FCAT entered into a contract with Exegy to purchase the required market data from Exegy in July 2019. All costs under the contract were treated as a direct pass through cost to CAT LLC. Therefore, the fees for the market data were paid by CAT LLC to FCAT, who, in turn, paid Exegy for the market data.
The public relations costs of $224,669 represent the fees paid to public relations firms during the Pre-FAM Period for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC was better positioned to understand and address CAT matters to the benefit of all market participants. Specifically, the public relations firms provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
The services performed by each of the public relations firms were comparable. The fees for such services were reasonable and in line with market rates. Only one public relations firm was engaged at a time; the three firms were engaged sequentially as the primary public relations contact moved among the three firms during this time period.
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 1 of the Financial Accountability Milestones (“FAM Period 1”),
By the completion
CAT LLC continued to utilize AWS in FAM Period 1 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 1 Period. Accordingly, the $2,642,122 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 1. The fee arrangement for AWS described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. Moreover, CAT LLC continued to believe that AWS's maturity in the cloud services space as well as the significant cost and time necessary to move the CAT to a different cloud services provider supported the continued engagement of AWS.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 1 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, reference data and other types of Other Data. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 1.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 1. Accordingly, the $1,099,680 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 1. The fee arrangement for FCAT described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, FCAT's activities with respect to the CAT included the following:
• Published iterative drafts of draft Technical Specifications for Phase 2d, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published iterative drafts of CAIS Technical Specifications, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated Industry Member reporting of Quote Sent Time on Options Market Maker quotes;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 1. Accordingly, the $254,998 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 1. The fee arrangement for Kingland described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to CCID Alternative, as well as the acceleration of the reporting of LTIDs.
CAT LLC did not incur costs related to change requests during FAM Period 1.
Capitalized developed technology costs for FAM Period 1 of $1,684,870 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include: (1) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including separate production and industry test entitlements, and reprocessing of exchange event timestamps; (2) implementation fees; and (3) license fees.
The legal costs of $481,687 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 1.
• Assisted with the development of the CAT funding model and drafted related amendments and fee filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, verbal activity, options market maker quote sent time, TRF linkages, and allocations;
• Provided interpretations related to CAT NMS Plan requirements, including the Financial Accountability Milestone amendment;
• Assisted with compliance with Regulation SCI;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the drafting of the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Assisted with communications and presentations for the industry regarding CAIS;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding CAT technical specifications;
• Assisted with third-party vendor agreements; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $137,209 represent the fees paid to Deloitte as project manager during FAM Period 1. CAT LLC continued to employ Deloitte during FAM Period 1 based on, among other things, their expertise and cumulative experience with the CAT. The fee rates for Deloitte during FAM Period 1 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 1 were paid by CAT LLC to the consulting firm. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 1, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
Although insurance was in effect during FAM Period 1, CAT LLC did not incur costs related to insurance during FAM Period 1.
• Maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups; and
• Prepared monthly and quarterly financial statements.
The public relations costs of $7,700 represent the fees paid to Peak Strategies during FAM Period 1. CAT LLC continued to employ Peak Strategies during FAM Period 1 based on, among other things, their expertise and history with the project. The fee rates for this firm were reasonable and in line with market rates for these types of services. The fees for these services during FAM Period 1 were paid by CAT LLC to Peak Strategies. During FAM Period 1, Peak Strategies continued to provide professional communications services to CAT LLC, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT LLC and already funded by Participants during Period 2 of the Financial Accountability Milestones (“FAM Period 2”),
By the
(a) Industry Member reporting (excluding reporting by Small Industry Members that are not OATS reporters) for equities transactions, excluding Customer Account Information, CustomerID, and Customer Identifying Information, is developed, tested, and implemented at a 5% Error Rate or less and with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, and trade reporting facilities linkage to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system, excluding linkage of representative orders, from order origination through order execution or order cancellation; and (b) the query tool functionality
CAT LLC completed the requirements of FAM Period 2 by December 31, 2020. The following describes the costs for each of the categories for FAM Period 2.
CAT LLC continued to utilize AWS in FAM Period 2 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 2 Period. Accordingly, the $20,709,212 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 2. The fee arrangement for AWS described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 2 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, and Other Data, including reference data. In addition, Industry Members began reporting LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 2.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 2. Accordingly, the $9,108,700 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 2. The fee arrangement for FCAT described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, FCAT's activities with respect to the CAT included publishing the Technical Specifications for Phase 2d and overseeing the reporting of firm to firm and intrafirm linkages by Industry Members. In addition, FCAT also continued to engage in the following activities during FAM Period 2:
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the development and implementation of the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 2. Accordingly, the $1,590,298 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 2. The fee arrangement for Kingland described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs.
During FAM Period 2, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 2, CAT incurred costs of $51,823 related to a change request regarding the addition of functionality for exchange Participants to report rejected messages to the CAT.
Capitalized developed technology costs for FAM Period 2 of $6,761,094 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to separate production and industry test entitlements, market maker reference data, and back-processing of exchange exception logic; (3) implementation fees; and (4) license fees.
The legal costs of $2,766,644 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 2.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, allocations, exchange activity, OTQT, initial data validation, error corrections and recordkeeping;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittees, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6 of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Assisted with third-party vendor agreements (
• Assisted with change requests; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $532,146 represent the fees paid to Deloitte as project manager during FAM Period 2. CAT LLC continued to employ Deloitte during FAM Period 2 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 2 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 2 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 2, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $976,098 represent the fees paid for insurance during FAM Period 2. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $438,523 represent the fees paid to Anchin and Grant Thornton for financial services provided during FAM Period 2.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from the Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audit by an independent auditor; and
• Reviewed historical costs from inception.
The public relations costs of $41,940 represent the fees paid to Peak Strategies during FAM Period 2. CAT LLC continued to employ Peak Strategies during FAM Period 2 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 2 were paid by CAT LLC to Peak Strategies. During FAM Period 2, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 3 of the Financial Accountability Milestones (“FAM Period 3”),
By
(a) reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders; (b) Industry Member reporting for equities transactions and simple electronic options transactions, excluding Customer Account Information, Customer-ID, and Customer Identifying Information, with
CAT LLC completed the requirements of FAM Period 3 by December 31, 2021. The following describes the costs for each of the categories for FAM Period 3.
CAT LLC continued to utilize AWS in FAM Period 3 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 3 Period. Accordingly, the $94,574,759 in technology costs for cloud hosting services represents costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 3. The fee arrangement for AWS described above for the earlier periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During FAM Period 3, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a, Phase 2b, Phase 2c and Phase 2d Industry Member Data (including certain linkages), SIP Data, Other Data, including reference data, and LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 3.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 3. Accordingly, the $23,106,091 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 3. The fee arrangement for FCAT described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, FCAT's activities with respect to the CAT included the following:
• Facilitated Phase 2c and Phase 2d testing for Industry Members;
• Oversaw creation of linkages of the lifecycle of order events based on the received data through Phase 2d;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement with FCAT discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 3. Accordingly, the $5,562,383 in technology costs for CAIS operating fees represents costs incurred for services provided by Kingland during FAM Period 3. The fee arrangement for Kingland described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs. The full CAIS Technical Specifications were published during FAM Period 3.
During FAM Period 3, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 3, CAT incurred costs of $396,169 related to change requests, including the following: (1) the addition of functionality for exchange Participants to report rejected messages to the CAT; (2) the migration of MIRS query engine to AWS to reduce operational costs and increase resiliency; and (3) updating the Participant Technical Specifications to allow for two-sided Participant option quote reporting.
Capitalized developed technology costs for FAM Period 3 of $10,763,372 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor, including the transition from equity data received by FINRA pursuant to various regulatory services agreements between FINRA and Participant exchanges to the equity CAT Data, and the completion of the Industry Member Phase 2d options manual and complex orders go-live requirements; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to off-exchange volume concentration, Participant 24-hour trading and an external metastore; (3) implementation fees; and (4) license fees.
The legal costs of $6,333,248 represent the fees paid for legal services provided by three law firms, WilmerHale, Pillsbury and Covington & Burling LLP (“Covington”) during FAM Period 3.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements, including, for example, verbal activity regarding Phase 2c cutover, error reports, error corrections, Phase 2d Reporting, unique Order-ID on internal route events, reporting addresses, recordkeeping, and unique CCID for foreign customers;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs, CAIS requirements, ADF, and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6(c) of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Provided assistance with change requests;
• Provided guidance and regulatory support for litigation regarding the response to the SEC's exemptive orders;
• Assisted with communications with the industry, including CAT Alerts and presentations;
• Provided guidance regarding the confidentiality of CAT Data, including third-party information requests;
• Assisted with cost management analysis and proposals; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
After Covington was hired in 2021 through the end of 2021, the firm provided legal assistance regarding the litigation with the SEC regarding the 2020 Orders. These services included researching, drafting, and filing motions to stay the 2020 orders and related materials in proceedings before the SEC, as well as researching, drafting, and filing petitions for judicial review of the 2020 Orders in proceedings before the U.S. Court of Appeals for the D.C. Circuit. Covington oversaw ongoing litigation proceedings on these matters, and also supported WilmerHale with respect to settlement negotiations with the SEC staff regarding the 2020 Orders.
In addition to these services, CAT LLC engaged Covington in November 2021 to provide assistance with respect to the SEC's disapproval of CAT NMS Plan amendments concerning a proposed limitation on liability in the event of a data breach or similar event. Covington provided advice concerning CAT's response to the SEC's disapproval order. This work accounted for a minority of Covington's fees in 2021.
The consulting costs of $1,408,209 represent the fees paid to Deloitte as project manager during FAM Period 3. CAT LLC continued to employ Deloitte during FAM Period 3 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 3 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 3 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 3, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $1,582,714 represent the fees paid for insurance during FAM Period 3. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $595,923 represent the fees paid to Anchin and Grant Thornton for financial services during FAM Period 3.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Faciliated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $92,400 represent the fees paid to Peak Strategies during FAM Period 3. CAT LLC continued to employ Peak Strategies during FAM Period 3 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 3 were paid by CAT LLC to Peak Strategies. During FAM Period 3, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would not include three categories of CAT costs (“Excluded Costs”): (1) $14,749,362 of costs related to the termination of the relationship with the Initial Plan Processor; (2) $48,874,937, which are all CAT costs incurred from November 15, 2017 through November 15, 2018; and (3) $19,628,791, which are costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when the relationship with the Initial Plan Processor was concluded. The Participants would remain responsible for 100% of these costs, which total $83,253,090. CAT LLC determined to exclude these Excluded Costs from Historical CAT Costs 1 because these costs relate to the delay in the start of reporting to the CAT and the conclusion of the relationship with the Initial Plan Processor.
First, Historical CAT Costs 1 would not include $14,749,362 of costs related to the conclusion of the relationship with the Initial Plan Processor. Such costs include costs related to the American Arbitration Association, the legal assistance of Pillsbury with regard to the arbitration with the Initial Plan Processor, and the settlement costs related to the arbitration with the Initial Plan Processor. The Participants would remain responsible for 100% of these $14,749,362 in costs.
Second, Historical CAT Costs 1 would not include all CAT costs incurred from November 15, 2017 through November 15, 2018. CAT LLC determined to exclude all costs during this one-year period of $48,874,937 from fees charged to Industry Members due to the delay in the start of reporting to the CAT. The Participants would remain responsible for 100% of these $48,874,937 in costs. The following table breaks down these costs into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The following provides additional detail regarding the Excluded Costs.
CAT LLC did not incur technology costs related to the categories of cloud hosting services, operating fees, CAIS operating fees or change requests during the period from November 15, 2017 through November 15, 2018.
Capitalized developed technology costs for the period from November 15, 2017 through November 15, 2018 include capitalizable application development costs of $37,852,083 incurred in the development of the CAT by the Initial Plan Processor. Such costs include development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Initial Plan Processor. Such costs include costs related to Industry Member technical specifications for orders and transactions, the system security plan, testing and production for Participant CAT reporting, third-party security assessment and response, query portal, onboarding of the Chief Information Security Officer, and ingestion of FINRA TRF data and FINRA data related to halts and corporate actions.
The legal costs of $6,143,278 represent the fees paid to WilmerHale for legal services from November 15, 2017 through November 15, 2018. During this period, WilmerHale provided legal assistance to the CAT, including with regard to the following:
• Provided legal support for the governance of the CAT, including governance support for the Operating Committee, Advisory Committee, Compliance Subcommittee, and CAT working groups;
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan;
• Provided assistance related to CAT security;
• Drafted exemptive requests, including requests related to PII;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided advice with regard to regulator access to the CAT;
• Assisted with the Plan Processor transition;
• Provided assistance regarding communications with the industry regarding the CAT;
• Provided advice regarding Customer Account Information and PII;
• Provided support for litigation related to SEC exemptive orders; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretative and implementation issues.
The consulting costs of $4,452,106 represent the fees paid to Deloitte for their role as project manager for the CAT from November 15, 2017 through November 15, 2018. During this period, Deloitte engaged in the following activities with respect to the CAT:
• Implemented program operations for the CAT project;
• Provided governance support to the Operating Committee, including support for Subcommittees and working groups of the Operating Committee (
• Assisted with cost and funding issues for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress.
CAT LLC did not incur costs related to insurance during the period from November 15, 2017 through November 15, 2018.
The professional and administration costs of $340,145 represent the fees paid to Anchin, Exegy and RSM from November 15, 2017 through November 15, 2018.
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $87,325 represent the fees paid to Sloane from November 15, 2017 through November 15, 2018. From the commencement of its engagment in March 2018 through November 15, 2018, Sloane provided professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, Sloane provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Third, Historical CAT Costs 1 would not include the $19,628,791 in costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when CAT LLC's relationship with the Initial Plan Processor concluded. CAT LLC determined that Historical CAT Costs 1 would not include any fees paid to the Initial Plan Processor after November 15, 2017,
(ii) Previously Invoiced Costs for Historical CAT Costs 1
CEBBs and CEBSs collectively have been invoiced for $173,075,024 of the $212,039,879.34 of Historical CAT Costs 1 via Historical CAT Assessment 1, where $86,537,512 was invoiced collectively to CEBBs and $86,537,512 was invoiced collectively to CEBSs. Accordingly, Historical CAT Assessment 1A would seek to recover the remaining $38,964,855.34 of Historical CAT Costs 1 collectively from CEBBs and CEBSs, where CEBBs collectively will be responsible for $19,482,427.67, and CEBSs collectively will be responsible for $19,482,427.67.
Under the CAT NMS Plan, the Operating Committee is required to reasonably establish the length of the Historical Recovery Period used in calculating each Historical Fee Rate based upon the amount of the Historical CAT Costs to be recovered by the Historical CAT Assessment, and to describe the reasons for its length.
The Operating Committee determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable Historical Fee Rate 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans to the Participants in a timely fashion. The Operating Committee determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
The length of the Historical Recovery Period 1A and the reasons for its length are provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a Historical CAT Assessment.
The calculation of the fee rate for Historical CAT Assessment 1A also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for Historical Recovery Period 1A. 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 Historical Recovery Period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A 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 Historical CAT Assessment.
The fee rate for Historical CAT Assessment 1A would be calculated by dividing the total amount of costs to be recovered by Historical CAT Assessment 1A by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A, and dividing by 2. Specifically, the fee rate for Historical CAT Assessment 1A would be calculated by dividing $38,964,855.34 by 11,961,875,098,720.98, and then dividing by 2, which equals $0.00000162871017371542 per executed equivalent shares. Rounding this to six decimal places results in a fee rate of $0.000002 per executed equivalent share.
Participants would not be required to pay any fees associated with Historical CAT Assessment 1A as the Participants previously have paid all Past CAT Costs. The CAT NMS Plan explains that:
Because Participants previously have paid Past CAT Costs via loans to the Company, Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs and such other additional Past CAT Costs as reasonably determined by the Operating Committee will be paid by the cancellation of loans made to the Company on a pro rata basis based on the outstanding loan amounts due under the loans.
The CAT NMS Plan further states that “Historical CAT Assessments are
CEBBs and CEBSs would be required to pay fees for Historical CAT Assessment 1A on a monthly basis for the period in which Historical CAT Assessment 1A is in effect.
The CAT NMS Plan states that, “[n]otwithstanding the length of the Historical Recovery Period used in calculating the Historical Fee Rate, each Historical CAT Assessment calculated using the Historical Fee Rate will remain in effect until all Historical CAT Costs for the Historical CAT Assessment are collected.”
To implement Historical CAT Assessment 1A, a new section would be added to the Exchange's fee schedule for “Consolidated Audit Trail Funding Fees”, and it would include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each month in which a Historical CAT Assessment is in effect, each CEBB and each CEBS shall pay a 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 Historical CAT Assessment for each transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Historical Fee Rate reasonably determined pursuant to paragraph (b)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(2) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(2) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for Historical CAT Assessment 1A in June 2026, which shall set forth the Historical CAT Assessment 1A fees calculated based on transactions in May 2026, and shall receive an invoice for Historical CAT Assessment 1A for each month thereafter in which Historical CAT Assessment 1A is in effect.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A 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 $0.000002 per executed equivalent share.
(C) Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time. Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).
Proposed paragraph (a)(2)(B) of the fee schedule would set forth the fee rate of $0.000002 per executed equivalent share for Historical CAT Assessment 1A, which is calculated as discussed above.
The proposed language in paragraph (a)(2)(B) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A. Specifically, CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in the prior month, that is, transactions executed in May 2026. 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)(2)(A) of the fee schedule also would describe the monthly cadence of the invoices for Historical CAT Assessment 1A. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter while Historical CAT Assessment 1A is in effect.
Proposed paragraph (a)(2)(B) of the fee schedule would describe the invoices for Historical CAT Assessment 1A. Proposed paragraph (a)(2)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A on a monthly basis.” Proposed paragraph (a)(2)(B) of the fee schedule also would describe the fees to be set forth in the invoices for Historical CAT Assessment 1A. 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
Furthermore, proposed paragraph (a)(2)(C) of the fee schedule would describe how long Historical CAT Assessment 1A would remain in effect. It would state that “Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time.” This proposed paragraph would further state that “Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.”
Historical CAT Assessment 1A will be assessed for all transactions executed in each month through the end of the month in which $38,964,855.34 is assessed, and then CAT LLC will provide notice that Historical CAT Assessment 1A is no longer in effect. Since Historical CAT Assessment 1A is a monthly fee based on transaction volume from the prior month, Historical CAT Assessment 1A may collect more than $38,964,855.34. To the extent that occurs, any excess money collected during the final month in which Historical CAT Assessment 1A is in effect will be used to offset future fees and/or to fund the reserve for the CAT.
Finally, proposed paragraph (a)(2)(D) of the fee schedule sets forth the requirement for the CAT Executing Brokers to pay the invoices for Historical CAT Assessment 1A. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).”
Paragraph (b)(1) of the “Consolidated Audit Trail Funding Fees” section of its fee schedule describes the manner of payment of Industry Member CAT fees. Paragraph (b)(1) 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.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange previously has added this requirement to the Exchange's fee schedule. Specifically, paragraph (b)(2) of the fee schedule states:
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 Historical CAT Assessment 1A.
The CAT NMS Plan states that:
Details regarding the calculation of a CAT Executing Broker's Historical CAT Assessment will be provided upon request to such CAT Executing Broker. At a minimum, such details would include each CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their Historical CAT Assessment.
In addition, CAT LLC will make certain aggregate statistics regarding Historical CAT Assessments publicly available. Specifically, the CAT NMS Plan states that, “[f]or each Historical CAT Assessment, 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 on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that Historical CAT Assessment 1A is in effect as well as the total amount invoiced for Historical CAT Assessment 1A 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 Historical CAT Assessment 1A. By reviewing statistics regarding how much has been invoiced and how much remains to be invoiced for Historical CAT Assessment 1A, Industry Members would have sufficient information to reasonably track how much longer Historical CAT Assessment 1A is likely to be in place.
To date, CAT LLC, via FCAT, has billed Industry Members for Historical CAT Assessment 1 and certain
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 Historical CAT Assessment until any applicable Financial Accountability Milestone described in Section 11.6 has been satisfied.”
In accordance with Section 11.6(b) of the CAT NMS Plan, Historical CAT Assessment 1A seeks to recover costs that are related to “all fees, costs, and expenses (including legal and consulting fees, costs, and expenses) incurred by or for the Company in connection with the development, implementation and operation of the CAT from the effective date of [Section 11.6 of the CAT NMS Plan] until such time as Full Implementation of CAT NMS Plan Requirements has been achieved”
The reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of both: (a) equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information; and (b) options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information.
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports.
Under the FAM Period 1 requirement of Initial Industry Member Core Equity and Options Reporting, Industry Members—excluding Small Industry Members that are not OATS reporters—were required to report two categories of data to the CAT: equites transaction data and options transaction data (both excluding Customer Account Information, Customer-ID, and Customer Identifying Information) by July 31, 2020. Pursuant to exemptive relief provided by the Commission, the Commission authorized the Participants' Compliance Rules to allow core equity reporting for Industry Members (Phase 2a) to begin on June 22, 2020 and core options reporting for Industry Members (Phase 2b) to begin on July 20, 2020.
In adopting the FAMs, the Commission stated that the equities transaction reporting required for FAM Period 1 “is consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Equities 2a file submission and data integrity validations.' ”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Equities 2a file submission and data integrity validation (Large Industry Members and Small OATS Reporters)” was completed on June 22, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information” was completed on June 22, 2020.
In adopting the FAMs, the Commission stated that the options transaction reporting required for FAM Period 1 is “consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Options 2b file submission and data integrity validations.'”
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Options 2b file submission and data integrity validations” was completed on July 20, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information” was completed on July 20, 2020.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from June 22, 2020 through July 31, 2020. The total costs for this period, as discussed above, are $6,377,343. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($2,125,781) and CEBSs paying one-third ($2,125,781) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 2. FAM Period 2 began on August 1, 2020, and concluded on December 31, 2020, the date of the Full Implementation of Core Equity Reporting. Section 1.1 of the CAT NMS Plan defines “Full Implementation of Core Equity Reporting” as: the point at which: (a) Industry Member reporting (excluding reporting by Small Industry Members that are not OATS reporters) for equities transactions, excluding Customer Account Information, Customer-ID, and Customer Identifying Information, is developed, tested, and implemented at a 5% Error Rate or less and with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, and trade reporting facilities linkage to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system, excluding linkage of representative orders, from order origination through order execution or order cancellation; and (b) the query tool functionality required by Section 6.10(c)(i)(A) and Appendix D, Sections 8.1.1-8.1.3 and Section 8.2.1 incorporates the Industry Member equities transaction data described in condition (a) and is available to the Participants and to the Commission. This Financial Accountability Milestone shall be considered complete as of the date identified in a Quarterly Progress Report meeting the requirements of Section 6.6(c).
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2020,
Specifically, the Full Implementation of Core Equity Reporting requires the satisfaction of two prongs. The first prong requires Participants to have fully implemented the first phase of equities transaction reporting for Industry Members (excluding Small Industry Members that are not OATS reporters) at an Error Rate of less than 5%. In addition, equities transaction data produced by the CAT at this stage must also be sufficiently interlinked so as to permit full analysis of an order's lifecycle across the national market, excluding full linkage of representative orders. As CAT LLC reported on its Quarterly Progress Reports, Phase 2a was fully implemented as of October 26, 2020, including intra-firm, inter-firm, national securities exchange, and trade reporting facilities linkages.
• “Production Go-Live for Equities 2a Intrafirm Linkage validations” was completed on 7/27/2020;
• “Production Go-Live for Firm to Firm Linkage validations for Equities 2a (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020; and
• “Production Go-Live for Equities 2a Exchange and TRF Linkage validations (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020.
Furthermore, as CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2020, the average overall error rate for Phase 2a Industry Member Data was less than 5% as of December 31, 2020. The average overall error rate was calculated by dividing the compliance errors by processed records.
The second prong of this FAM requires that the equities transaction data collected by the CAT at this stage be made available to regulators through two basic query tools required by the CAT NMS Plan—a targeted query tool that will enable regulators to retrieve data via an online query screen with a variety of predefined selection criteria, and a user-defined direct query tool that will provide regulators with the ability to query data using all available attributes and data sources.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from August 1, 2020 through December 31, 2020. The total costs for this period, as discussed above, are $42,976,478. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($14,325,492.70) and CEBSs paying one-third ($14,325,492.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 3. FAM Period 3 began on January 1, 2021, and concluded on December 31, 2021, the date of the Full Availability and Regulatory Utilization of Transactional Database Functionality. Section 1.1 of the CAT NMS Plan defines “Full Availability and Regulatory Utilization of Transactional Database Functionality” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2021,
Specifically, the “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires the satisfaction of five prongs. The first prong requires that reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021,
In addition to Phase 2a and Phase 2b Industry Member Data, the second and third prongs of “Full Availability and Regulatory Utilization of Transactional Database Functionality” require Industry Member reporting of Phase 2c Industry Member Data and Phase 2d Industry Member Data. The Phase 2c Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. That Order states that “Phase 2c Industry Member Data” is Industry Member Data related to Eligible Securities that are equities other than Phase 2a Industry Member Data, Phase 2d Industry Member Data, or Phase 2e Industry Member Data. Specifically, the Phase 2c Industry
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Phase 2d Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. “Phase 2d Industry Member Data” is Industry Member Data that is related to Eligible Securities that are options other than Phase 2b Industry Member Data, Industry Member Data that is related to Eligible Securities that are equities other than Phase 2a Industry Member Data or Phase 2c Industry Member Data, and Industry Member Data other than Phase 2e Industry Member Data. Phase 2d Industry Member Data includes with respect to the Eligible Securities that are options: (1) simple manual orders; (2) electronic and manual paired orders; (3) all complex orders with linkages to all CAT-reportable legs; (4) LTIDs (if applicable) for accounts with Reportable Events for Phase 2d; (5) date account opened or Account Effective Date (as applicable) for accounts with an LTID and flag indicating the Firm Designated ID type as account or relationship for such accounts; (6) Allocation Reports as required to be recorded and reported to the Central Repository pursuant to Section 6.4(d)(ii)(A)(1) of the CAT NMS Plan; (7) the modification or cancellation of an internal route of an order; and (8) linkage between a combined order and the original customer orders. Phase 2d Industry Member Data also would include electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are options and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: a listed option bid or offer which is accessible electronically by customers or other market participants and is immediately actionable (
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data will include verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Quarterly Progress Report for the fourth quarter of 2021 states that “Phase 2a was fully implemented as of October 26, 2020;” “Phase 2b was fully implemented as of January 4, 2021;” “Phase 2c was implemented as of April 26, 2021;” and “Phase 2d was fully implemented as of December 13, 2021.”
• “Production Go-Live for Equities 2c reporting requirements (Large Industry Members)” was completed on April 26, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b and
• “FCAT Plan Processor creates linkages of the lifecycle of order events based on the received data through Phase 2d Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2b reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Equities 2c reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2d (Large Industry Members)” was completed on December 13, 2021; and
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b, 2c and 2d (Small Industry Members)” was completed on December 13, 2021.
The third prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” also imposes an Error Rate requirement of 5% or less. The Quarterly Progress Report for the fourth quarter of 2021 states the average overall error rate was less than 5% as of December 31, 2021. The average overall error rate was calculated by dividing the compliance errors by processed records.
The fourth prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires that the data collected by the CAT at this stage be made available to regulators through an online targeted query tool and a user-defined direct query tool. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The fifth prong requires the requirements of Section 6.10(a) of the CAT NMS Plan to have been met. Section 6.10(a) of the CAT NMS Plan requires the Participants to use the tools described in Appendix D to “develop and implement a surveillance system, or enhance existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository.” The Exchange implemented a surveillance system, or enhanced existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository as of December 31, 2021 in accordance with Section 6.10(a) of the CAT NMS Plan.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2021 through December 31, 2021. The total costs for this period, as discussed above, are $144,415,268. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remain two-thirds, with CEBBs paying one-third ($48,138,422.70) and CEBSs paying one-third ($48,138,422.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
As discussed above, CAT LLC has satisfied the Financial Accountability Milestones (“FAMs”) for Periods 1 through 3.
CAT LLC does not believe that the exemptive relief relating to the reporting of electronic responses for quotes (“RFQs”) that are not immediately actionable (“NIA Electronic RFQ Responses”) affect the conclusion that FAMs 1 through 3 have been satisfied. The only reason CAT LLC pursued this relief is because certain Industry Members introduced concerns that NIA Electronic RFQ Responses could be considered “orders” reportable pursuant to Rule 613(j)(8) and some Industry Members were not prepared to report such orders to CAT. Thus, the relief was requested on behalf of Industry Members. CAT LLC itself has not taken any position on whether NIA Electronic RFQ Responses are “orders,” as the definition of “order” is an SEC rule and the trading processes for NIA Electronic RFQ Responses are the Industry Members', not those of the Participants or CAT LLC. Accordingly, CAT LLC stated in its letter that “Industry Members must determine whether trading interest falls within the definition of an `order' for CAT purposes. To the extent an NIA Electronic RFQ Response is not considered an `order” as defined in Rule 613(j)(8) and the CAT NMS Plan, it would not be reportable to CAT.”
Only “orders” as defined in SEC Rule 613(j)(8) are reportable to CAT. There is no agreement across the industry or among regulators as to whether NIA Electronic RFQ Responses are “orders” reportable to CAT. Certain Industry Members have raised the question as to whether NIA Electronic RFQ Responses are orders, but others have argued that they are not orders under Rule 613(j)(8).
As further discussed in the prior FIF letters, even if the Commission had the legal authority to require the reporting of NIA RFQ responses to CAT without an amendment to Rule 613, the Commission has not provided guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT. In subsequent discussions with industry members, Commission representatives have agreed that, prior to NIA RFQ responses being reportable to CAT, it would be necessary for the Commission to provide further guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT.
On May 20, 2024, the Commission granted CAT LLC's request for exemptive relief from certain CAT reporting requirements pertaining to NIA Electronic RFQ Responses to the extent such responses are considered “orders” reportable pursuant to Rule 613(j)(8).
When the Commission proposed the FAMs, the Participants expressed concern that, “by conditioning the ability of CAT LLC and the Participants to collect Post-Amendment Industry Member Fees on factors dependent on the efforts of Industry Members, the Commission's proposals inadvertently establish a perverse incentive for Industry Members to devote less than maximum efforts to comply with their obligations related to the CAT as they will pay less fees in such instances.”
CAT LLC does not believe that the Commission's May 19, 2023 order granting temporary exemptive relief relating to certain verbal floor activity and unstructured verbal and electronic upstairs activity (the “2023 Verbal Quotes Exemption”) affects the conclusion that FAMs 1 through 3 have been satisfied. The 2023 Verbal Quotes Exemption, which was issued on May 19, 2023, is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. The relevant exemption for this time period is the Commission's November 12, 2020 order, which granted relief for the same activity through July 31, 2023 (the “2020 Verbal Quotes Order”).
CAT LLC does not believe that the Commission's November 2, 2023 order granting relief from certain CAT NMS Plan requirements (the “November 2023 Order”) affects the conclusion that FAMs 1 through 3 have been satisfied. The November 2023 Order is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. As described in the November 2023 Order, the relevant exemptive orders for this time period were issued on December 16, 2020, which also states that “the Commission has determined that the Participants have sufficiently complied with the conditions set forth in the prior Orders and with the technical requirements for Quarterly Progress Reports set forth in section 6.6(c) of the CAT NMS Plan, including for purposes of determining compliance with any applicable Financial Accountability Milestones.”
CAT LLC also completed the requirements of FAM Period 2, including the required linkages, by December 31, 2020. Although Participant exchanges may report the Executing Broker to CAT differently in certain situations, these reporting differences are irrelevant for linkage purposes as the fields used for CAT Executing Broker are not used for linkage.
The CAT Funding Model approved by the Commission permits the recovery of reasonable costs in each of the categories of CAT costs sought to be recovered via Historical CAT Assessment 1A.
CAT LLC believes that it is reasonable to seek recovery of costs incurred prior to when the CAT NMS Plan became effective in November 2016, such as legal and consulting fees incurred to create the CAT NMS Plan. Rule 613 specifically mandates that the CAT be created, implemented and maintained, and further provides that the CAT NMS Plan include a proposed allocation of estimated costs to fund the creation, implementation and maintenance of the CAT among the Participants (referred to as “plan sponsors”), and between the Participants and Industry Members (referred to as “members of the plan sponsors”).
[i]n determining fees on Participants and Industry Members the Operating Committee shall take into account fees, costs and expenses (including legal and consulting fees and expenses) reasonably incurred by Participants on behalf of the Company prior to the Effective Date in connection with the creation and implementation of the CAT.
Accordingly, the CAT NMS Plan specifically permits the recovery of costs, including legal and consulting costs, reasonably incurred prior to November 2016 in connection with the creation and implementation of the CAT.
Furthermore, the costs incurred to create and implement the CAT prior to the effective date of the CAT NMS Plan (“Pre-Formation Costs”) were reasonable both in scope and amount, in accordance with the requirements of Section 11.1(c) of the CAT NMS Plan. During the four-year period from 2012 to 2016, a total of $13,842,881 in Pre-Formation Costs were incurred. This is an average of approximately $3.5 million per year over this period. The Pre-Formation Costs fell into three categories: legal costs, consulting costs and public relations costs. This includes legal costs of $3,196,434; consulting costs of $10,589,273; and public relations costs of $57,174. The legal, consulting and public relations services were performed by WilmerHale, Deloitte and Peppercomm, respectively. The selection considerations and fees for these three firms are described in detail above and are described further below. The Pre-Formation Costs are direct costs of CAT, which have been funded entirely by the Participants through non-interest-bearing notes. The Pre-Formation Costs do not include the significant costs incurred by each of the individual Participants in responding to the adoption of Rule 613.
The Pre-Formation Costs are reasonable and appropriate as they reflect the extensive efforts that were necessary to create the CAT NMS Plan as mandated after the SEC's adoption of Rule 613. As described in more detail below, these efforts included, among other things, developing a plan for selecting the Plan Processor, soliciting and evaluating bids, engaging a diverse set of market participants and the SEC in the development of the Plan, interacting with the SEC in their oversight of the development of the Plan, and seeking appropriate exemptive relief to address areas of concern in Rule 613.
The Participants determined to utilize an RFP to ensure that potential alternative solutions for creating the Plan could be presented and considered, and that a detailed and meaningful cost-benefit analysis could be performed. The SEC supported the use of an RFP, and approved its use as it is described in extensive detail in the CAT NMS Plan.
In the context of the SEC's adoption of Rule 613, commenters urged the Commission to utilize an RFP process to assist in the planning and design of the NMS plan.
In this regard, several commenters suggested that the Commission undergo a RFP or request for information (“RFI”) process to create and implement a consolidated audit trail. Specifically, FIF urged the Commission to perform a RFP process “to determine the best technical solution for developing a consolidated audit trail.” FIF suggested that the Commission “should outline a set of goals and guiding principles they are striving to achieve as part of the adopted CAT filing and leave the determination of data elements and other technical requirements to [an] industry working group.” Similarly, Direct Edge suggested that Commission staff should form and engage in a
In response to these comments, the Commission modified Rule 613 to require the Participants to address certain important considerations regarding the features and details of the NMS plan and to extend the timeframe for submission of the CAT NMS Plan by the Participants from the 90 days as originally proposed to 270 days, in part, to accommodate a process that would address these considerations.
The SEC specifically recognized that the Participants planned to use an RFP when it approved the Selection Plan, and stated that the RFP was a reasonable approach.
On February 26, 2013, the Participants published an RFP soliciting bids from parties interested in serving as the plan processor for the CAT. Initially, 31 firms submitted intentions to bid. In the following months, the Participants engaged with potential bidders with respect to, among other things, the selection process, selection criteria, and potential bidders' questions and concerns. On March 21, 2014, the Participants received ten bids in response to the RFP.
On September 4, 2013, the Participants filed with the Commission a national market system plan to govern the process for Participant review of the bids submitted in response to the RFP, the procedures for evaluating the bids, and, ultimately, selection of the plan processor (the “Selection Plan”).
The Selection Plan divided the review and evaluation of bids, and the selection of the plan processor, into various stages. Specifically, pursuant to the Selection Plan, a selection committee reviewed all bids and determined which bids contained sufficient information to allow the Participants to meaningfully assess and evaluate the bids. The ten submitted bids were deemed “Qualified Bids,” and so passed to the next stage, in which each bidder presented its bids to the Participants on a confidential basis. On July 1, 2014, after conducting careful analysis and comparison of the bids, the Selection Committee voted and selected a shortlist of six eligible bidders. The Selection Committee determined which shortlisted bidders would be provided the opportunity to revise their bids. After the Selection Committee assessed and evaluated the revised bids, the Selection Committee selected the plan processor via two rounds of voting by the Participants, as described in the Selection Plan.
The Selection Plan established an Operating Committee responsible for formulating, drafting, and filing with the Commission the CAT NMS Plan and for ensuring that the Participants' joint obligations under Rule 613 were met in a timely and efficient manner. In formulating the CAT NMS Plan, the Participants also engaged multiple persons across a wide range of roles and expertise, engaged the consulting firm Deloitte as project manager, and engaged the law firm WilmerHale to serve as legal counsel in drafting the Plan. Within this structure, the Participants focused on, among other things, comparative analyses of the proposed technologies and operating models, development of funding models to support the building and operation of the CAT, and detailed review of governance considerations. Given the complexity and scope of developing the CAT NMS Plan, these efforts were extensive.
When it approved the CAT NMS Plan in 2016, the Commission reiterated its belief that the Selection Plan remains a “reasonable approach,” that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue”:
In approving the Selection Plan, the Commission stated that the Selection Plan is reasonably designed to achieve its objective of facilitating the development of the CAT NMS Plan and the selection of the Plan Processor. The Commission also found that the Selection Plan is reasonably designed to govern the process by which the SROs will formulate and submit the CAT NMS Plan, including the review, evaluation, and narrowing down of Bids in response to the RFP, and ultimately choosing the Plan Processor that will build, operate, and maintain the consolidated audit trail. The Commission believes that the process set out in the Selection Plan for selecting a Plan Processor remains a reasonable approach, which will facilitate the selection of Plan Processor through a fair, transparent and competitive process and that no modifications to the Selection Plan are required to meet the approval standard. . . . In response to the comment that offered support for a specific Bidder, the Commission agrees with the Participants that the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor
During the process of developing the CAT NMS Plan, the Participants engaged in extensive and meaningful dialogue with market participants and the SEC. To this end, the Participants created a website to update the public on the progress of the CAT NMS Plan, published a request for comment on multiple issues related to the Plan, held multiple public events to inform the industry of the progress of the CAT and to address inquiries, and formed, and later expanded, a DAG to solicit more input from a representative industry group.
The DAG included representatives of Participants and Industry Members and conducted meetings to discuss, among other things, technical and operational aspects the Participants were considering for the Plan. The Participants issued press releases soliciting participants for the DAG, and a wide spectrum of firms was deliberately chosen to provide insight from various industry segments affected by CAT. The DAG meetings included discussions of topics such as option market maker quote reporting, requirements for capturing Customer IDs, timestamps and clock synchronization, reporting requirements for order handling scenarios, costs and funding, error handling and corrections, and potential elimination of systems made redundant by the CAT. From the inception of the DAG through September 2014, the DAG participated in 36 meetings, as well as a variety of DAG subcommittee meetings.
Following multiple discussions between the Participants and both the DAG and the bidders, as well as among the Participants themselves, the Participants recognized that some provisions of Rule 613 would not permit certain solutions to be included in the Plan that the Participants, in coordination with the DAG, determined advisable to effectuate the most efficient and cost-effective CAT. Specifically, “the SROs reached the conclusion that additional flexibility in certain of the minimum requirements specified in Rule 613 would allow them to propose a more efficient and cost-effective approach without adversely affecting the reliability or accuracy of CAT Data, or its security and confidentiality.”
After reviewing the exemptive request, the Commission determined that it was appropriate in the public interest and consistent with the protection of investors to grant the requested exemptive relief.
[T]he Commission is persuaded to provide flexibility in the discrete areas discussed in the Exemption Request so that the alternative approaches can be included in the CAT NMS Plan and subject to notice and comment. Doing so could allow for more efficient and cost-effective approaches than otherwise would be permitted. The Commission at this stage is not deciding whether the proposed approaches detailed below are more efficient or effective than those in Rule 613. However, the Commission believes the proposed approaches should be within the permissible range of alternatives available to the SROs.
The Commission further stated that the requested exemptive relief is consistent with the protection of investors. The Commission noted that:
Doing so will provide the public an opportunity to consider and comment on whether these proposed alternative approaches would indeed be more efficient and cost-effective than those otherwise required by Rule 613, and whether such approaches would adversely affect the reliability or accuracy of CAT Data or otherwise undermine the goals of Rule 613. Moreover, if—as the SROs represent—efficiency gains and cost savings would result from including the proposed approaches in the CAT NMS Plan without adverse effects, then the resultant benefits could potentially flow to investors (
The Participants incorporated the exemptive relief into the proposed CAT NMS Plan, which was noticed for comment, and the Commission ultimately approved the CAT NMS Plan with the more efficient and cost-effective alternative approaches described in the exemptive relief. Accordingly, the Participants believe that the costs incurred in developing the exemptive request were critical to the creation of a better CAT than was originally contemplated by Rule 613, and therefore should be recoverable as part of Historical CAT Assessment 1A.
Rule 613(a)(1) under Regulation NMS required the Participants to jointly file the CAT NMS Plan on or before April 28, 2013, less than a year after the adoption of Rule 613. In recognition of the complexity of the project to create the CAT NMS Plan as well as industry interest in limiting or eliminating certain requirements of Rule 613 (
The SROs stated in their Request Letter that they do not believe that the 270-day time period provided for in Rule 613(a)(1) provides sufficient time for the development of the RFP, formulation and submission of bids, and review and evaluation of such bids. The SROs also stated that they believe additional time beyond the 270 days provided for in Rule 613(a)(1) is necessary in order to provide sufficient time for effective consultation with and input from the industry and the public on the proposed solution chosen by the SROs for the creation of the consolidated audit trail at the conclusion of the RFP process and the NMS plan itself.
In recognition of the need for additional time to refine the technical description of and requirements for the CAT and to allow for additional evaluation of the proposed cost and funding considerations, the SEC granted two extensions of this deadline.
This additional time to complete the RFP process should allow the SROs to engage in a more thoughtful and comprehensive process for the development of an NMS plan. In this regard, the Commission notes that the additional time to solicit comment from the industry and the public at certain key points in the development of the NMS plan could identify issues that can be resolved earlier in the development of the consolidated audit trail and prior to filing the NMS plan with the Commission.
Given the Commission's recognition of the reasonableness and value of the extension of the deadline to file the CAT NMS Plan, the Participants believe that the costs incurred in developing the extension request were important to the process of developing the CAT NMS Plan, and therefore should be recoverable as part of Historical CAT Assessment 1A.
After extensive analyses and discussions with the DAG, bidders, market participants and the SEC staff, the Participants finalized the draft of the CAT NMS Plan and filed the CAT NMS Plan with the SEC on September 30, 2014. Following additional discussions, the Participants filed several amendments to the CAT NMS Plan during 2015 and 2016. With these additional changes, the SEC published the CAT NMS Plan for notice and comment in May 2016.
The Pre-Formation Costs include legal costs of $3,196,434. The legal services were performed by WilmerHale. The selection considerations and fees for WilmerHale were described in detail above. Prior to the creation of CAT LLC, WilmerHale was engaged to represent the consortium of SROs, not the individual Participants. For administrative purposes, FINRA agreed to receive such legal bills, although such costs were shared among the Participants. Therefore, the legal costs incurred with respect to WilmerHale do not include legal costs incurred by the individual Participants. These pre-formation legal costs are described in detail above and are further described below:
• Analyzed various legal matters associated with the Selection Plan and drafted an amendment to Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the DAG;
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on the CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Drafted exemptive requests;
• Provided interpretations related to the CAT NMS Plan;
• Provided support with regard to discussions among the exchanges, FINRA and other third parties, such as Deloitte;
• Provided tax advice with regard to CAT's status as a tax-exempt organization; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The Pre-Formation Costs include consulting costs of $10,589,273. The consulting services were performed by Deloitte. The selection considerations and fees for Deloitte were described in detail above. Prior to the creation of CAT LLC, for administrative purposes, Deloitte was engaged by FINRA to provide consulting services related to CAT, but the costs were shared by the consortium of SROs per agreement. Therefore, the consulting costs incurred with respect to Deloitte do not include consulting costs incurred by the individual Participants. The pre-formation consulting costs include the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participants' independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, reviewing technical requirements of other NMS plans, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided support for industry outreach sessions, including with regard to program design and agenda development, program support and logistics and coordination; and
• Provided support in fact finding, drafting content and meeting coordination for WilmerHale with regard to the CAT and the development of the CAT NMS Plan.
Such Pre-Formation Costs did not include costs related to the Chair of the CAT NMS Plan Operating Committee, as the CAT NMS Plan had not yet been adopted.
The Pre-Formation Costs include public relations costs of $57,174. The public relations services were performed by Peppercomm. The selection considerations and fees for Peppercomm are described in detail above. The costs related to Peppercomm were shared among the SROs. Therefore, the public relations costs do not include public relations costs incurred by the individual Participants. The pre-formation public relations costs include services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs related to cloud hosting services as a part of Historical CAT Assessments. CAT LLC believes that the costs related to cloud hosting services described in detail above are reasonable and appropriate given the strict data processing timelines and storage requirements imposed by the Commission-approved CAT NMS Plan and should be recoverable as a part of Historical CAT Assessment 1A.
CAT LLC believes that the costs for the cloud hosting services are reasonable, both in terms of the level of the fees paid by CAT LLC for cloud hosting services provided by AWS and the scope of the services performed by AWS for CAT LLC. CAT LLC believes that both the scope and amount of the costs for cloud hosting services are reasonable given the current requirements of the CAT NMS Plan adopted pursuant to Rule 613, including the strict data processing timeline, storage and other technical requirements under the Commission-approved CAT NMS Plan.
CAT LLC believes that the level of fees for the cloud hosting services is 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.
CAT LLC also believes that the scope of services provided by AWS for the CAT are appropriate given the current requirements of the Commission-approved CAT NMS Plan. As described above, the cloud hosting services costs reflect a variety of factors including, among other things:
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In addition, various requirements of the CAT NMS Plan adopted pursuant to Rule 613 contribute to the significant cloud hosting services costs, and that various Plan requirements could be amended or removed without affecting the regulatory purpose of the CAT. Indeed, CAT LLC has repeatedly sought exemptive relief and filed amendments to the CAT NMS Plan, and has even filed suit against the Commission, to seek to revise or eliminate certain costly requirements related to the CAT. However, despite these efforts, absent the Commission granting exemptive relief or approving cost savings amendments to the CAT NMS Plan, CAT LLC, the Participants and Industry Members are all required to comply with such requirements.
CAT is reasonably designed to efficiently and effectively utilize cloud computing and storage services, given the requirements of the Commission-approved CAT NMS Plan, including requirements related to security, operational reliance and quality assurance, and maintainability.
The Plan Processor uses state-of-the-art software that meets the strict security standards of the CAT NMS Plan. CAT utilizes a big data processing framework that is extensively used by large data processing companies, such as Apple, Meta, Netflix, IBM and Google. As such, it has substantial commercial support and support in the open-source community. It is also well suited for use with regard to iterative types of algorithms and query functions and analytics that the CAT requires, and it provides the heightened security necessary for the CAT.
The development and implementation of the design of CAT is not and has not been static. CAT LLC and the Plan Processor are always evaluating new innovations and service offerings from AWS and other providers to seek to maximize efficiency and cost avoidance while still satisfying the requirements of the CAT NMS Plan. These efforts have led to substantial savings to date. The cloud hosting costs for 2023 were less than the cloud hosting costs for 2022 by $8 million despite processing seven trillion more events in 2023 due to the efficiency and cost avoidance efforts for cloud hosting services. For example, when AWS introduced new storage options, FCAT adopted the cost-efficient new storage option after establishing that the new offering would satisfy the security and other standards of the CAT NMS Plan. This change led to millions of dollars of savings in storage costs. Similarly, when AWS introduced a new compute processor, FCAT adopted this new compute processor, which lead to millions of dollars in savings in compute costs. However, in other cases, new cloud technology developments could not be implemented in CAT because they would not satisfy the security or other requirements of the CAT NMS Plan.
When evaluating the design of the CAT, it must be kept in mind that the CAT is not a typical commercial technology project. The ability to make use of technology approaches that may lead to cost avoidance is also subject to the restrictive requirements of the CAT NMS Plan, such as processing timeframes, requirements for retention of data versions, query requirements, and security standards. Because such requirements are set forth in the CAT NMS Plan, any modification of such requirements are subject to the time-consuming process of amending the CAT NMS Plan or seeking an exemption from the relevant requirement. For example, CAT LLC recently has filed an amendment to address several of these expensive Plan requirements.
The CAT System also was designed to minimize the extent to which Industry Members would need to alter their systems to report to CAT. During the design process, Industry Member groups argued that it would make more sense financially for the CAT to accommodate differences in industry systems, than for all Industry Members to change their systems. Moreover, such design choices would facilitate consistency, uniformity and accuracy in reporting. Requiring the CAT to make such accommodations may increase CAT costs while accommodating CAT Reporters.
Based on the requirements in the CAT NMS Plan and/or in response to industry requests for functionality to be embedded with the Plan Processor to streamline or limit Industry Member system changes, the CAT has been designed to limit the effect on Industry Members. The following provides examples of such accommodations:
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To be clear, if OATS-like error correction tools are not made available on Day 1, hundreds of firms will be required to create and test their own tools or obtain vendor alternatives prior to the CAT Go-Live Date. Proprietary tools will require additional system builds, access to and ingestion of CAT data to perform system validation, and testing which will further stress the limited number of subject matter experts (“SMEs”) dedicated to the implementation of CAT reporting. Should this occur, inevitably firms (especially small firms who lack the necessary IT staff to write code and develop proprietary systems), may be put in the position of passing onto investors the cost required to build hundreds of redundant systems.
CAT provides various tools to help Industry Members identify and rectify errors.
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FIF CAT WG is not proposing a specific format; rather, we are proposing flexibility of input formats which includes support of existing formats (
Mandating a uniform format for reporting data to the CAT simplifies the task for the Central Repository of consolidating/storing data, but it puts the burden on each CAT Reporter to accurately translate their current (
CAT provides such a flexible input format.
The costs for cloud hosting services are appropriate and have not been adversely affected by the original design and approaches of the Initial Plan Processor. FCAT's design costs are the result of the requirements of the Commission-approved CAT NMS Plan.
When FCAT took over as the Plan Processor from Thesys, it utilized certain aspects of the technical specifications created by Thesys in its design. However, FCAT has not maintained aspects of the original design that would not be appropriate for the CAT. FCAT revised and enhanced the original technical specifications of the CAT System to increase its efficiency and efficacy, and to ensure its compliance with the CAT NMS Plan. For example, the Initial Plan Processor's approach utilized many more fields than FCAT's approach, which relies on additional linkages. With the additional linkages, the CAT System takes on more of the CAT-related burdens than the Industry Members. Such an approach serves to facilitate consistency, uniformity and accuracy in reporting.
Moreover, FCAT did not utilize the system built by the Initial Plan Processor; it rebuilt the CAT System based on revised technical specifications. For example, the Initial Plan Processor used an on-premises processing approach which was not geared toward the huge amounts of data stored in the CAT, while FCAT adopted a cloud-based solution in response to such data demands.
Furthermore, given the very short timeframe to develop the CAT System and the prior optimization of certain query tools (
CAT LLC continues to support the selection of AWS as the cloud hosting services provider for CAT given the compliance, operational, and security requirements of the CAT. Independent
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In addition, the nature of the CAT, including the amount of data it must process and the size of its data footprint, does not allow for a multi-cloud solution as this would be cost prohibitive and greatly increase the security boundary and associated risk profile of the CAT. For example, a multi-cloud hosting option would increase costs, complexity, and risk for operations with regard to, for example, DevOps, production support, and networking. Similarly, with regard to security, a multi-cloud solution would increase risk, including with regard to the need for data transfers between cloud providers and the expansion of the security boundary. With regard to labor, a multi-cloud solution would lose economies of scale due to the need to support unique cloud requirements. Accordingly, the use of a single-cloud solution continues to provide advantages with regard to cost, complexity, and risk. Indeed, “[t]he best practice is to focus on a single primary strategic provider.”
Furthermore, if another cloud service provider were determined to be a better match for the CAT at some future date, switching cloud service providers would be a very significant, expensive and time-consuming effort. Such an effort would likely be a 10-to-15-year commitment at a substantial expense. Such a move would require the replication or redesign of the underlying cloud environments (
CAT LLC believes that the recovery of costs related to the development of the funding model is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
Funding the CAT is a critical aspect of Rule 613 and the CAT NMS Plan. Article XI of the CAT NMS Plan describes in detail the requirements for funding the CAT, and the Participants are required to comply with and enforce compliance with the funding requirements of the CAT NMS Plan, just as with other aspects of the Plan. Accordingly, the development and implementation of a funding model for the CAT is as much a part of the requirements of the CAT NMS Plan as the development and operation of the CAT System. CAT LLC sees no reason to distinguish the efforts to develop a funding model from, for example, efforts to develop the CAT System, in seeking to recover reasonable CAT costs.
Moreover, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . legal costs.”
In addition, the legal costs incurred for the assistance in developing the CAT Funding Model are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at negotiated rates for such services that reflect both the extent of the services and market rates. Moreover, the scope of the legal costs associated with the development of the funding model reflect the complexity of the task in satisfying the detailed requirements of the CAT NMS Plan, the standards of the Exchange Act, and the many perspectives of the different market constituents potentially affected by or interested in the funding model, including Industry Members, Participants and investors. The many and varied comments by market participants on CAT funding over the years demonstrate the complexity of the task.
CAT LLC believes that the recovery of legal costs related to the litigation with the SEC regarding the CAT NMS Plan is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
The conditional exemptive relief in this Order allows for the implementation of alternative regulatory solutions that continue to advance the regulatory goals that Rule 613 and the CAT NMS Plan were intended to promote, while reducing the implementation and operational costs, burdens, and/or difficulties that would otherwise be incurred by the Participants and Industry Members that must fund the CAT.
CAT LLC believes it is reasonable and appropriate to incur costs to limit the need to incur even greater costs due to certain interpretations of the Plan.
In addition, the legal costs incurred during the litigation are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at market rates for such services. As such, the legal costs related to this litigation incurred during the period covered by Historical CAT Assessment 1A were reasonable.
Finally, Industry Members will directly benefit from the result of the litigation because it has addressed CAT NMS Plan requirements that would have imposed significantly greater costs on the CAT. Accordingly, it is reasonable and appropriate that the costs of such litigation be included in Historical CAT Costs 1.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017, which was the date by which Participants were required to begin reporting to the CAT, due to the delay in the commencement of reporting to the CAT. As discussed above, the Participants determined to exclude all CAT costs incurred from November 15, 2017 through November 15, 2018, which includes $37,852,083 in Thesys costs incurred from November 15, 2017 through November 15, 2018 (as well as other CAT costs during this period). The remaining Thesys costs incurred after November 15, 2018 are the $19,628,791 in capitalized developed technology costs for the period from November 16, 2018 through February 2019 incurred in the development of the CAT by the Initial Plan Processor, as well as a transition fee for the transition from the Initial Plan Processor to the successor Plan Processor. The Participants would remain responsible for 100% of these $19,628,791 in costs.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017. CAT LLC notes that the development and implementation of the CAT System, while unprecedented in scope and design, is like any other large and innovative technology project in that, inevitably, there were adjustments and refinements in the technical approach as the project developed, even with substantial planning efforts and oversight prior to the build. This is even more likely when the project faces a very tight implementation schedule, such as the one imposed by the Commission in Rule 613 and the CAT NMS Plan. However, an adjusted approach does not mean that the funds were not valid expenditures and should not be recovered.
The reasonableness of Thesys costs should be evaluated by the Commission as of the time they were incurred, not in hindsight. As detailed above, the Commission concluded in 2016 that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue.”
As noted in the CAT Funding Model Approval Order, the Commission recognized that “[t]he CAT NMS Plan contemplates that the costs of the CAT are to be allocated between the Participants and Industry Members.”
CAT LLC believes that the recovery of CAIS-related costs is appropriate, and that the amount and scope of such costs, as described above, are reasonable, and that the reasonableness of historical costs should be evaluated by the Commission as of the time they were incurred, not in hindsight.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable CAIS operating costs as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . CAIS operating fees.”
In addition, CAT LLC determined that the CAIS operating fees described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The “CAIS Operating Costs” for Historical CAT Costs 1 total $9,480,587, with Pre-FAM costs of $2,072,908, FAM 1 costs of $254,998, FAM 2 costs of $1,590,298, and FAM 3 costs of $5,562,383. As described above, the CAIS operating fees were incurred with regard to two categories of CAIS-related efforts: (1) the acceleration of the reporting of LTIDs; and (2) the development of the CAIS Technical Specifications and the building of CAIS. These two categories of costs are discussed in more detail below.
During the period covered by Historical CAT Assessment 1A, the CAIS operating costs included costs related to the acceleration of the
• After FCAT developed the LTID Technical Specifications, the LTID Technical Specifications were published on January 31, 2020, with additional updates provided to the LTID Technical Specifications through April 2021.
• The LTID account information testing environment opened on August 24, 2020.
• The LTID account information reporting production environment opened on December 14, 2020.
• CAT Reporters were required to request their production readiness certification for account information related to LTIDs by the deadline of April 9, 2021.
• The LTID account information reporting for Phases 2a, 2b and 2c for Large Industry Members went live on April 26, 2021.
• The LTID account information reporting for Phases 2d for Large Industry Members went live on December 13, 2021.
• The LTID account information reporting for Phases 2a, 2b, 2c and 2d for Small Industry Members went live on April 26, 2021.
Throughout this project, FCAT and CAT LLC worked closely with the industry on LTID and CAIS reporting. Between December 2019 and December 2021, at least 57 checkpoint calls, webinars, and technical working group meetings with industry representatives were hosted to address issues and to educate CAT Reporters regarding LTID and CAIS reporting.
The LTID reporting project was successfully completed in a timely fashion, and the fees related to the project were reasonable. Accordingly, CAT LLC appropriately seeks to recover such costs via Historical CAT Assessment 1A.
During the period covered by Historical CAT Assessment 1A, FCAT began the development of the full CAIS Technical Specifications and the building of CAIS. The CAIS Technical Specifications were developed during this period as follows:
• Iterative drafts of the CAIS Technical Specifications were published on June 30, 2020, December 1, 2020, and January 1, 2021.
• The full, final CAIS Technical Specifications were published on January 29, 2021.
• Updated versions of the CAIS Technical Specifications were published throughout 2021.
As discussed above, FCAT and CAT LLC frequently engaged with the industry regarding the development of CAIS, hosting regular checkpoint calls, webinars, and technical working group meetings with industry representatives to address any issues, including addressing the interplay between Industry Members' existing customer systems and CAIS, and to educate CAT Reporters regarding LTID and CAIS reporting. Such engagement was critical to the CAIS development process as the CAIS project was unprecedented in terms of its content, scope and complexity.
During this period, FCAT also commenced the building of the CAIS system in accordance with the CAIS Technical Specifications during the period covered by Historical CAT Assessment 1A. The CAIS system was ready for industry testing shortly after the end of this period in January 2022.
The CAIS Technical Specifications and the CAIS system, as developed during this period, continue to be used. Industry Members have been required to report, and have continuously reported, required data to CAIS on a daily basis since November 7, 2022, consistent with interim reporting obligations. The CAIS system accepts and validates the CAIS data submitted by Industry Members and provides Industry Members with initial feedback on data errors. In light of the unprecedented nature of the CAIS system, certain changes to the system, such as changes related to error corrections and the CAIS regulatory portal, were necessary to finalize CAIS reporting. FCAT worked to address these remaining issues,
CAT LLC believes that the recovery of public relations costs is appropriate and that the amount and scope of such costs, as described above, are reasonable.
The Commission has long recognized that external public relations costs are reasonably associated with creating, implementing and maintaining the CAT. In the CAT NMS Plan Approval Order, the Commission estimated that the Participants had collectively spent approximately $2,400,000 in preparation of the CAT NMS Plan on external public relations, legal, and consulting costs, and estimated that the Participants would continue to incur external public relations costs associated with maintaining the CAT upon approval of the CAT NMS Plan.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for public relations services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . public relations costs.”
In addition, CAT LLC determined that the public relations costs described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The services performed by the public relations firms through 2021 were limited in scope to assist CAT LLC,
CAT LLC believes that the recovery of legal costs related to the limitation of liability provision, including costs related to the proceedings before the SEC and costs related to the proposed amendment to the Consolidated Audit Trail Reporter Agreement and the Consolidated Audit Trail Reporting Agent Agreement (the “Reporting Agreements”) is appropriate and that the amount and scope of such costs as described above are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
Moreover, it is critical that CAT LLC, which has no employees of its own, have the ability to fund a legal defense in litigation and other legal proceedings against it. In response to CAT LLC requiring Industry Members to agree to the limitation of liability provision to submit data to the CAT, SIFMA filed an application for review of actions taken by CAT LLC and the Participants pursuant to Sections 19(d) and 19(f) of the Exchange Act. Contemporaneously with the filing of this proceeding, SIFMA moved for a stay of the requirement that Industry Members sign a Reporter Agreement, or in the alternative, asked the Commission to further delay the launch of CAT reporting on June 22, 2020. CAT LLC must have the resources to defend itself from litigious actions by others, like these.
Although a limitation of liability provision ultimately was not adopted as proposed, it was a reasonable provision to propose for the CAT Reporter Agreements, given that such provisions are in accordance with industry norms. Limitations of liability are ubiquitous within the securities industry and have long governed the economic relationships between self-regulatory organizations and the entities that they regulate. For example, U.S. securities exchanges have adopted rules to limit their liability for losses that Industry Members incur through their use of exchange facilities.
Furthermore, as described above, the specialized services were performed by experienced counsel at market rates for such services. Accordingly, the legal costs for the efforts related to the limitation of liability provision were reasonable.
CAT LLC believes that the recovery of consulting costs related to the Chair of the CAT Operating Committee is appropriate and that the amount and scope of such costs are reasonable.
As a preliminary matter, the selection of the Chair of the Operating Committee complies with the requirements of Section 4.2 of the CAT NMS Plan. The initial Chair that served during the period covered by Historical CAT Assessment 1A was designated by a Participant as the Participant's alternate voting member. Accordingly, the Chair is a representative of the Participants, as required by the CAT NMS Plan.
In addition, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for consulting as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . consulting . . . ” costs.
The Participants determined that the position of the Chair was a critical role for the implementation of the CAT, and an independent Chair would appropriately consider and address the views of each of the Participants. The Participants also determined that it was important to have a Chair with a strong background regarding issues related to the regulatory obligations of self-regulatory organizations, including their obligations under national market system plans. The compensation paid to the Chair is appropriate for a person with such background and skills. The average annual amount paid to the Chair from 2017 through the end of FAM 3 was $292,733.30. Separate from the Chair, CAT LLC relies upon a Leadership Team of representatives of the SROs to oversee the day-to-day implementation of the CAT NMS Plan. CAT LLC does not compensate any member of the Leadership Team.
CAT LLC understands that there are three types of reconciliation processes related to the invoices:
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As discussed further below, CAT LLC only considers the first type of process to be a “reconciliation” and the only type of process that is required under the CAT NMS Plan. CAT LLC provides the means to reconcile the CAT invoice amount to the underlying trades provided by CAT.
The CAT NMS Plan does not require CAT LLC to facilitate the second type of process: matching underlying trades for a CAT invoice with a firm's internal books and records. CAT LLC has access only to the underlying trades provided by CAT; it does not have access to a firm's internal books and records. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
The CAT NMS Plan also does not require CAT LLC to provide the ability to identify the order originator for the underlying trades for the CAT invoices. Accordingly, the billing guidance and processes do not provide CAT Reporters with the ability to identify the order originator for the underlying trades provided by CAT with CAT invoices. CAT LLC has been working closely with CAT Reporters to explain its billing approach and to address any outstanding billing questions. But, it should not be lost that CAT LLC provides information sufficient to allow CAT Reporters to reconcile CAT invoice amounts with the underlying trades provided by CAT LLC.
The CAT NMS Plan does not require CAT LLC to facilitate the matching of underlying trades for a CAT invoice with a firm's internal books and records, which may consist of trading data from various sources external to CAT. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
In this regard, it is important to recognize that CAT LLC has developed a billing approach that greatly improves upon existing billing practices for similar regulatory fees (
To facilitate the introduction of CAT fees, CAT LLC has worked with FCAT to develop an approach to CAT billing that is consistent with existing billing constructs used with regard to Section 31-related sales values fees, subject to certain enhancements. Under this billing approach, FCAT is providing additional linkage elements, not necessarily provided in the Section 31-sales value fee context, to facilitate CAT Reporters' ability to match the underlying trades provided by CAT with their internal books and records and to reduce the complexity of that process. Specifically, FCAT is providing various key elements of the trade itself, such as the tradeID and branch sequence,
With the Additional Trade Details, CAT LLC and FCAT believe that the overwhelming majority of underlying trades provided by CAT bills can be matched with a CAT Reporter's internal books and records. CAT LLC recognizes that there may be certain cases in which such matching is more difficult given various firm-specific considerations, but believes that such instances are significantly more limited than with regard to the SRO fees charged in relation to Section 31.
Similar to other regulatory fees, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Accordingly, Historical CAT Assessment 1A does not address the process by which any CAT Reporters may pass through the fee to their customers. Likewise, the CAT billing approach provided by the Plan Processor is designed to address the needs of CAT Reporters with regard to the reconciliation of CAT invoices with the underlying trades provided by CAT LLC with the invoices; they are not designed to address issues related to any pass-through fees. Accordingly, facilitating CAT Reporters' ability to pass through fees to their clients is outside the scope of this fee filing. Nevertheless, as described below, CAT LLC and the Plan Processor have expended significant efforts to provide technical assistance to Industry Members regarding the implementation of Historical CAT Assessment 1A, including providing Additional Trade Details that provide significant details about each underlying trade.
In its approval of the CAT Funding Model, the Commission approved charging CAT fees to the CAT Executing Broker, rather than the originating broker. This fee filing must comply with the requirements of the CAT Funding Model, and, therefore, charges the Historical CAT Assessment 1A to CAT Executing Brokers.
Moreover, charging originating brokers would introduce significant complexity to the billing process from the CAT's perspective, and would increase the costs of implementing CAT fees. Charging the CAT Executing Broker is simple and straightforward, and leverages a one-to-one relationship between billable events (trades) and billable parties, similar to other
As noted, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT Fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Nevertheless, the Additional Trade Details provided with regard to the underlying trades on CAT invoices may assist with this process. Like with Section 31-related sales value fees, however, it is not always possible to trace every fee on a transaction back to the originating party. Industry Members have faced these issues under Section 31-related sales values fees for many years.
CAT LLC has worked with FCAT to provide significant technical assistance to Industry Members to allow the Industry Members to understand how Historical CAT Assessments will be implemented and billed, including webinars, CAT alerts, mock invoices, and responses to questions posed to the FCAT Help Desk.
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By providing such detailed and sustained assistance to Industry Members regarding CAT fees and billing, CAT LLC has successfully addressed questions raised by Industry Members regarding the CAT fees and billing processes.
In keeping with past practice, CAT LLC provided notice of the proposed
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the Historical CAT Assessment 1A fees to be collected are directly associated with the 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 Exchange has already incurred such development and implementation costs and the proposed Historical CAT Assessment 1A fees, therefore, would allow the Exchange to collect certain of such costs in a fair and reasonable manner from Industry Members, as contemplated by the CAT NMS Plan.
The proposed Historical CAT Assessment 1A fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining Historical CAT Assessments as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Historical Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for the Historical CAT Assessment, is reasonable and satisfies the Exchange Act.
The formula for calculating a Historical Fee Rate requires the amount of Historical CAT Costs to be recovered. Specifically, Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan requires a fee filing to provide:
a brief description of the amount and type of the Historical CAT Costs, 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.
In accordance with this requirement, the Exchange has set forth the amount and type of Historical CAT Costs 1 for each of these categories of costs above.
Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the Historical CAT Costs are reasonable and appropriate.” As discussed below, the Exchange believes that the amounts set forth in this filing for each of these cost categories is “reasonable and appropriate.” Each of the costs included in Historical CAT Costs 1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover costs related to cloud hosting services as a part of Historical CAT Assessments.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and an amendment to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to CAIS operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to change request fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to capitalized developed technology costs as a part of Historical CAT Assessments.
These costs involve the activity of both the Initial Plan Processor and FCAT, as the successor Plan Processor.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to legal fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover consulting costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover insurance costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover professional and administration costs as a part of Historical CAT Assessments.
CAT LLC determined to hire a financial advisory firm, Anchin, to assist with financial matters for the CAT. CAT LLC interviewed Anchin as well as other potential financial advisory firms to assist with the CAT project, considering a variety of factors in its analysis, including the firm's relevant expertise and fees.
CAT LLC also determined to engage an independent accounting firm, Grant Thornton, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC interviewed this firm as well as another potential accounting firm to audit CAT LLC's financial statements, considering a variety of factors in its analysis, including the relevant expertise and fees of each of the firms. CAT LLC determined that Grant Thornton was well-qualified for the role given the balance of these considerations.
The professional and administrative costs also include costs related to the receipt of certain market data from Exegy. After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy. Exegy provided the data elements required by the CAT NMS Plan, and the fees were reasonable and in line with market rates for the market data received.
The professional and administrative costs also include costs related to a third
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover public relations costs as a part of Historical CAT Assessments.
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 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 will count executed equivalent shares for CAT billing purposes.
CAT LLC has determined to establish a Historical Recovery Period of 24 months for Historical CAT Assessment 1A and that such length is reasonable. CAT LLC determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable fee rate for Historical CAT Assessment 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans notes to the Participants in a timely fashion. CAT LLC determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
As noted in the Plan amendment for the CAT Funding Model, as a practical matter, the fee filing for a Historical CAT Assessment would provide the exact fee per executed equivalent share to be paid for each Historical CAT Assessment, and describe the relevant number of decimal places for the fee rate.
The Exchange believes that imposing Historical CAT Assessment 1A with a fee rate of $0.000002 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the remaining Historical CAT Costs 1 and such costs would be spread out over an appropriate recovery period, as discussed above. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, Historical CAT Assessment 1A is significantly lower than fees assessed pursuant to Section 31 (
Historical CAT Assessment 1A 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 Historical CAT Assessments as well as the Industry Members to be charged the Historical CAT Assessments.
Historical CAT Assessment 1A provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. For example, as described above, the calculation of Historical CAT Assessment 1A complies with the formula set forth in Section 11.3(b) of the CAT NMS Plan. In addition, Historical CAT Assessment 1A would be charged to CEBBs and CEBSs in accordance with Section 11.3(b) of the CAT NMS Plan. Furthermore, the Participants would continue to remain responsible for their designated share of Past CAT Costs through the cancellation of loans made by the Participants to CAT LLC.
In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A—Historical CAT Costs 1 (including Excluded Costs) and the exclusion of costs previously invoiced via Historical CAT Assessment 1, the count for the executed equivalent share volume for the prior 12 months, the length of the Historical Recovery Period, and the projected executed equivalent share volume for the Historical Recovery Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for Historical CAT Assessment 1A 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.
Historical CAT Assessment 1A is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of Historical CAT Assessments 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. Historical CAT Assessment 1A complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A and the resulting fee rate for Historical CAT Assessment 1A is reasonable. Therefore, Historical CAT Assessment 1A does not impose an unfairly discriminatory fee on Industry Members.
Finally, 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 specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce Historical CAT Assessment 1A on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A is reasonable and the resulting fee rate for Historical CAT Assessment 1A calculated in accordance with the CAT Funding Model is reasonable. Therefore, Historical CAT Assessment 1A would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
Not applicable.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to establish fees for Industry Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“Prospective CAT Costs” fees).
Under the CAT Funding Model, “[t]he Operating Committee will establish one or more fees (each a 'Historical CAT Assessment') to be payable by Industry Members with regard to CAT costs previously paid by the Participants (`Past CAT Costs').”
Each Historical CAT Assessment to be paid by CEBBs and CEBSs is designed to contribute toward the recovery of two-thirds of the Historical CAT Costs. Because the Participants previously have paid Past CAT Costs via loans to the Company, the Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs will be paid by the cancellation of loans made by the Participants to the Company on a pro rata basis based on the outstanding loan amounts due under the loans, instead of through the payment of a CAT fee.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) Historical CAT Assessment 1A to recover certain historical CAT costs incurred prior to January 1, 2022, 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.' ”
The Exchange, along with the other Participants in the CAT, previously filed a fee filing to implement Historical CAT Assessment 1.
Historical CAT Assessment 1A will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange.
In addition,
The Operating Committee determined the fee rate to be used in calculating Historical CAT Assessment 1A based on the Historical CAT Costs for Historical CAT Assessment 1A and the projected total executed share volume of all transactions in Eligible Securities for the Historical Recovery Period for Historical CAT Assessment 1A (“Historical Recovery Period 1A”), as discussed in detail below. Based on this calculation, the Operating Committee has determined that the fee rate for Historical CAT Assessment 1A would be $0.000002, as discussed in detail below.
Under the CAT NMS Plan, for purposes of calculating each Historical CAT Assessment, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he Operating Committee will reasonably determine the Historical CAT Costs sought to be recovered by each Historical CAT Assessment, where the Historical CAT Costs will be Past CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT Costs by the Operating Committee. Each Historical CAT Assessment will seek to recover from CAT Executing Brokers two-thirds of Historical CAT Costs incurred during the period covered by the Historical CAT Assessment.”
The following describes in detail Historical CAT Costs 1 with regard to four separate historical time periods as well as Past CAT Costs excluded from Historical CAT Costs 1 (“Excluded Costs”). The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing “a brief description of the amount and type of Historical CAT Costs, 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
Historical CAT Costs 1 would include costs incurred by CAT prior to June 22, 2020 (“Pre-FAM Period”) and already funded by the Participants, excluding Excluded Costs (described further below). Historical CAT Costs 1 would include costs for the Pre-FAM Period of $124,290,730. The Participants would remain responsible for one-third of this cost (which they have previously paid) ($41,430,243.33), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($41,430,243.33) and CEBSs paying one-third ($41,430,243.33). These costs do not include Excluded Costs, as discussed further below. The following table breaks down Historical CAT Costs 1 for the Pre-FAM Period into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The Pre-FAM Period includes
The $10,268,840 in technology costs for cloud hosting services represent costs incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the Pre-FAM Period.
As part of its proposal for acting as the successor Plan Processor for the CAT, FCAT selected AWS as a subcontractor to provide cloud hosting services. In 2019, after reviewing the capabilities of other cloud services providers, FCAT determined that AWS was the only cloud services provider at that time sufficiently mature and capable of providing the full suite of necessary cloud services for the CAT, including, for example, the security, resiliency and complexity necessary for the CAT computing requirements. The use of cloud hosting services is standard for this type of high-volume data activity and reasonable and necessary for implementation of the CAT, particularly given the substantial data volumes associated with the CAT.
Under the Plan Processor Agreement with FCAT, 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 cost 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. The fees for cloud hosting services during the Pre-FAM Period were paid to FCAT by CAT NMS, LLC
AWS was engaged by FCAT to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools). AWS also was engaged to provide various environments for CAT, such as development, performance testing, test and production environments.
The cost for AWS services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to the CAT. During the Pre-FAM Period from the engagement of AWS in February 2019 through June 2020, AWS provided 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,”
The $21,085,485 in technology costs related to operating fees represent costs incurred with regard to activities of FCAT as the Plan Processor. 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 (
FCAT was selected to assume the role of the successor Plan Processor. Prior to this selection, the Participants engaged in discussions with two prior Bidders
The Selection Subcommittee considered factors including, but not limited to, the following, in recommending FINRA to the Operating Committee as the successor Plan Processor:
a. FINRA's specialized technical expertise and capabilities in the area of broker-dealer technology;
b. The need to appoint a successor Plan Processor with specialized expertise to develop, implement, and maintain the CAT System in accordance with the CAT NMS Plan and SEC Rule 613;
c. FINRA's detailed proposal in response to CATLLC's recent inquiries; and
d. FINRA's data query and analytics systems demonstration to the Participants.
Based on these and other factors, the Selection Subcommittee determined that FINRA was the most appropriate Bidder to become the successor Plan Processor.
On February 26, 2019, the Operating Committee (with FINRA recusing itself) voted to select FINRA as the successor Plan Processor pursuant to Section 6.1(t) of the CAT NMS Plan.
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. The operating fees during the Pre-FAM Period were paid to FCAT by CAT LLC.
From March 29, 2019 (the commencement of the Plan Processor Agreement with FCAT) through June 22, 2020 (the end of the Pre-FAM Period), the Plan Processor's activities with respect to the CAT included the following:
• Commenced user acceptance testing with market data provided by Exegy Incorporated (“Exegy”), a market data provider;
• Published Technical Specifications and related reporting scenarios documents for Phase 2a, 2b and 2c reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated testing for Phase 2a and 2b reporting for Industry Members;
• Began developing Technical Specifications and related reporting scenarios documents for Phase 2d reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published Central Repository Access Technical Specifications, and provided regulator access to test data from Industry Members;
• Facilitated Participant exchanges that support options market makers sending Quote Sent Time to the CAT;
• Facilitated the introduction of OPRA and Options NBBO Other Data to CAT;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing requirements under Regulation SCI;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants, the SEC and its staff;
• Operated the FINRA CAT Helpdesk, which is the primary source for answers to questions about CAT, including questions regarding: clock synchronization, firm reporting responsibilities, interpretive questions, technical specifications for reporting to CAT and more;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content;
• Provided 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.
The $2,072,908 in technology costs related to CAIS operating fees represent the fees paid for FCAT's subcontractor charged with the development and operation of CAT's Customer and Account Information System (“CAIS”). 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.
During the Pre-FAM Period, the CAIS-related services were provided by the Plan Processor through the Plan Processor's subcontractor, Kingland Systems Incorporation (“Kingland”). Kingland had experience operating in the securities regulatory technology space, and as a part of its proposal for acting as the Plan Processor for the CAT, FCAT selected Kingland as a subcontractor to provide certain CAIS-related services.
Under the Plan Processor Agreement with FCAT, CAT LLC was required to pay to the Plan Processor the fees incurred by FCAT for CAIS-related services provided by FCAT through Kingland on a monthly basis. FCAT negotiated the fees for Kingland'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. The fees for CAIS-related services during the Pre-FAM Period were paid by CAT LLC to FCAT. FCAT, in turn, paid Kingland.
During the Pre-FAM Period, Kingland began development of the CAIS Technical Specifications and the building of CAIS. In addition, Kingland also worked on the build related to the CCID Alternative, an alternative approach to customer information that was not included in the CAT NMS Plan as originally adopted.
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 change 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 costs were paid by CAT LLC to FCAT. During the Pre-FAM Period, CAT LLC incurred costs of $141,346 related to change requests implemented by FCAT. Such change requests related to a development fee regarding the OPRA
This category of costs includes capitalizable application development costs incurred in the development of the CAT. The capitalized developed technology costs for the Pre-FAM Period of $51,847,150 relate to technology provided by the Initial Plan Processor and the successor Plan Processor.
On January 17, 2017, the Selection Committee of the CAT NMS Plan selected the Initial Plan Processor, Thesys Technologies, LLC, for the CAT NMS Plan pursuant to Article V of the CAT NMS Plan.
From January 17, 2017 through January 30, 2019, the time in which Thesys CAT was engaged for the CAT, but excluding the period from November 15, 2017 through January 30, 2019, the Initial Plan Processor engaged in various activities with respect to the CAT, including preparing iterative drafts of Participant Technical Specifications, Industry Member Technical Specifications and the Central Repository Access Technical Specifications. In addition, Thesys CAT also developed CAT technology, addressed compliance items, including drafting CAT policies and procedures, addressing Regulation SCI requirements, establishing a CAT Compliance Officer and a Chief Information Security Officer, addressed security-related matters for the CAT, and worked towards the initiation of Participant reporting per the Participant Technical Specifications.
The legal costs of $19,674,463 represent the fees paid for legal services provided by two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), during the Pre-FAM Period. The legal costs exclude those costs incurred from November 15, 2017 through November 15, 2018.
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. WilmerHale's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading law firms for similar work.
The legal costs for WilmerHale during the Pre-FAM Period included costs incurred from 2013 until June 22, 2020 to address corporate and regulatory legal matters related to the CAT. The legal fees for this law firm during the period from February 2013 until the formation of the CAT NMS, LLC on November 15, 2016 were paid directly by the exchanges and FINRA to WilmerHale. After the formation of CAT NMS LLC, the legal fees were paid by CAT LLC to WilmerHale.
After WilmerHale was engaged in 2013 through the end of the Pre-FAM Period on June 22, 2020 (excluding the legal costs from November 15, 2017 through November 15, 2018), WilmerHale provided legal assistance to the CAT on a variety of matters, including with regard to the following:
• Analyzed various legal matters associated with the Selection Plan, and drafted an amendment to the Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the Development Advisory Group (“DAG”);
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan and related filings;
• Negotiated and drafted the plan processor agreements with the Initial Plan Processor and the successor Plan Processor;
• Provided assistance with compliance with Regulation SCI;
• Assisted with clock synchronization study;
• Provided assistance with respect to the establishment of CAT security;
• Drafted exemptive requests from CAT NMS Plan requirements, including with regard to options market maker quotes, Customer IDs, CAT Reporter IDs, linking allocations to executions, CAT reporting timeline, FDIDs, customer and account information, timestamp granularity, small industry members, data facility reporting and linkage, allocation reports, SRO-assigned market participant identifiers and cancelled trade indicators, thereby seeking to implement changes that would be cost effective and benefit Industry Members and Participants;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided advice regarding CAT policies and procedures;
• Analyzed the SEC's amendment of the CAT NMS Plan regarding financial accountability;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues; and
• Assisted with third-party vendor agreements.
The consulting costs of $17,013,414 represent the fees paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the Pre-FAM Period, from October 2012 until June 22, 2020. 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.
To help facilitate project management given the unprecedented complexity and scope of the CAT project, the Participants determined it was necessary to engage a consulting firm to assist with the CAT project in 2012, following the adoption of Rule 613. A variety of factors were considered in the analysis of prospective consulting firms, including (1) the firm's qualifications, resources, and expertise; (2) the firm's relevant experience and understanding of the regulatory issues raised by the CAT and in coordinating matters of similar scope; (3) the composition of the consulting team; and (4) professional fees. Following a series of interviews, the exchanges and FINRA as a consortium determined that Deloitte was well qualified given the balance of these considerations and engaged Deloitte on October 1, 2012.
Deloitte's fee rates are negotiated on an annual basis and are in line with market rates for this type of specialized consulting work. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. Deloitte's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading consulting firms for similar work.
The consulting costs for CAT during the period from 2012 until the formation of the CAT NMS, LLC were paid directly by the Participants to Deloitte. After the formation of CAT NMS, LLC, the consulting fees were paid by CAT LLC to Deloitte. CAT LLC reviewed the consulting fees each month and approved the invoices.
After Deloitte was hired in 2012 through the end of the Pre-FAM Period on June 22, 2020 (excluding the consulting costs from November 15, 2017 through November 15, 2018), Deloitte provided a variety of consulting services, including the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participant's independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Assisted with cost and funding-related activities for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided 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;
• Assisted with industry outreach and communications regarding the CAT, including assistance with industry outreach events, the development of the CAT website, frequently asked questions, and coordinating with the CAT LLC's public relations firm;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress;
• Coordinated efforts regarding the selection of the successor Plan Processor;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor, including support for the Operating Committee and successor Plan Processor for the new role; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $880,419 represent the cost incurred for insurance for CAT during the Pre-FAM Period. Commencing in 2020, CAT LLC performed an evaluation of various potential alternatives for CAT insurance policies, which included engaging in discussions with different insurance companies and conducting cost comparisons of various alternative approaches to insurance. Based on an analysis of a variety of factors, including coverage and premiums, CAT LLC determined to purchase cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance from USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
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.
After Anchin was hired in April 2018 through the end of the Pre-FAM Period on June 22, 2020 (excluding the period from April 2018 through November 15, 2018), Anchin provided a variety of services, including the following:
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial reporting matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy from July 2018 through March 2019. CAT LLC determined that, unlike certain other vendors, Exegy provided market data that included all data elements required by the CAT NMS Plan.
Upon the termination of the contract between CAT LLC and Exegy, FCAT entered into a contract with Exegy to purchase the required market data from Exegy in July 2019. All costs under the contract were treated as a direct pass through cost to CAT LLC. Therefore, the fees for the market data were paid by CAT LLC to FCAT, who, in turn, paid Exegy for the market data.
The public relations costs of $224,669 represent the fees paid to public relations firms during the Pre-FAM Period for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC was better positioned to understand and address CAT matters to the benefit of all market participants. Specifically, the public relations firms provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
The services performed by each of the public relations firms were comparable. The fees for such services were reasonable and in line with market rates. Only one public relations firm was engaged at a time; the three firms were engaged sequentially as the primary public relations contact moved among the three firms during this time period.
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 1 of the Financial Accountability Milestones (“FAM Period 1”),
By the completion of FAM Period 1, CAT LLC was required to implement the reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of equities transaction data and options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information.
CAT LLC continued to utilize AWS in FAM Period 1 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 1 Period. Accordingly, the $2,642,122 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 1. The fee arrangement for AWS described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. Moreover, CAT LLC continued to believe that AWS's maturity in the cloud services space as well as the significant cost and time necessary to move the CAT to a different cloud services provider supported the continued engagement of AWS.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 1 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, reference data and other types of Other Data. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 1.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 1. Accordingly, the $1,099,680 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 1. The fee arrangement for FCAT described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, FCAT's activities with respect to the CAT included the following:
• Published iterative drafts of draft Technical Specifications for Phase 2d, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published iterative drafts of CAIS Technical Specifications, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated Industry Member reporting of Quote Sent Time on Options Market Maker quotes;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 1. Accordingly, the $254,998 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 1. The fee arrangement for Kingland described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to CCID Alternative, as well as the acceleration of the reporting of LTIDs.
CAT LLC did not incur costs related to change requests during FAM Period 1.
Capitalized developed technology costs for FAM Period 1 of $1,684,870 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include: (1) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including separate production and industry test entitlements, and reprocessing of exchange event timestamps; (2) implementation fees; and (3) license fees.
The legal costs of $481,687 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 1.
• Assisted with the development of the CAT funding model and drafted related amendments and fee filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, verbal activity, options market maker quote sent time, TRF linkages, and allocations;
• Provided interpretations related to CAT NMS Plan requirements, including the Financial Accountability Milestone amendment;
• Assisted with compliance with Regulation SCI;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the drafting of the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Assisted with communications and presentations for the industry regarding CAIS;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding CAT technical specifications;
• Assisted with third-party vendor agreements; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $137,209 represent the fees paid to Deloitte as project manager during FAM Period 1. CAT LLC continued to employ Deloitte during FAM Period 1 based on, among other things, their expertise and cumulative experience with the CAT. The fee rates for Deloitte during FAM Period 1 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 1 were paid by CAT LLC to the consulting firm. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 1, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
Although insurance was in effect during FAM Period 1, CAT LLC did not incur costs related to insurance during FAM Period 1.
• Maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups; and
• Prepared monthly and quarterly financial statements.
The public relations costs of $7,700 represent the fees paid to Peak Strategies during FAM Period 1. CAT LLC continued to employ Peak Strategies during FAM Period 1 based on, among other things, their expertise and history with the project. The fee rates for this firm were reasonable and in line with market rates for these types of services. The fees for these services during FAM Period 1 were paid by CAT LLC to Peak Strategies. During FAM Period 1, Peak Strategies continued to provide professional communications services to CAT LLC, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT LLC and already funded by Participants during Period 2 of the Financial Accountability Milestones (“FAM Period 2”),
By
(a) Industry Member reporting (excluding reporting by Small Industry Members that are not OATS reporters) for equities transactions, excluding Customer Account Information, CustomerID, and Customer Identifying Information, is developed, tested, and implemented at a 5% Error Rate or less and with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, and trade reporting facilities linkage to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system, excluding linkage of representative orders, from order origination through order execution or order cancellation; and (b) the query tool functionality
CAT LLC completed the requirements of FAM Period 2 by December 31, 2020. The following describes the costs for each of the categories for FAM Period 2.
CAT LLC continued to utilize AWS in FAM Period 2 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 2 Period. Accordingly, the $20,709,212 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 2. The fee arrangement for AWS described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 2 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, and Other Data, including reference data. In addition, Industry Members began reporting LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 2.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 2. Accordingly, the $9,108,700 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 2. The fee arrangement for FCAT described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, FCAT's activities with respect to the CAT included publishing the Technical Specifications for Phase 2d and overseeing the reporting of firm to firm and intrafirm linkages by Industry Members. In addition, FCAT also continued to engage in the following activities during FAM Period 2:
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the development and implementation of the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 2. Accordingly, the $1,590,298 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 2. The fee arrangement for Kingland described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs.
During FAM Period 2, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 2, CAT incurred costs of $51,823 related to a change request regarding the addition of functionality for exchange Participants to report rejected messages to the CAT.
Capitalized developed technology costs for FAM Period 2 of $6,761,094 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to separate production and industry test entitlements, market maker reference data, and back-processing of exchange exception logic; (3) implementation fees; and (4) license fees.
The legal costs of $2,766,644 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 2.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, allocations, exchange activity, OTQT, initial data validation, error corrections and recordkeeping;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittees, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6 of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Assisted with third-party vendor agreements (
• Assisted with change requests; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $532,146 represent the fees paid to Deloitte as project manager during FAM Period 2. CAT LLC continued to employ Deloitte during FAM Period 2 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 2 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 2 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 2, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $976,098 represent the fees paid for insurance during FAM Period 2. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $438,523 represent the fees paid to Anchin and Grant Thornton for financial services provided during FAM Period 2.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from the Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audit by an independent auditor; and
• Reviewed historical costs from inception.
The public relations costs of $41,940 represent the fees paid to Peak Strategies during FAM Period 2. CAT LLC continued to employ Peak Strategies during FAM Period 2 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 2 were paid by CAT LLC to Peak Strategies. During FAM Period 2, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 3 of the Financial Accountability Milestones (“FAM Period 3”),
By the
CAT LLC completed the requirements of FAM Period 3 by December 31, 2021. The following describes the costs for each of the categories for FAM Period 3.
CAT LLC continued to utilize AWS in FAM Period 3 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 3 Period. Accordingly, the $94,574,759 in technology costs for cloud hosting services represents costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 3. The fee arrangement for AWS described above for the earlier periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During FAM Period 3, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a, Phase 2b, Phase 2c and Phase 2d Industry Member Data (including certain linkages), SIP Data, Other Data, including reference data, and LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 3.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 3. Accordingly, the $23,106,091 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 3. The fee arrangement for FCAT described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, FCAT's activities with respect to the CAT included the following:
• Facilitated Phase 2c and Phase 2d testing for Industry Members;
• Oversaw creation of linkages of the lifecycle of order events based on the received data through Phase 2d;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement with FCAT discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 3. Accordingly, the $5,562,383 in technology costs for CAIS operating fees represents costs incurred for services provided by Kingland during FAM Period 3. The fee arrangement for Kingland described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs. The full CAIS Technical Specifications were published during FAM Period 3.
During FAM Period 3, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 3, CAT incurred costs of $396,169 related to change requests, including the following: (1) the addition of functionality for exchange Participants to report rejected messages to the CAT; (2) the migration of MIRS query engine to AWS to reduce operational costs and increase resiliency; and (3) updating the Participant Technical Specifications to allow for two-sided Participant option quote reporting.
Capitalized developed technology costs for FAM Period 3 of $10,763,372 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor, including the transition from equity data received by FINRA pursuant to various regulatory services agreements between FINRA and Participant exchanges to the equity CAT Data, and the completion of the Industry Member Phase 2d options manual and complex orders go-live requirements; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to off-exchange volume concentration, Participant 24-hour trading and an external metastore; (3) implementation fees; and (4) license fees.
The legal costs of $6,333,248 represent the fees paid for legal services provided by three law firms, WilmerHale, Pillsbury and Covington & Burling LLP (“Covington”) during FAM Period 3.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements, including, for example, verbal activity regarding Phase 2c cutover, error reports, error corrections, Phase 2d Reporting, unique Order-ID on internal route events, reporting addresses, recordkeeping, and unique CCID for foreign customers;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs, CAIS requirements, ADF, and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6(c) of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Provided assistance with change requests;
• Provided guidance and regulatory support for litigation regarding the response to the SEC's exemptive orders;
• Assisted with communications with the industry, including CAT Alerts and presentations;
• Provided guidance regarding the confidentiality of CAT Data, including third-party information requests;
• Assisted with cost management analysis and proposals; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
After Covington was hired in 2021 through the end of 2021, the firm provided legal assistance regarding the litigation with the SEC regarding the 2020 Orders. These services included researching, drafting, and filing motions to stay the 2020 orders and related materials in proceedings before the SEC, as well as researching, drafting, and filing petitions for judicial review of the 2020 Orders in proceedings before the U.S. Court of Appeals for the D.C. Circuit. Covington oversaw ongoing litigation proceedings on these matters, and also supported WilmerHale with respect to settlement negotiations with the SEC staff regarding the 2020 Orders.
In addition to these services, CAT LLC engaged Covington in November 2021 to provide assistance with respect to the SEC's disapproval of CAT NMS Plan amendments concerning a proposed limitation on liability in the event of a data breach or similar event. Covington provided advice concerning CAT's response to the SEC's disapproval order. This work accounted for a minority of Covington's fees in 2021.
The consulting costs of $1,408,209 represent the fees paid to Deloitte as project manager during FAM Period 3. CAT LLC continued to employ Deloitte during FAM Period 3 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 3 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 3 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 3, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $1,582,714 represent the fees paid for insurance during FAM Period 3. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $595,923 represent the fees paid to Anchin and Grant Thornton for financial services during FAM Period 3.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Faciliated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $92,400 represent the fees paid to Peak Strategies during FAM Period 3. CAT LLC continued to employ Peak Strategies during FAM Period 3 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 3 were paid by CAT LLC to Peak Strategies. During FAM Period 3, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would not include three categories of CAT costs (“Excluded Costs”): (1) $14,749,362 of costs related to the termination of the relationship with the Initial Plan Processor; (2) $48,874,937, which are all CAT costs incurred from November 15, 2017 through November 15, 2018; and (3) $19,628,791, which are costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when the relationship with the Initial Plan Processor was concluded. The Participants would remain responsible for 100% of these costs, which total $83,253,090. CAT LLC determined to exclude these Excluded Costs from Historical CAT Costs 1 because these costs relate to the delay in the start of reporting to the CAT and the conclusion of the relationship with the Initial Plan Processor.
First, Historical CAT Costs 1 would not include $14,749,362 of costs related to the conclusion of the relationship with the Initial Plan Processor. Such costs include costs related to the American Arbitration Association, the legal assistance of Pillsbury with regard to the arbitration with the Initial Plan Processor, and the settlement costs related to the arbitration with the Initial Plan Processor. The Participants would remain responsible for 100% of these $14,749,362 in costs.
Second, Historical CAT Costs 1 would not include all CAT costs incurred from November 15, 2017 through November 15, 2018. CAT LLC determined to exclude all costs during this one-year period of $48,874,937 from fees charged to Industry Members due to the delay in the start of reporting to the CAT. The Participants would remain responsible for 100% of these $48,874,937 in costs. The following table breaks down these costs into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
CAT LLC did not incur technology costs related to the categories of cloud hosting services, operating fees, CAIS operating fees or change requests during the period from November 15, 2017 through November 15, 2018.
Capitalized developed technology costs for the period from November 15, 2017 through November 15, 2018 include capitalizable application development costs of $37,852,083 incurred in the development of the CAT by the Initial Plan Processor. Such costs include development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Initial Plan Processor. Such costs include costs related to Industry Member technical specifications for orders and transactions, the system security plan, testing and production for Participant CAT reporting, third-party security assessment and response, query portal, onboarding of the Chief Information Security Officer, and ingestion of FINRA TRF data and FINRA data related to halts and corporate actions.
The legal costs of $6,143,278 represent the fees paid to WilmerHale for legal services from November 15, 2017 through November 15, 2018. During this period, WilmerHale provided legal assistance to the CAT, including with regard to the following:
• Provided legal support for the governance of the CAT, including governance support for the Operating Committee, Advisory Committee, Compliance Subcommittee, and CAT working groups;
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan;
• Provided assistance related to CAT security;
• Drafted exemptive requests, including requests related to PII;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided advice with regard to regulator access to the CAT;
• Assisted with the Plan Processor transition;
• Provided assistance regarding communications with the industry regarding the CAT;
• Provided advice regarding Customer Account Information and PII;
• Provided support for litigation related to SEC exemptive orders; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretative and implementation issues.
The consulting costs of $4,452,106 represent the fees paid to Deloitte for their role as project manager for the CAT from November 15, 2017 through November 15, 2018. During this period, Deloitte engaged in the following activities with respect to the CAT:
• Implemented program operations for the CAT project;
• Provided governance support to the Operating Committee, including support for Subcommittees and working groups of the Operating Committee (
• Assisted with cost and funding issues for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress.
CAT LLC did not incur costs related to insurance during the period from November 15, 2017 through November 15, 2018.
The professional and administration costs of $340,145 represent the fees paid to Anchin, Exegy and RSM from November 15, 2017 through November 15, 2018.
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $87,325 represent the fees paid to Sloane from November 15, 2017 through November 15, 2018. From the commencement of its engagment in March 2018 through November 15, 2018, Sloane provided professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, Sloane provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Third, Historical CAT Costs 1 would not include the $19,628,791 in costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when CAT LLC's relationship with the Initial Plan Processor concluded. CAT LLC determined that Historical CAT Costs 1 would not include any fees paid to the Initial Plan Processor after November 15, 2017,
CEBBs and CEBSs collectively have been invoiced for $173,075,024 of the $212,039,879.34 of Historical CAT Costs 1 via Historical CAT Assessment 1, where $86,537,512 was invoiced collectively to CEBBs and $86,537,512 was invoiced collectively to CEBSs. Accordingly, Historical CAT Assessment 1A would seek to recover the remaining $38,964,855.34 of Historical CAT Costs 1 collectively from CEBBs and CEBSs, where CEBBs collectively will be responsible for $19,482,427.67, and CEBSs collectively will be responsible for $19,482,427.67.
Under the CAT NMS Plan, the Operating Committee is required to
The Operating Committee determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable Historical Fee Rate 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans to the Participants in a timely fashion. The Operating Committee determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
The length of the Historical Recovery Period 1A and the reasons for its length are provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a Historical CAT Assessment.
The calculation of the fee rate for Historical CAT Assessment 1A also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for Historical Recovery Period 1A. 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 Historical Recovery Period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A 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 Historical CAT Assessment.
The fee rate for Historical CAT Assessment 1A would be calculated by dividing the total amount of costs to be recovered by Historical CAT Assessment 1A by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A, and dividing by 2. Specifically, the fee rate for Historical CAT Assessment 1A would be calculated by dividing $38,964,855.34 by 11,961,875,098,720.98, and then dividing by 2, which equals $0.00000162871017371542 per executed equivalent shares. Rounding this to six decimal places results in a fee rate of $0.000002 per executed equivalent share.
Participants would not be required to pay any fees associated with Historical CAT Assessment 1A as the Participants previously have paid all Past CAT Costs. The CAT NMS Plan explains that:
Because Participants previously have paid Past CAT Costs via loans to the Company, Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs and such other additional Past CAT Costs as reasonably determined by the Operating Committee will be paid by the cancellation of loans made to the Company on a pro rata basis based on the outstanding loan amounts due under the loans.
The CAT NMS Plan further states that “Historical CAT Assessments are
CEBBs and CEBSs would be required to pay fees for Historical CAT Assessment 1A on a monthly basis for the period in which Historical CAT Assessment 1A is in effect.
The CAT NMS Plan states that, “[n]otwithstanding the length of the Historical Recovery Period used in calculating the Historical Fee Rate, each Historical CAT Assessment calculated using the Historical Fee Rate will remain in effect until all Historical CAT Costs for the Historical CAT Assessment are collected.”
To implement Historical CAT Assessment 1A, a new section would be added to the Exchange's fee schedule for “Consolidated Audit Trail Funding Fees”, and it would include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each month in which a Historical CAT Assessment is in effect, each CEBB and each CEBS shall pay a 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 Historical CAT Assessment for each transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Historical Fee Rate reasonably determined pursuant to paragraph (b)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(2) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(2) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for Historical CAT Assessment 1A in June 2026, which shall set forth the Historical CAT Assessment 1A fees calculated based on transactions in May 2026, and shall receive an invoice for Historical CAT Assessment 1A for each month thereafter in which Historical CAT Assessment 1A is in effect.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A 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 $0.000002 per executed equivalent share.
(C) Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time. Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).
Proposed paragraph (a)(2)(B) of the fee schedule would set forth the fee rate of $0.000002 per executed equivalent share for Historical CAT Assessment 1A, which is calculated as discussed above.
The proposed language in paragraph (a)(2)(B) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A. Specifically, CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in the prior month, that is, transactions executed in May 2026. 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)(2)(A) of the fee schedule also would describe the monthly cadence of the invoices for Historical CAT Assessment 1A. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter while Historical CAT Assessment 1A is in effect.
Proposed paragraph (a)(2)(B) of the fee schedule would describe the invoices for Historical CAT Assessment 1A. Proposed paragraph (a)(2)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A on a monthly basis.” Proposed paragraph (a)(2)(B) of the fee schedule also would describe the fees to be set forth in the invoices for Historical CAT Assessment 1A. 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
Furthermore, proposed paragraph (a)(2)(C) of the fee schedule would describe how long Historical CAT Assessment 1A would remain in effect. It would state that “Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time.” This proposed paragraph would further state that “Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.”
Historical CAT Assessment 1A will be assessed for all transactions executed in each month through the end of the month in which $38,964,855.34 is assessed, and then CAT LLC will provide notice that Historical CAT Assessment 1A is no longer in effect. Since Historical CAT Assessment 1A is a monthly fee based on transaction volume from the prior month, Historical CAT Assessment 1A may collect more than $38,964,855.34. To the extent that occurs, any excess money collected during the final month in which Historical CAT Assessment 1A is in effect will be used to offset future fees and/or to fund the reserve for the CAT.
Finally, proposed paragraph (a)(2)(D) of the fee schedule sets forth the requirement for the CAT Executing Brokers to pay the invoices for Historical CAT Assessment 1A. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).”
Paragraph (b)(1) of the “Consolidated Audit Trail Funding Fees” section of its fee schedule describes the manner of payment of Industry Member CAT fees. Paragraph (b)(1) 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.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange previously has added this requirement to the Exchange's fee schedule. Specifically, paragraph (b)(2) of the fee schedule states:
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 Historical CAT Assessment 1A.
The CAT NMS Plan states that:
Details regarding the calculation of a CAT Executing Broker's Historical CAT Assessment will be provided upon request to such CAT Executing Broker. At a minimum, such details would include each CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their Historical CAT Assessment.
In addition, CAT LLC will make certain aggregate statistics regarding Historical CAT Assessments publicly available. Specifically, the CAT NMS Plan states that, “[f]or each Historical CAT Assessment, 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 on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that Historical CAT Assessment 1A is in effect as well as the total amount invoiced for Historical CAT Assessment 1A 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 Historical CAT Assessment 1A. By reviewing statistics regarding how much has been invoiced and how much remains to be invoiced for Historical CAT Assessment 1A, Industry Members would have sufficient information to reasonably track how much longer Historical CAT Assessment 1A is likely to be in place.
To date, CAT LLC, via FCAT, has billed Industry Members for Historical CAT Assessment 1 and certain
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 Historical CAT Assessment until any applicable Financial Accountability Milestone described in Section 11.6 has been satisfied.”
In accordance with Section 11.6(b) of the CAT NMS Plan, Historical CAT Assessment 1A seeks to recover costs that are related to “all fees, costs, and expenses (including legal and consulting fees, costs, and expenses) incurred by or for the Company in connection with the development, implementation and operation of the CAT from the effective date of [Section 11.6 of the CAT NMS Plan] until such time as Full Implementation of CAT NMS Plan Requirements has been achieved”
The reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of both: (a) equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information; and (b) options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information.
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports.
Under the FAM Period 1 requirement of Initial Industry Member Core Equity and Options Reporting, Industry Members—excluding Small Industry Members that are not OATS reporters—were required to report two categories of data to the CAT: equites transaction data and options transaction data (both excluding Customer Account Information, Customer-ID, and Customer Identifying Information) by July 31, 2020. Pursuant to exemptive relief provided by the Commission, the Commission authorized the Participants' Compliance Rules to allow core equity reporting for Industry Members (Phase 2a) to begin on June 22, 2020 and core options reporting for Industry Members (Phase 2b) to begin on July 20, 2020.
In adopting the FAMs, the Commission stated that the equities transaction reporting required for FAM Period 1 “is consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Equities 2a file submission and data integrity validations.' ”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Equities 2a file submission and data integrity validation (Large Industry Members and Small OATS Reporters)” was completed on June 22, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information” was completed on June 22, 2020.
In adopting the FAMs, the Commission stated that the options transaction reporting required for FAM Period 1 is “consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Options 2b file submission and data integrity validations.' ”
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Options 2b file submission and data integrity validations” was completed on July 20, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information” was completed on July 20, 2020.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from June 22, 2020 through July 31, 2020. The total costs for this period, as discussed above, are $6,377,343. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($2,125,781) and CEBSs paying one-third ($2,125,781) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 2. FAM Period 2 began on August 1, 2020, and concluded on December 31, 2020, the date of the Full Implementation of Core Equity Reporting. Section 1.1 of the CAT NMS Plan defines “Full Implementation of Core Equity Reporting” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2020,
Specifically, the Full Implementation of Core Equity Reporting requires the satisfaction of two prongs. The first prong requires Participants to have fully implemented the first phase of equities transaction reporting for Industry Members (excluding Small Industry Members that are not OATS reporters) at an Error Rate of less than 5%. In addition, equities transaction data produced by the CAT at this stage must also be sufficiently interlinked so as to permit full analysis of an order's lifecycle across the national market, excluding full linkage of representative orders. As CAT LLC reported on its Quarterly Progress Reports, Phase 2a was fully implemented as of October 26, 2020, including intra-firm, inter-firm, national securities exchange, and trade reporting facilities linkages.
• “Production Go-Live for Equities 2a Intrafirm Linkage validations” was completed on 7/27/2020;
• “Production Go-Live for Firm to Firm Linkage validations for Equities 2a (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020; and
• “Production Go-Live for Equities 2a Exchange and TRF Linkage validations (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020.
Furthermore, as CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2020, the average overall error rate for Phase 2a Industry Member Data was less than 5% as of December 31, 2020. The average overall error rate was calculated by dividing the compliance errors by processed records.
The second prong of this FAM requires that the equities transaction data collected by the CAT at this stage be made available to regulators through two basic query tools required by the CAT NMS Plan—a targeted query tool that will enable regulators to retrieve data via an online query screen with a variety of predefined selection criteria, and a user-defined direct query tool that will provide regulators with the ability to query data using all available attributes and data sources.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from August 1, 2020 through December 31, 2020. The total costs for this period, as discussed above, are $42,976,478. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($14,325,492.70) and CEBSs paying one-third ($14,325,492.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 3. FAM Period 3 began on January 1, 2021, and concluded on December 31, 2021, the date of the Full Availability and Regulatory Utilization of Transactional Database Functionality. Section 1.1 of the CAT NMS Plan defines “Full Availability and Regulatory Utilization of Transactional Database Functionality” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2021,
Specifically, the “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires the satisfaction of five prongs. The first prong requires that reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021,
In addition to Phase 2a and Phase 2b Industry Member Data, the second and third prongs of “Full Availability and Regulatory Utilization of Transactional Database Functionality” require Industry Member reporting of Phase 2c Industry Member Data and Phase 2d Industry Member Data. The Phase 2c Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. That Order states that “Phase 2c Industry Member Data” is Industry Member Data related to Eligible Securities that are equities other than Phase 2a Industry Member Data, Phase 2d Industry Member Data, or Phase 2e Industry Member Data. Specifically, the Phase 2c Industry
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Phase 2d Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. “Phase 2d Industry Member Data” is Industry Member Data that is related to Eligible Securities that are options other than Phase 2b Industry Member Data, Industry Member Data that is related to Eligible Securities that are equities other than Phase 2a Industry Member Data or Phase 2c Industry Member Data, and Industry Member Data other than Phase 2e Industry Member Data. Phase 2d Industry Member Data includes with respect to the Eligible Securities that are options: (1) simple manual orders; (2) electronic and manual paired orders; (3) all complex orders with linkages to all CAT-reportable legs; (4) LTIDs (if applicable) for accounts with Reportable Events for Phase 2d; (5) date account opened or Account Effective Date (as applicable) for accounts with an LTID and flag indicating the Firm Designated ID type as account or relationship for such accounts; (6) Allocation Reports as required to be recorded and reported to the Central Repository pursuant to Section 6.4(d)(ii)(A)(1) of the CAT NMS Plan; (7) the modification or cancellation of an internal route of an order; and (8) linkage between a combined order and the original customer orders. Phase 2d Industry Member Data also would include electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are options and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: a listed option bid or offer which is accessible electronically by customers or other market participants and is immediately actionable (
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data will include verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Quarterly Progress Report for the fourth quarter of 2021 states that “Phase 2a was fully implemented as of October 26, 2020;” “Phase 2b was fully implemented as of January 4, 2021;” “Phase 2c was implemented as of April 26, 2021;” and “Phase 2d was fully implemented as of December 13, 2021.”
• “Production Go-Live for Equities 2c reporting requirements (Large Industry Members)” was completed on April 26, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b and
• “FCAT Plan Processor creates linkages of the lifecycle of order events based on the received data through Phase 2d Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2b reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Equities 2c reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2d (Large Industry Members)” was completed on December 13, 2021; and
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b, 2c and 2d (Small Industry Members)” was completed on December 13, 2021.
The third prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” also imposes an Error Rate requirement of 5% or less. The Quarterly Progress Report for the fourth quarter of 2021 states the average overall error rate was less than 5% as of December 31, 2021. The average overall error rate was calculated by dividing the compliance errors by processed records.
The fourth prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires that the data collected by the CAT at this stage be made available to regulators through an online targeted query tool and a user-defined direct query tool. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The fifth prong requires the requirements of Section 6.10(a) of the CAT NMS Plan to have been met. Section 6.10(a) of the CAT NMS Plan requires the Participants to use the tools described in Appendix D to “develop and implement a surveillance system, or enhance existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository.” The Exchange implemented a surveillance system, or enhanced existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository as of December 31, 2021 in accordance with Section 6.10(a) of the CAT NMS Plan.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2021 through December 31, 2021. The total costs for this period, as discussed above, are $144,415,268. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remain two-thirds, with CEBBs paying one-third ($48,138,422.70) and CEBSs paying one-third ($48,138,422.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
As discussed above, CAT LLC has satisfied the Financial Accountability Milestones (“FAMs”) for Periods 1 through 3.
CAT LLC does not believe that the exemptive relief relating to the reporting of electronic responses for quotes (“RFQs”) that are not immediately actionable (“NIA Electronic RFQ Responses”) affect the conclusion that FAMs 1 through 3 have been satisfied. The only reason CAT LLC pursued this relief is because certain Industry Members introduced concerns that NIA Electronic RFQ Responses could be considered “orders” reportable pursuant to Rule 613(j)(8) and some Industry Members were not prepared to report such orders to CAT. Thus, the relief was requested on behalf of Industry Members. CAT LLC itself has not taken any position on whether NIA Electronic RFQ Responses are “orders,” as the definition of “order” is an SEC rule and the trading processes for NIA Electronic RFQ Responses are the Industry Members', not those of the Participants or CAT LLC. Accordingly, CAT LLC stated in its letter that “Industry Members must determine whether trading interest falls within the definition of an `order' for CAT purposes. To the extent an NIA Electronic RFQ Response is not considered an `order' as defined in Rule 613(j)(8) and the CAT NMS Plan, it would not be reportable to CAT.”
Only “orders” as defined in SEC Rule 613(j)(8) are reportable to CAT. There is no agreement across the industry or among regulators as to whether NIA Electronic RFQ Responses are “orders” reportable to CAT. Certain Industry Members have raised the question as to whether NIA Electronic RFQ Responses are orders, but others have argued that they are not orders under Rule 613(j)(8).
As further discussed in the prior FIF letters, even if the Commission had the legal authority to require the reporting of NIA RFQ responses to CAT without an amendment to Rule 613, the Commission has not provided guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT. In subsequent discussions with industry members, Commission representatives have agreed that, prior to NIA RFQ responses being reportable to CAT, it would be necessary for the Commission to provide further guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT.
On May 20, 2024, the Commission granted CAT LLC's request for exemptive relief from certain CAT reporting requirements pertaining to NIA Electronic RFQ Responses to the extent such responses are considered “orders” reportable pursuant to Rule 613(j)(8).
When the Commission proposed the FAMs, the Participants expressed concern that, “by conditioning the ability of CAT LLC and the Participants to collect Post-Amendment Industry Member Fees on factors dependent on the efforts of Industry Members, the Commission's proposals inadvertently establish a perverse incentive for Industry Members to devote less than maximum efforts to comply with their obligations related to the CAT as they will pay less fees in such instances.”
CAT LLC does not believe that the Commission's May 19, 2023 order granting temporary exemptive relief relating to certain verbal floor activity and unstructured verbal and electronic upstairs activity (the “2023 Verbal Quotes Exemption”) affects the conclusion that FAMs 1 through 3 have been satisfied. The 2023 Verbal Quotes Exemption, which was issued on May 19, 2023, is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. The relevant exemption for this time period is the Commission's November 12, 2020 order, which granted relief for the same activity through July 31, 2023 (the “2020 Verbal Quotes Order”).
CAT LLC does not believe that the Commission's November 2, 2023 order granting relief from certain CAT NMS Plan requirements (the “November 2023 Order”) affects the conclusion that FAMs 1 through 3 have been satisfied. The November 2023 Order is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. As described in the November 2023 Order, the relevant exemptive orders for this time period were issued on December 16, 2020, which also states that “the Commission has determined that the Participants have sufficiently complied with the conditions set forth in the prior Orders and with the technical requirements for Quarterly Progress Reports set forth in section 6.6(c) of the CAT NMS Plan, including for purposes of determining compliance with any applicable Financial Accountability Milestones.”
CAT LLC also completed the requirements of FAM Period 2, including the required linkages, by December 31, 2020. Although Participant exchanges may report the Executing Broker to CAT differently in certain situations, these reporting differences are irrelevant for linkage purposes as the fields used for CAT Executing Broker are not used for linkage.
The CAT Funding Model approved by the Commission permits the recovery of reasonable costs in each of the categories of CAT costs sought to be recovered via Historical CAT Assessment 1A.
CAT LLC believes that it is reasonable to seek recovery of costs incurred prior to when the CAT NMS Plan became effective in November 2016, such as legal and consulting fees incurred to create the CAT NMS Plan. Rule 613 specifically mandates that the CAT be created, implemented and maintained, and further provides that the CAT NMS Plan include a proposed allocation of estimated costs to fund the creation, implementation and maintenance of the CAT among the Participants (referred to as “plan sponsors”), and between the Participants and Industry Members (referred to as “members of the plan sponsors”).
Accordingly, the CAT NMS Plan specifically permits the recovery of costs, including legal and consulting costs, reasonably incurred prior to November 2016 in connection with the creation and implementation of the CAT.
Furthermore, the costs incurred to create and implement the CAT prior to the effective date of the CAT NMS Plan (“Pre-Formation Costs”) were reasonable both in scope and amount, in accordance with the requirements of Section 11.1(c) of the CAT NMS Plan. During the four-year period from 2012 to 2016, a total of $13,842,881 in Pre-Formation Costs were incurred. This is an average of approximately $3.5 million per year over this period. The Pre-Formation Costs fell into three categories: legal costs, consulting costs and public relations costs. This includes legal costs of $3,196,434; consulting costs of $10,589,273; and public relations costs of $57,174. The legal, consulting and public relations services were performed by WilmerHale, Deloitte and Peppercomm, respectively. The selection considerations and fees for these three firms are described in detail above and are described further below. The Pre-Formation Costs are direct costs of CAT, which have been funded entirely by the Participants through non-interest-bearing notes. The Pre-Formation Costs do not include the significant costs incurred by each of the individual Participants in responding to the adoption of Rule 613.
The Pre-Formation Costs are reasonable and appropriate as they reflect the extensive efforts that were necessary to create the CAT NMS Plan as mandated after the SEC's adoption of Rule 613. As described in more detail below, these efforts included, among other things, developing a plan for selecting the Plan Processor, soliciting and evaluating bids, engaging a diverse set of market participants and the SEC in the development of the Plan, interacting with the SEC in their oversight of the development of the Plan, and seeking appropriate exemptive relief to address areas of concern in Rule 613.
The Participants determined to utilize an RFP to ensure that potential alternative solutions for creating the Plan could be presented and considered, and that a detailed and meaningful cost-benefit analysis could be performed. The SEC supported the use of an RFP, and approved its use as it is described in extensive detail in the CAT NMS Plan.
In the context of the SEC's adoption of Rule 613, commenters urged the Commission to utilize an RFP process to assist in the planning and design of the NMS plan.
In this regard, several commenters suggested that the Commission undergo a RFP or request for information (“RFI”) process to create and implement a consolidated audit trail. Specifically, FIF urged the Commission to perform a RFP process “to determine the best technical solution for developing a consolidated audit trail.” FIF suggested that the Commission “should outline a set of goals and guiding principles they are striving to achieve as part of the adopted CAT filing and leave the determination of data elements and other technical requirements to [an] industry working group.” Similarly, Direct Edge suggested that Commission staff should form and engage in a
In response to these comments, the Commission modified Rule 613 to require the Participants to address certain important considerations regarding the features and details of the NMS plan and to extend the timeframe for submission of the CAT NMS Plan by the Participants from the 90 days as originally proposed to 270 days, in part, to accommodate a process that would address these considerations.
The SEC specifically recognized that the Participants planned to use an RFP when it approved the Selection Plan, and stated that the RFP was a reasonable approach.
On February 26, 2013, the Participants published an RFP soliciting bids from parties interested in serving as the plan processor for the CAT. Initially, 31 firms submitted intentions to bid. In the following months, the Participants engaged with potential bidders with respect to, among other things, the selection process, selection criteria, and potential bidders' questions and concerns. On March 21, 2014, the Participants received ten bids in response to the RFP.
On September 4, 2013, the Participants filed with the Commission a national market system plan to govern the process for Participant review of the bids submitted in response to the RFP, the procedures for evaluating the bids, and, ultimately, selection of the plan processor (the “Selection Plan”).
The Selection Plan divided the review and evaluation of bids, and the selection of the plan processor, into various stages. Specifically, pursuant to the Selection Plan, a selection committee reviewed all bids and determined which bids contained sufficient information to allow the Participants to meaningfully assess and evaluate the bids. The ten submitted bids were deemed “Qualified Bids,” and so passed to the next stage, in which each bidder presented its bids to the Participants on a confidential basis. On July 1, 2014, after conducting careful analysis and comparison of the bids, the Selection Committee voted and selected a shortlist of six eligible bidders. The Selection Committee determined which shortlisted bidders would be provided the opportunity to revise their bids. After the Selection Committee assessed and evaluated the revised bids, the Selection Committee selected the plan processor via two rounds of voting by the Participants, as described in the Selection Plan.
The Selection Plan established an Operating Committee responsible for formulating, drafting, and filing with the Commission the CAT NMS Plan and for ensuring that the Participants' joint obligations under Rule 613 were met in a timely and efficient manner. In formulating the CAT NMS Plan, the Participants also engaged multiple persons across a wide range of roles and expertise, engaged the consulting firm Deloitte as project manager, and engaged the law firm WilmerHale to serve as legal counsel in drafting the Plan. Within this structure, the Participants focused on, among other things, comparative analyses of the proposed technologies and operating models, development of funding models to support the building and operation of the CAT, and detailed review of governance considerations. Given the complexity and scope of developing the CAT NMS Plan, these efforts were extensive.
When it approved the CAT NMS Plan in 2016, the Commission reiterated its belief that the Selection Plan remains a “reasonable approach,” that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue”:
In approving the Selection Plan, the Commission stated that the Selection Plan is reasonably designed to achieve its objective of facilitating the development of the CAT NMS Plan and the selection of the Plan Processor. The Commission also found that the Selection Plan is reasonably designed to govern the process by which the SROs will formulate and submit the CAT NMS Plan, including the review, evaluation, and narrowing down of Bids in response to the RFP, and ultimately choosing the Plan Processor that will build, operate, and maintain the consolidated audit trail. The Commission believes that the process set out in the Selection Plan for selecting a Plan Processor remains a reasonable approach, which will facilitate the selection of Plan Processor through a fair, transparent and competitive process and that no modifications to the Selection Plan are required to meet the approval standard. . . . In response to the comment that offered support for a specific Bidder, the Commission agrees with the Participants that the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor
During the process of developing the CAT NMS Plan, the Participants engaged in extensive and meaningful dialogue with market participants and the SEC. To this end, the Participants created a website to update the public on the progress of the CAT NMS Plan, published a request for comment on multiple issues related to the Plan, held multiple public events to inform the industry of the progress of the CAT and to address inquiries, and formed, and later expanded, a DAG to solicit more input from a representative industry group.
The DAG included representatives of Participants and Industry Members and conducted meetings to discuss, among other things, technical and operational aspects the Participants were considering for the Plan. The Participants issued press releases soliciting participants for the DAG, and a wide spectrum of firms was deliberately chosen to provide insight from various industry segments affected by CAT. The DAG meetings included discussions of topics such as option market maker quote reporting, requirements for capturing Customer IDs, timestamps and clock synchronization, reporting requirements for order handling scenarios, costs and funding, error handling and corrections, and potential elimination of systems made redundant by the CAT. From the inception of the DAG through September 2014, the DAG participated in 36 meetings, as well as a variety of DAG subcommittee meetings.
Following multiple discussions between the Participants and both the DAG and the bidders, as well as among the Participants themselves, the Participants recognized that some provisions of Rule 613 would not permit certain solutions to be included in the Plan that the Participants, in coordination with the DAG, determined advisable to effectuate the most efficient and cost-effective CAT. Specifically, “the SROs reached the conclusion that additional flexibility in certain of the minimum requirements specified in Rule 613 would allow them to propose a more efficient and cost-effective approach without adversely affecting the reliability or accuracy of CAT Data, or its security and confidentiality.”
After reviewing the exemptive request, the Commission determined that it was appropriate in the public interest and consistent with the protection of investors to grant the requested exemptive relief.
[T]he Commission is persuaded to provide flexibility in the discrete areas discussed in the Exemption Request so that the alternative approaches can be included in the CAT NMS Plan and subject to notice and comment. Doing so could allow for more efficient and cost-effective approaches than otherwise would be permitted. The Commission at this stage is not deciding whether the proposed approaches detailed below are more efficient or effective than those in Rule 613. However, the Commission believes the proposed approaches should be within the permissible range of alternatives available to the SROs.
The Commission further stated that the requested exemptive relief is consistent with the protection of investors. The Commission noted that:
Doing so will provide the public an opportunity to consider and comment on whether these proposed alternative approaches would indeed be more efficient and cost-effective than those otherwise required by Rule 613, and whether such approaches would adversely affect the reliability or accuracy of CAT Data or otherwise undermine the goals of Rule 613. Moreover, if—as the SROs represent—efficiency gains and cost savings would result from including the proposed approaches in the CAT NMS Plan without adverse effects, then the resultant benefits could potentially flow to investors (
The Participants incorporated the exemptive relief into the proposed CAT NMS Plan, which was noticed for comment, and the Commission ultimately approved the CAT NMS Plan with the more efficient and cost-effective alternative approaches described in the exemptive relief. Accordingly, the Participants believe that the costs incurred in developing the exemptive request were critical to the creation of a better CAT than was originally contemplated by Rule 613, and therefore should be recoverable as part of Historical CAT Assessment 1A.
Rule 613(a)(1) under Regulation NMS required the Participants to jointly file the CAT NMS Plan on or before April 28, 2013, less than a year after the adoption of Rule 613. In recognition of the complexity of the project to create the CAT NMS Plan as well as industry interest in limiting or eliminating certain requirements of Rule 613 (
The SROs stated in their Request Letter that they do not believe that the 270-day time period provided for in Rule 613(a)(1) provides sufficient time for the development of the RFP, formulation and submission of bids, and review and evaluation of such bids. The SROs also stated that they believe additional time beyond the 270 days provided for in Rule 613(a)(1) is necessary in order to provide sufficient time for effective consultation with and input from the industry and the public on the proposed solution chosen by the SROs for the creation of the consolidated audit trail at the conclusion of the RFP process and the NMS plan itself.
In recognition of the need for additional time to refine the technical description of and requirements for the CAT and to allow for additional evaluation of the proposed cost and funding considerations, the SEC granted two extensions of this deadline.
This additional time to complete the RFP process should allow the SROs to engage in a more thoughtful and comprehensive process for the development of an NMS plan. In this regard, the Commission notes that the additional time to solicit comment from the industry and the public at certain key points in the development of the NMS plan could identify issues that can be resolved earlier in the development of the consolidated audit trail and prior to filing the NMS plan with the Commission.
Given the Commission's recognition of the reasonableness and value of the extension of the deadline to file the CAT NMS Plan, the Participants believe that the costs incurred in developing the extension request were important to the process of developing the CAT NMS Plan, and therefore should be recoverable as part of Historical CAT Assessment 1A.
After extensive analyses and discussions with the DAG, bidders, market participants and the SEC staff, the Participants finalized the draft of the CAT NMS Plan and filed the CAT NMS Plan with the SEC on September 30, 2014. Following additional discussions, the Participants filed several amendments to the CAT NMS Plan during 2015 and 2016. With these additional changes, the SEC published the CAT NMS Plan for notice and comment in May 2016.
The Pre-Formation Costs include legal costs of $3,196,434. The legal services were performed by WilmerHale. The selection considerations and fees for WilmerHale were described in detail above. Prior to the creation of CAT LLC, WilmerHale was engaged to represent the consortium of SROs, not the individual Participants. For administrative purposes, FINRA agreed to receive such legal bills, although such costs were shared among the Participants. Therefore, the legal costs incurred with respect to WilmerHale do not include legal costs incurred by the individual Participants. These pre-formation legal costs are described in detail above and are further described below:
• Analyzed various legal matters associated with the Selection Plan and drafted an amendment to Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the DAG;
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on the CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Drafted exemptive requests;
• Provided interpretations related to the CAT NMS Plan;
• Provided support with regard to discussions among the exchanges, FINRA and other third parties, such as Deloitte;
• Provided tax advice with regard to CAT's status as a tax-exempt organization; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The Pre-Formation Costs include consulting costs of $10,589,273. The consulting services were performed by Deloitte. The selection considerations and fees for Deloitte were described in detail above. Prior to the creation of CAT LLC, for administrative purposes, Deloitte was engaged by FINRA to provide consulting services related to CAT, but the costs were shared by the consortium of SROs per agreement. Therefore, the consulting costs incurred with respect to Deloitte do not include consulting costs incurred by the individual Participants. The pre-formation consulting costs include the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participants' independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, reviewing technical requirements of other NMS plans, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided support for industry outreach sessions, including with regard to program design and agenda development, program support and logistics and coordination; and
• Provided support in fact finding, drafting content and meeting coordination for WilmerHale with regard to the CAT and the development of the CAT NMS Plan.
Such Pre-Formation Costs did not include costs related to the Chair of the CAT NMS Plan Operating Committee, as the CAT NMS Plan had not yet been adopted.
The Pre-Formation Costs include public relations costs of $57,174. The public relations services were performed by Peppercomm. The selection considerations and fees for Peppercomm are described in detail above. The costs related to Peppercomm were shared among the SROs. Therefore, the public relations costs do not include public relations costs incurred by the individual Participants. The pre-formation public relations costs include services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs related to cloud hosting services as a part of Historical CAT Assessments. CAT LLC believes that the costs related to cloud hosting services described in detail above are reasonable and appropriate given the strict data processing timelines and storage requirements imposed by the Commission-approved CAT NMS Plan and should be recoverable as a part of Historical CAT Assessment 1A.
CAT LLC believes that the costs for the cloud hosting services are reasonable, both in terms of the level of the fees paid by CAT LLC for cloud hosting services provided by AWS and the scope of the services performed by AWS for CAT LLC. CAT LLC believes that both the scope and amount of the costs for cloud hosting services are reasonable given the current requirements of the CAT NMS Plan adopted pursuant to Rule 613, including the strict data processing timeline, storage and other technical requirements under the Commission-approved CAT NMS Plan.
CAT LLC believes that the level of fees for the cloud hosting services is 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.
CAT LLC also believes that the scope of services provided by AWS for the CAT are appropriate given the current requirements of the Commission-approved CAT NMS Plan. As described above, the cloud hosting services costs reflect a variety of factors including, among other things:
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In addition, various requirements of the CAT NMS Plan adopted pursuant to Rule 613 contribute to the significant cloud hosting services costs, and that various Plan requirements could be amended or removed without affecting the regulatory purpose of the CAT. Indeed, CAT LLC has repeatedly sought exemptive relief and filed amendments to the CAT NMS Plan, and has even filed suit against the Commission, to seek to revise or eliminate certain costly requirements related to the CAT. However, despite these efforts, absent the Commission granting exemptive relief or approving cost savings amendments to the CAT NMS Plan, CAT LLC, the Participants and Industry Members are all required to comply with such requirements.
CAT is reasonably designed to efficiently and effectively utilize cloud computing and storage services, given the requirements of the Commission-approved CAT NMS Plan, including requirements related to security, operational reliance and quality assurance, and maintainability.
The Plan Processor uses state-of-the-art software that meets the strict security standards of the CAT NMS Plan. CAT utilizes a big data processing framework that is extensively used by large data processing companies, such as Apple, Meta, Netflix, IBM and Google. As such, it has substantial commercial support and support in the open-source community. It is also well suited for use with regard to iterative types of algorithms and query functions and analytics that the CAT requires, and it provides the heightened security necessary for the CAT.
The development and implementation of the design of CAT is not and has not been static. CAT LLC and the Plan Processor are always evaluating new innovations and service offerings from AWS and other providers to seek to maximize efficiency and cost avoidance while still satisfying the requirements of the CAT NMS Plan. These efforts have led to substantial savings to date. The cloud hosting costs for 2023 were less than the cloud hosting costs for 2022 by $8 million despite processing seven trillion more events in 2023 due to the efficiency and cost avoidance efforts for cloud hosting services. For example, when AWS introduced new storage options, FCAT adopted the cost-efficient new storage option after establishing that the new offering would satisfy the security and other standards of the CAT NMS Plan. This change led to millions of dollars of savings in storage costs. Similarly, when AWS introduced a new compute processor, FCAT adopted this new compute processor, which lead to millions of dollars in savings in compute costs. However, in other cases, new cloud technology developments could not be implemented in CAT because they would not satisfy the security or other requirements of the CAT NMS Plan.
When evaluating the design of the CAT, it must be kept in mind that the CAT is not a typical commercial technology project. The ability to make use of technology approaches that may lead to cost avoidance is also subject to the restrictive requirements of the CAT NMS Plan, such as processing timeframes, requirements for retention of data versions, query requirements, and security standards. Because such requirements are set forth in the CAT NMS Plan, any modification of such requirements are subject to the time-consuming process of amending the CAT NMS Plan or seeking an exemption from the relevant requirement. For example, CAT LLC recently has filed an amendment to address several of these expensive Plan requirements.
The CAT System also was designed to minimize the extent to which Industry Members would need to alter their systems to report to CAT. During the design process, Industry Member groups argued that it would make more sense financially for the CAT to accommodate differences in industry systems, than for all Industry Members to change their systems. Moreover, such design choices would facilitate consistency, uniformity and accuracy in reporting. Requiring the CAT to make such accommodations may increase CAT costs while accommodating CAT Reporters.
Based on the requirements in the CAT NMS Plan and/or in response to industry requests for functionality to be embedded with the Plan Processor to streamline or limit Industry Member system changes, the CAT has been designed to limit the effect on Industry Members. The following provides examples of such accommodations:
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To be clear, if OATS-like error correction tools are not made available on Day 1, hundreds of firms will be required to create and test their own tools or obtain vendor alternatives prior to the CAT Go-Live Date. Proprietary tools will require additional system builds, access to and ingestion of CAT data to perform system validation, and testing which will further stress the limited number of subject matter experts (“SMEs”) dedicated to the implementation of CAT reporting. Should this occur, inevitably firms (especially small firms who lack the necessary IT staff to write code and develop proprietary systems), may be put in the position of passing onto investors the cost required to build hundreds of redundant systems.
CAT provides various tools to help Industry Members identify and rectify errors.
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FIF CAT WG is not proposing a specific format; rather, we are proposing flexibility of input formats which includes support of existing formats (
Mandating a uniform format for reporting data to the CAT simplifies the task for the Central Repository of consolidating/storing data, but it puts the burden on each CAT Reporter to accurately translate their current (
CAT provides such a flexible input format.
The costs for cloud hosting services are appropriate and have not been adversely affected by the original design and approaches of the Initial Plan Processor. FCAT's design costs are the result of the requirements of the Commission-approved CAT NMS Plan.
When FCAT took over as the Plan Processor from Thesys, it utilized certain aspects of the technical specifications created by Thesys in its design. However, FCAT has not maintained aspects of the original design that would not be appropriate for the CAT. FCAT revised and enhanced the original technical specifications of the CAT System to increase its efficiency and efficacy, and to ensure its compliance with the CAT NMS Plan. For example, the Initial Plan Processor's approach utilized many more fields than FCAT's approach, which relies on additional linkages. With the additional linkages, the CAT System takes on more of the CAT-related burdens than the Industry Members. Such an approach serves to facilitate consistency, uniformity and accuracy in reporting.
Moreover, FCAT did not utilize the system built by the Initial Plan Processor; it rebuilt the CAT System based on revised technical specifications. For example, the Initial Plan Processor used an on-premises processing approach which was not geared toward the huge amounts of data stored in the CAT, while FCAT adopted a cloud-based solution in response to such data demands.
Furthermore, given the very short timeframe to develop the CAT System and the prior optimization of certain query tools (
CAT LLC continues to support the selection of AWS as the cloud hosting services provider for CAT given the compliance, operational, and security requirements of the CAT. Independent
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In addition, the nature of the CAT, including the amount of data it must process and the size of its data footprint, does not allow for a multi-cloud solution as this would be cost prohibitive and greatly increase the security boundary and associated risk profile of the CAT. For example, a multi-cloud hosting option would increase costs, complexity, and risk for operations with regard to, for example, DevOps, production support, and networking. Similarly, with regard to security, a multi-cloud solution would increase risk, including with regard to the need for data transfers between cloud providers and the expansion of the security boundary. With regard to labor, a multi-cloud solution would lose economies of scale due to the need to support unique cloud requirements. Accordingly, the use of a single-cloud solution continues to provide advantages with regard to cost, complexity, and risk. Indeed, “[t]he best practice is to focus on a single primary strategic provider.”
Furthermore, if another cloud service provider were determined to be a better match for the CAT at some future date, switching cloud service providers would be a very significant, expensive and time-consuming effort. Such an effort would likely be a 10-to-15-year commitment at a substantial expense. Such a move would require the replication or redesign of the underlying cloud environments (
CAT LLC believes that the recovery of costs related to the development of the funding model is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
Funding the CAT is a critical aspect of Rule 613 and the CAT NMS Plan. Article XI of the CAT NMS Plan describes in detail the requirements for funding the CAT, and the Participants are required to comply with and enforce compliance with the funding requirements of the CAT NMS Plan, just as with other aspects of the Plan. Accordingly, the development and implementation of a funding model for the CAT is as much a part of the requirements of the CAT NMS Plan as the development and operation of the CAT System. CAT LLC sees no reason to distinguish the efforts to develop a funding model from, for example, efforts to develop the CAT System, in seeking to recover reasonable CAT costs.
Moreover, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . legal costs.”
In addition, the legal costs incurred for the assistance in developing the CAT Funding Model are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at negotiated rates for such services that reflect both the extent of the services and market rates. Moreover, the scope of the legal costs associated with the development of the funding model reflect the complexity of the task in satisfying the detailed requirements of the CAT NMS Plan, the standards of the Exchange Act, and the many perspectives of the different market constituents potentially affected by or interested in the funding model, including Industry Members, Participants and investors. The many and varied comments by market participants on CAT funding over the years demonstrate the complexity of the task.
CAT LLC believes that the recovery of legal costs related to the litigation with the SEC regarding the CAT NMS Plan is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
The conditional exemptive relief in this Order allows for the implementation of alternative regulatory solutions that continue to advance the regulatory goals that Rule 613 and the CAT NMS Plan were intended to promote, while reducing the implementation and operational costs, burdens, and/or difficulties that would otherwise be incurred by the Participants and Industry Members that must fund the CAT.
CAT LLC believes it is reasonable and appropriate to incur costs to limit the need to incur even greater costs due to certain interpretations of the Plan.
In addition, the legal costs incurred during the litigation are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at market rates for such services. As such, the legal costs related to this litigation incurred during the period covered by Historical CAT Assessment 1A were reasonable.
Finally, Industry Members will directly benefit from the result of the litigation because it has addressed CAT NMS Plan requirements that would have imposed significantly greater costs on the CAT. Accordingly, it is reasonable and appropriate that the costs of such litigation be included in Historical CAT Costs 1.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017, which was the date by which Participants were required to begin reporting to the CAT, due to the delay in the commencement of reporting to the CAT. As discussed above, the Participants determined to exclude all CAT costs incurred from November 15, 2017 through November 15, 2018, which includes $37,852,083 in Thesys costs incurred from November 15, 2017 through November 15, 2018 (as well as other CAT costs during this period). The remaining Thesys costs incurred after November 15, 2018 are the $19,628,791 in capitalized developed technology costs for the period from November 16, 2018 through February 2019 incurred in the development of the CAT by the Initial Plan Processor, as well as a transition fee for the transition from the Initial Plan Processor to the successor Plan Processor. The Participants would remain responsible for 100% of these $19,628,791 in costs.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017. CAT LLC notes that the development and implementation of the CAT System, while unprecedented in scope and design, is like any other large and innovative technology project in that, inevitably, there were adjustments and refinements in the technical approach as the project developed, even with substantial planning efforts and oversight prior to the build. This is even more likely when the project faces a very tight implementation schedule, such as the one imposed by the Commission in Rule 613 and the CAT NMS Plan. However, an adjusted approach does not mean that the funds were not valid expenditures and should not be recovered.
The reasonableness of Thesys costs should be evaluated by the Commission as of the time they were incurred, not in hindsight. As detailed above, the Commission concluded in 2016 that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue.”
As noted in the CAT Funding Model Approval Order, the Commission recognized that “[t]he CAT NMS Plan contemplates that the costs of the CAT are to be allocated between the Participants and Industry Members.”
CAT LLC believes that the recovery of CAIS-related costs is appropriate, and that the amount and scope of such costs, as described above, are reasonable, and that the reasonableness of historical costs should be evaluated by the Commission as of the time they were incurred, not in hindsight.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable CAIS operating costs as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . CAIS operating fees.”
In addition, CAT LLC determined that the CAIS operating fees described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The “CAIS Operating Costs” for Historical CAT Costs 1 total $9,480,587, with Pre-FAM costs of $2,072,908, FAM 1 costs of $254,998, FAM 2 costs of $1,590,298, and FAM 3 costs of $5,562,383. As described above, the CAIS operating fees were incurred with regard to two categories of CAIS-related efforts: (1) the acceleration of the reporting of LTIDs; and (2) the development of the CAIS Technical Specifications and the building of CAIS. These two categories of costs are discussed in more detail below.
During the period covered by Historical CAT Assessment 1A, the CAIS operating costs included costs related to the acceleration of the
• After FCAT developed the LTID Technical Specifications, the LTID Technical Specifications were published on January 31, 2020, with additional updates provided to the LTID Technical Specifications through April 2021.
• The LTID account information testing environment opened on August 24, 2020.
• The LTID account information reporting production environment opened on December 14, 2020.
• CAT Reporters were required to request their production readiness certification for account information related to LTIDs by the deadline of April 9, 2021.
• The LTID account information reporting for Phases 2a, 2b and 2c for Large Industry Members went live on April 26, 2021.
• The LTID account information reporting for Phases 2d for Large Industry Members went live on December 13, 2021.
• The LTID account information reporting for Phases 2a, 2b, 2c and 2d for Small Industry Members went live on April 26, 2021.
Throughout this project, FCAT and CAT LLC worked closely with the industry on LTID and CAIS reporting. Between December 2019 and December 2021, at least 57 checkpoint calls, webinars, and technical working group meetings with industry representatives were hosted to address issues and to educate CAT Reporters regarding LTID and CAIS reporting.
The LTID reporting project was successfully completed in a timely fashion, and the fees related to the project were reasonable. Accordingly, CAT LLC appropriately seeks to recover such costs via Historical CAT Assessment 1A.
During the period covered by Historical CAT Assessment 1A, FCAT began the development of the full CAIS Technical Specifications and the building of CAIS. The CAIS Technical Specifications were developed during this period as follows:
• Iterative drafts of the CAIS Technical Specifications were published on June 30, 2020, December 1, 2020, and January 1, 2021.
• The full, final CAIS Technical Specifications were published on January 29, 2021.
• Updated versions of the CAIS Technical Specifications were published throughout 2021.
As discussed above, FCAT and CAT LLC frequently engaged with the industry regarding the development of CAIS, hosting regular checkpoint calls, webinars, and technical working group meetings with industry representatives to address any issues, including addressing the interplay between Industry Members' existing customer systems and CAIS, and to educate CAT Reporters regarding LTID and CAIS reporting. Such engagement was critical to the CAIS development process as the CAIS project was unprecedented in terms of its content, scope and complexity.
During this period, FCAT also commenced the building of the CAIS system in accordance with the CAIS Technical Specifications during the period covered by Historical CAT Assessment 1A. The CAIS system was ready for industry testing shortly after the end of this period in January 2022.
The CAIS Technical Specifications and the CAIS system, as developed during this period, continue to be used. Industry Members have been required to report, and have continuously reported, required data to CAIS on a daily basis since November 7, 2022, consistent with interim reporting obligations. The CAIS system accepts and validates the CAIS data submitted by Industry Members and provides Industry Members with initial feedback on data errors. In light of the unprecedented nature of the CAIS system, certain changes to the system, such as changes related to error corrections and the CAIS regulatory portal, were necessary to finalize CAIS reporting. FCAT worked to address these remaining issues,
CAT LLC believes that the recovery of public relations costs is appropriate and that the amount and scope of such costs, as described above, are reasonable.
The Commission has long recognized that external public relations costs are reasonably associated with creating, implementing and maintaining the CAT. In the CAT NMS Plan Approval Order, the Commission estimated that the Participants had collectively spent approximately $2,400,000 in preparation of the CAT NMS Plan on external public relations, legal, and consulting costs, and estimated that the Participants would continue to incur external public relations costs associated with maintaining the CAT upon approval of the CAT NMS Plan.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for public relations services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . public relations costs.”
In addition, CAT LLC determined that the public relations costs described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The services performed by the public relations firms through 2021 were limited in scope to assist CAT LLC,
CAT LLC believes that the recovery of legal costs related to the limitation of liability provision, including costs related to the proceedings before the SEC and costs related to the proposed amendment to the Consolidated Audit Trail Reporter Agreement and the Consolidated Audit Trail Reporting Agent Agreement (the “Reporting Agreements”) is appropriate and that the amount and scope of such costs as described above are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
Moreover, it is critical that CAT LLC, which has no employees of its own, have the ability to fund a legal defense in litigation and other legal proceedings against it. In response to CAT LLC requiring Industry Members to agree to the limitation of liability provision to submit data to the CAT, SIFMA filed an application for review of actions taken by CAT LLC and the Participants pursuant to Sections 19(d) and 19(f) of the Exchange Act. Contemporaneously with the filing of this proceeding, SIFMA moved for a stay of the requirement that Industry Members sign a Reporter Agreement, or in the alternative, asked the Commission to further delay the launch of CAT reporting on June 22, 2020. CAT LLC must have the resources to defend itself from litigious actions by others, like these.
Although a limitation of liability provision ultimately was not adopted as proposed, it was a reasonable provision to propose for the CAT Reporter Agreements, given that such provisions are in accordance with industry norms. Limitations of liability are ubiquitous within the securities industry and have long governed the economic relationships between self-regulatory organizations and the entities that they regulate. For example, U.S. securities exchanges have adopted rules to limit their liability for losses that Industry Members incur through their use of exchange facilities.
Furthermore, as described above, the specialized services were performed by experienced counsel at market rates for such services. Accordingly, the legal costs for the efforts related to the limitation of liability provision were reasonable.
CAT LLC believes that the recovery of consulting costs related to the Chair of the CAT Operating Committee is appropriate and that the amount and scope of such costs are reasonable.
As a preliminary matter, the selection of the Chair of the Operating Committee complies with the requirements of Section 4.2 of the CAT NMS Plan. The initial Chair that served during the period covered by Historical CAT Assessment 1A was designated by a Participant as the Participant's alternate voting member. Accordingly, the Chair is a representative of the Participants, as required by the CAT NMS Plan.
In addition, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for consulting as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . consulting . . . ” costs.
The Participants determined that the position of the Chair was a critical role for the implementation of the CAT, and an independent Chair would appropriately consider and address the views of each of the Participants. The Participants also determined that it was important to have a Chair with a strong background regarding issues related to the regulatory obligations of self-regulatory organizations, including their obligations under national market system plans. The compensation paid to the Chair is appropriate for a person with such background and skills. The average annual amount paid to the Chair from 2017 through the end of FAM 3 was $292,733.30. Separate from the Chair, CAT LLC relies upon a Leadership Team of representatives of the SROs to oversee the day-to-day implementation of the CAT NMS Plan. CAT LLC does not compensate any member of the Leadership Team.
CAT LLC understands that there are three types of reconciliation processes related to the invoices:
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As discussed further below, CAT LLC only considers the first type of process to be a “reconciliation” and the only type of process that is required under the CAT NMS Plan. CAT LLC provides the means to reconcile the CAT invoice amount to the underlying trades provided by CAT.
The CAT NMS Plan does not require CAT LLC to facilitate the second type of process: matching underlying trades for a CAT invoice with a firm's internal books and records. CAT LLC has access only to the underlying trades provided by CAT; it does not have access to a firm's internal books and records. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
The CAT NMS Plan also does not require CAT LLC to provide the ability to identify the order originator for the underlying trades for the CAT invoices. Accordingly, the billing guidance and processes do not provide CAT Reporters with the ability to identify the order originator for the underlying trades provided by CAT with CAT invoices. CAT LLC has been working closely with CAT Reporters to explain its billing approach and to address any outstanding billing questions. But, it should not be lost that CAT LLC provides information sufficient to allow CAT Reporters to reconcile CAT invoice amounts with the underlying trades provided by CAT LLC.
The CAT NMS Plan does not require CAT LLC to facilitate the matching of underlying trades for a CAT invoice with a firm's internal books and records, which may consist of trading data from various sources external to CAT. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
In this regard, it is important to recognize that CAT LLC has developed a billing approach that greatly improves upon existing billing practices for similar regulatory fees (
To facilitate the introduction of CAT fees, CAT LLC has worked with FCAT to develop an approach to CAT billing that is consistent with existing billing constructs used with regard to Section 31-related sales values fees, subject to certain enhancements. Under this billing approach, FCAT is providing additional linkage elements, not necessarily provided in the Section 31-sales value fee context, to facilitate CAT Reporters' ability to match the underlying trades provided by CAT with their internal books and records and to reduce the complexity of that process. Specifically, FCAT is providing various key elements of the trade itself, such as the tradeID and branch sequence,
With the Additional Trade Details, CAT LLC and FCAT believe that the overwhelming majority of underlying trades provided by CAT bills can be matched with a CAT Reporter's internal books and records. CAT LLC recognizes that there may be certain cases in which such matching is more difficult given various firm-specific considerations, but believes that such instances are significantly more limited than with regard to the SRO fees charged in relation to Section 31.
Similar to other regulatory fees, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Accordingly, Historical CAT Assessment 1A does not address the process by which any CAT Reporters may pass through the fee to their customers. Likewise, the CAT billing approach provided by the Plan Processor is designed to address the needs of CAT Reporters with regard to the reconciliation of CAT invoices with the underlying trades provided by CAT LLC with the invoices; they are not designed to address issues related to any pass-through fees. Accordingly, facilitating CAT Reporters' ability to pass through fees to their clients is outside the scope of this fee filing. Nevertheless, as described below, CAT LLC and the Plan Processor have expended significant efforts to provide technical assistance to Industry Members regarding the implementation of Historical CAT Assessment 1A, including providing Additional Trade Details that provide significant details about each underlying trade.
In its approval of the CAT Funding Model, the Commission approved charging CAT fees to the CAT Executing Broker, rather than the originating broker. This fee filing must comply with the requirements of the CAT Funding Model, and, therefore, charges the Historical CAT Assessment 1A to CAT Executing Brokers.
Moreover, charging originating brokers would introduce significant complexity to the billing process from the CAT's perspective, and would increase the costs of implementing CAT fees. Charging the CAT Executing Broker is simple and straightforward, and leverages a one-to-one relationship between billable events (trades) and billable parties, similar to other
As noted, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT Fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Nevertheless, the Additional Trade Details provided with regard to the underlying trades on CAT invoices may assist with this process. Like with Section 31-related sales value fees, however, it is not always possible to trace every fee on a transaction back to the originating party. Industry Members have faced these issues under Section 31-related sales values fees for many years.
CAT LLC has worked with FCAT to provide significant technical assistance to Industry Members to allow the Industry Members to understand how Historical CAT Assessments will be implemented and billed, including webinars, CAT alerts, mock invoices, and responses to questions posed to the FCAT Help Desk.
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By providing such detailed and sustained assistance to Industry Members regarding CAT fees and billing, CAT LLC has successfully addressed questions raised by Industry Members regarding the CAT fees and billing processes.
In keeping with past practice, CAT LLC provided notice of the proposed
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the Historical CAT Assessment 1A fees to be collected are directly associated with the 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 Exchange has already incurred such development and implementation costs and the proposed Historical CAT Assessment 1A fees, therefore, would allow the Exchange to collect certain of such costs in a fair and reasonable manner from Industry Members, as contemplated by the CAT NMS Plan.
The proposed Historical CAT Assessment 1A fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining Historical CAT Assessments as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Historical Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for the Historical CAT Assessment, is reasonable and satisfies the Exchange Act.
The formula for calculating a Historical Fee Rate requires the amount of Historical CAT Costs to be recovered. Specifically, Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Historical CAT Costs 1 for each of these categories of costs above.
Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the Historical CAT Costs are reasonable and appropriate.” As discussed below, the Exchange believes that the amounts set forth in this filing for each of these cost categories is “reasonable and appropriate.” Each of the costs included in Historical CAT Costs 1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover costs related to cloud hosting services as a part of Historical CAT Assessments.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and an amendment to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to CAIS operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to change request fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to capitalized developed technology costs as a part of Historical CAT Assessments.
These costs involve the activity of both the Initial Plan Processor and FCAT, as the successor Plan Processor.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to legal fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover consulting costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover insurance costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover professional and administration costs as a part of Historical CAT Assessments.
CAT LLC determined to hire a financial advisory firm, Anchin, to assist with financial matters for the CAT. CAT LLC interviewed Anchin as well as other potential financial advisory firms to assist with the CAT project, considering a variety of factors in its analysis, including the firm's relevant expertise and fees.
CAT LLC also determined to engage an independent accounting firm, Grant Thornton, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC interviewed this firm as well as another potential accounting firm to audit CAT LLC's financial statements, considering a variety of factors in its analysis, including the relevant expertise and fees of each of the firms. CAT LLC determined that Grant Thornton was well-qualified for the role given the balance of these considerations.
The professional and administrative costs also include costs related to the receipt of certain market data from Exegy. After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy. Exegy provided the data elements required by the CAT NMS Plan, and the fees were reasonable and in line with market rates for the market data received.
The professional and administrative costs also include costs related to a third
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover public relations costs as a part of Historical CAT Assessments.
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 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 will count executed equivalent shares for CAT billing purposes.
CAT LLC has determined to establish a Historical Recovery Period of 24 months for Historical CAT Assessment 1A and that such length is reasonable. CAT LLC determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable fee rate for Historical CAT Assessment 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans notes to the Participants in a timely fashion. CAT LLC determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
As noted in the Plan amendment for the CAT Funding Model, as a practical matter, the fee filing for a Historical CAT Assessment would provide the exact fee per executed equivalent share to be paid for each Historical CAT Assessment, and describe the relevant number of decimal places for the fee rate.
The Exchange believes that imposing Historical CAT Assessment 1A with a fee rate of $0.000002 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the remaining Historical CAT Costs 1 and such costs would be spread out over an appropriate recovery period, as discussed above. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, Historical CAT Assessment 1A is significantly lower than fees assessed pursuant to Section 31 (
Historical CAT Assessment 1A 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 Historical CAT Assessments as well as the Industry Members to be charged the Historical CAT Assessments.
Historical CAT Assessment 1A provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. For example, as described above, the calculation of Historical CAT Assessment 1A complies with the formula set forth in Section 11.3(b) of the CAT NMS Plan. In addition, Historical CAT Assessment 1A would be charged to CEBBs and CEBSs in accordance with Section 11.3(b) of the CAT NMS Plan. Furthermore, the Participants would continue to remain responsible for their designated share of Past CAT Costs through the cancellation of loans made by the Participants to CAT LLC.
In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A—Historical CAT Costs 1 (including Excluded Costs) and the exclusion of costs previously invoiced via Historical CAT Assessment 1, the count for the executed equivalent share volume for the prior 12 months, the length of the Historical Recovery Period, and the projected executed equivalent share volume for the Historical Recovery Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for Historical CAT Assessment 1A 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.
Historical CAT Assessment 1A is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of Historical CAT Assessments 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. Historical CAT Assessment 1A complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A and the resulting fee rate for Historical CAT Assessment 1A is reasonable. Therefore, Historical CAT Assessment 1A does not impose an unfairly discriminatory fee on Industry Members.
Finally, 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 specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce Historical CAT Assessment 1A on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A is reasonable and the resulting fee rate for Historical CAT Assessment 1A calculated in accordance with the CAT Funding Model is reasonable. Therefore, Historical CAT Assessment 1A would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to establish fees for Industry Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“Prospective CAT Costs” fees).
Under the CAT Funding Model, “[t]he Operating Committee will establish one or more fees (each a `Historical CAT Assessment') to be payable by Industry Members with regard to CAT costs previously paid by the Participants (`Past CAT Costs').”
Each Historical CAT Assessment to be paid by CEBBs and CEBSs is designed to contribute toward the recovery of two-thirds of the Historical CAT Costs. Because the Participants previously have paid Past CAT Costs via loans to the Company, the Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs will be paid by the cancellation of loans made by the Participants to the Company on a pro rata basis based on the outstanding loan amounts due under the loans, instead of through the payment of a CAT fee.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) Historical CAT Assessment 1A to recover certain historical CAT costs incurred prior to January 1, 2022, 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.' ”
The Exchange, along with the other Participants in the CAT, previously filed a fee filing to implement Historical CAT Assessment 1.
Historical CAT Assessment 1A will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange.
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange.
The Operating Committee determined the fee rate to be used in calculating Historical CAT Assessment 1A based on the Historical CAT Costs for Historical CAT Assessment 1A and the projected total executed share volume of all transactions in Eligible Securities for the Historical Recovery Period for Historical CAT Assessment 1A (“Historical Recovery Period 1A”), as discussed in detail below. Based on this calculation, the Operating Committee has determined that the fee rate for Historical CAT Assessment 1A would be $0.000002, as discussed in detail below.
Under the CAT NMS Plan, for purposes of calculating each Historical CAT Assessment, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he Operating Committee will reasonably determine the Historical CAT Costs sought to be recovered by each Historical CAT Assessment, where the Historical CAT Costs will be Past CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT Costs by the Operating Committee. Each Historical CAT Assessment will seek to recover from CAT Executing Brokers two-thirds of Historical CAT Costs incurred during the period covered by the Historical CAT Assessment.”
The following describes in detail Historical CAT Costs 1 with regard to four separate historical time periods as well as Past CAT Costs excluded from Historical CAT Costs 1 (“Excluded Costs”). The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing “a brief description of the amount and type of Historical CAT Costs, 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.”
Historical CAT Costs 1 would include costs incurred by CAT prior to June 22, 2020 (“Pre-FAM Period”) and already funded by the Participants, excluding Excluded Costs (described further below). Historical CAT Costs 1 would include costs for the Pre-FAM Period of $124,290,730. The Participants would remain responsible for one-third of this cost (which they have previously paid) ($41,430,243.33), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($41,430,243.33) and CEBSs paying one-third ($41,430,243.33). These costs do not include Excluded Costs, as discussed further below. The following table breaks down Historical CAT Costs 1 for the Pre-FAM Period into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The Pre-FAM
The $10,268,840 in technology costs for cloud hosting services represent costs incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the Pre-FAM Period.
As part of its proposal for acting as the successor Plan Processor for the CAT, FCAT selected AWS as a subcontractor to provide cloud hosting services. In 2019, after reviewing the capabilities of other cloud services providers, FCAT determined that AWS was the only cloud services provider at that time sufficiently mature and capable of providing the full suite of necessary cloud services for the CAT, including, for example, the security, resiliency and complexity necessary for the CAT computing requirements. The use of cloud hosting services is standard for this type of high-volume data activity and reasonable and necessary for implementation of the CAT, particularly given the substantial data volumes associated with the CAT.
Under the Plan Processor Agreement with FCAT, 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 cost 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. The fees for cloud hosting services during the Pre-FAM Period were paid to FCAT by CAT NMS,
AWS was engaged by FCAT to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools). AWS also was engaged to provide various environments for CAT, such as development, performance testing, test and production environments.
The cost for AWS services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to the CAT. During the Pre-FAM Period from the engagement of AWS in February 2019 through June 2020, AWS provided 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,”
The $21,085,485 in technology costs related to operating fees represent costs incurred with regard to activities of FCAT as the Plan Processor. 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 (
FCAT was selected to assume the role of the successor Plan Processor. Prior to this selection, the Participants engaged in discussions with two prior Bidders
The Selection Subcommittee considered factors including, but not limited to, the following, in recommending FINRA to the Operating Committee as the successor Plan Processor:
a. FINRA's specialized technical expertise and capabilities in the area of broker-dealer technology;
b. The need to appoint a successor Plan Processor with specialized expertise to develop, implement, and maintain the CAT System in accordance with the CAT NMS Plan and SEC Rule 613;
c. FINRA's detailed proposal in response to CATLLC's recent inquiries; and
d. FINRA's data query and analytics systems demonstration to the Participants.
Based on these and other factors, the Selection Subcommittee determined that FINRA was the most appropriate
On February 26, 2019, the Operating Committee (with FINRA recusing itself) voted to select FINRA as the successor Plan Processor pursuant to Section 6.1(t) of the CAT NMS Plan.
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. The operating fees during the Pre-FAM Period were paid to FCAT by CAT LLC.
From March 29, 2019 (the commencement of the Plan Processor Agreement with FCAT) through June 22, 2020 (the end of the Pre-FAM Period), the Plan Processor's activities with respect to the CAT included the following:
• Commenced user acceptance testing with market data provided by Exegy Incorporated (“Exegy”), a market data provider;
• Published Technical Specifications and related reporting scenarios documents for Phase 2a, 2b and 2c reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated testing for Phase 2a and 2b reporting for Industry Members;
• Began developing Technical Specifications and related reporting scenarios documents for Phase 2d reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published Central Repository Access Technical Specifications, and provided regulator access to test data from Industry Members;
• Facilitated Participant exchanges that support options market makers sending Quote Sent Time to the CAT;
• Facilitated the introduction of OPRA and Options NBBO Other Data to CAT;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing requirements under Regulation SCI;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants, the SEC and its staff;
• Operated the FINRA CAT Helpdesk, which is the primary source for answers to questions about CAT, including questions regarding: clock synchronization, firm reporting responsibilities, interpretive questions, technical specifications for reporting to CAT and more;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content;
• Provided 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.
The $2,072,908 in technology costs related to CAIS operating fees represent the fees paid for FCAT's subcontractor charged with the development and operation of CAT's Customer and Account Information System (“CAIS”). 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.
During the Pre-FAM Period, the CAIS-related services were provided by the Plan Processor through the Plan Processor's subcontractor, Kingland Systems Incorporation (“Kingland”). Kingland had experience operating in the securities regulatory technology space, and as a part of its proposal for acting as the Plan Processor for the CAT, FCAT selected Kingland as a subcontractor to provide certain CAIS-related services.
Under the Plan Processor Agreement with FCAT, CAT LLC was required to pay to the Plan Processor the fees incurred by FCAT for CAIS-related services provided by FCAT through Kingland on a monthly basis. FCAT negotiated the fees for Kingland'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. The fees for CAIS-related services during the Pre-FAM Period were paid by CAT LLC to FCAT. FCAT, in turn, paid Kingland.
During the Pre-FAM Period, Kingland began development of the CAIS Technical Specifications and the building of CAIS. In addition, Kingland also worked on the build related to the CCID Alternative, an alternative approach to customer information that was not included in the CAT NMS Plan as originally adopted.
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 change 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 costs were paid by CAT LLC to FCAT.
This category of costs includes capitalizable application development costs incurred in the development of the CAT. The capitalized developed technology costs for the Pre-FAM Period of $51,847,150 relate to technology provided by the Initial Plan Processor and the successor Plan Processor.
On January 17, 2017, the Selection Committee of the CAT NMS Plan selected the Initial Plan Processor, Thesys Technologies, LLC, for the CAT NMS Plan pursuant to Article V of the CAT NMS Plan.
From January 17, 2017 through January 30, 2019, the time in which Thesys CAT was engaged for the CAT, but excluding the period from November 15, 2017 through January 30, 2019, the Initial Plan Processor engaged in various activities with respect to the CAT, including preparing iterative drafts of Participant Technical Specifications, Industry Member Technical Specifications and the Central Repository Access Technical Specifications. In addition, Thesys CAT also developed CAT technology, addressed compliance items, including drafting CAT policies and procedures, addressing Regulation SCI requirements, establishing a CAT Compliance Officer and a Chief Information Security Officer, addressed security-related matters for the CAT, and worked towards the initiation of Participant reporting per the Participant Technical Specifications.
The legal costs of $19,674,463 represent the fees paid for legal services provided by two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), during the Pre-FAM Period. The legal costs exclude those costs incurred from November 15, 2017 through November 15, 2018.
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. WilmerHale's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading law firms for similar work.
The legal costs for WilmerHale during the Pre-FAM Period included costs incurred from 2013 until June 22, 2020 to address corporate and regulatory legal matters related to the CAT. The legal fees for this law firm during the period from February 2013 until the formation of the CAT NMS, LLC on November 15, 2016 were paid directly by the exchanges and FINRA to WilmerHale. After the formation of CAT NMS LLC, the legal fees were paid by CAT LLC to WilmerHale.
After WilmerHale was engaged in 2013 through the end of the Pre-FAM Period on June 22, 2020 (excluding the legal costs from November 15, 2017 through November 15, 2018), WilmerHale provided legal assistance to the CAT on a variety of matters, including with regard to the following:
• Analyzed various legal matters associated with the Selection Plan, and drafted an amendment to the Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the Development Advisory Group (“DAG”);
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan and related filings;
• Negotiated and drafted the plan processor agreements with the Initial Plan Processor and the successor Plan Processor;
• Provided assistance with compliance with Regulation SCI;
• Assisted with clock synchronization study;
• Provided assistance with respect to the establishment of CAT security;
• Drafted exemptive requests from CAT NMS Plan requirements, including with regard to options market maker quotes, Customer IDs, CAT Reporter IDs, linking allocations to executions, CAT reporting timeline, FDIDs, customer and account information, timestamp granularity, small industry members, data facility reporting and linkage, allocation reports, SRO-assigned market participant identifiers and cancelled trade indicators, thereby seeking to implement changes that would be cost effective and benefit Industry Members and Participants;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided advice regarding CAT policies and procedures;
• Analyzed the SEC's amendment of the CAT NMS Plan regarding financial accountability;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues; and
• Assisted with third-party vendor agreements.
The consulting costs of $17,013,414 represent the fees paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the Pre-FAM Period, from October 2012 until June 22, 2020. 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.
To help facilitate project management given the unprecedented complexity and scope of the CAT project, the Participants determined it was necessary to engage a consulting firm to assist with the CAT project in 2012, following the adoption of Rule 613. A variety of factors were considered in the analysis of prospective consulting firms, including (1) the firm's qualifications, resources, and expertise; (2) the firm's relevant experience and understanding of the regulatory issues raised by the CAT and in coordinating matters of similar scope; (3) the composition of the consulting team; and (4) professional fees. Following a series of interviews, the exchanges and FINRA as a consortium determined that Deloitte was well qualified given the balance of these considerations and engaged Deloitte on October 1, 2012.
Deloitte's fee rates are negotiated on an annual basis and are in line with market rates for this type of specialized consulting work. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. Deloitte's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading consulting firms for similar work.
The consulting costs for CAT during the period from 2012 until the formation of the CAT NMS, LLC were paid directly by the Participants to Deloitte. After the formation of CAT NMS, LLC, the consulting fees were paid by CAT LLC to Deloitte. CAT LLC reviewed the consulting fees each month and approved the invoices.
After Deloitte was hired in 2012 through the end of the Pre-FAM Period on June 22, 2020 (excluding the consulting costs from November 15, 2017 through November 15, 2018), Deloitte provided a variety of consulting services, including the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participant's independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Assisted with cost and funding-related activities for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA
• Provided 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;
• Assisted with industry outreach and communications regarding the CAT, including assistance with industry outreach events, the development of the CAT website, frequently asked questions, and coordinating with the CAT LLC's public relations firm;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress;
• Coordinated efforts regarding the selection of the successor Plan Processor;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor, including support for the Operating Committee and successor Plan Processor for the new role; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $880,419 represent the cost incurred for insurance for CAT during the Pre-FAM Period. Commencing in 2020, CAT LLC performed an evaluation of various potential alternatives for CAT insurance policies, which included engaging in discussions with different insurance companies and conducting cost comparisons of various alternative approaches to insurance. Based on an analysis of a variety of factors, including coverage and premiums, CAT LLC determined to purchase cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance from USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
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.
After Anchin was hired in April 2018 through the end of the Pre-FAM Period on June 22, 2020 (excluding the period from April 2018 through November 15, 2018), Anchin provided a variety of services, including the following:
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial reporting matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase
Upon the termination of the contract between CAT LLC and Exegy, FCAT entered into a contract with Exegy to purchase the required market data from Exegy in July 2019. All costs under the contract were treated as a direct pass through cost to CAT LLC. Therefore, the fees for the market data were paid by CAT LLC to FCAT, who, in turn, paid Exegy for the market data.
The public relations costs of $224,669 represent the fees paid to public relations firms during the Pre-FAM Period for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC was better positioned to understand and address CAT matters to the benefit of all market participants. Specifically, the public relations firms provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
The services performed by each of the public relations firms were comparable. The fees for such services were reasonable and in line with market rates. Only one public relations firm was engaged at a time; the three firms were engaged sequentially as the primary public relations contact moved among the three firms during this time period.
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 1 of the Financial Accountability Milestones (“FAM Period 1”),
By
CAT LLC continued to utilize AWS in FAM Period 1 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 1 Period. Accordingly, the $2,642,122 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 1. The fee arrangement for AWS described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. Moreover, CAT LLC continued to believe that AWS's maturity in the cloud services space as well as the significant cost and time necessary to move the CAT to a different cloud services provider supported the continued engagement of AWS.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 1 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, reference data and other types of Other Data. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 1.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 1. Accordingly, the $1,099,680 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 1. The fee arrangement for FCAT described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, FCAT's activities with respect to the CAT included the following:
• Published iterative drafts of draft Technical Specifications for Phase 2d, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published iterative drafts of CAIS Technical Specifications, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated Industry Member reporting of Quote Sent Time on Options Market Maker quotes;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 1. Accordingly, the $254,998 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 1. The fee arrangement for Kingland described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to CCID Alternative, as well as the acceleration of the reporting of LTIDs.
CAT LLC did not incur costs related to change requests during FAM Period 1.
Capitalized developed technology costs for FAM Period 1 of $1,684,870 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include: (1) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including separate production and industry test entitlements, and reprocessing of exchange event timestamps; (2) implementation fees; and (3) license fees.
The legal costs of $481,687 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 1.
• Assisted with the development of the CAT funding model and drafted related amendments and fee filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, verbal activity, options market maker quote sent time, TRF linkages, and allocations;
• Provided interpretations related to CAT NMS Plan requirements, including the Financial Accountability Milestone amendment;
• Assisted with compliance with Regulation SCI;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the drafting of the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Assisted with communications and presentations for the industry regarding CAIS;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding CAT technical specifications;
• Assisted with third-party vendor agreements; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $137,209 represent the fees paid to Deloitte as project manager during FAM Period 1. CAT LLC continued to employ Deloitte during FAM Period 1 based on, among other things, their expertise and cumulative experience with the CAT. The fee rates for Deloitte during FAM Period 1 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 1 were paid by CAT LLC to the consulting firm. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 1, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
Although insurance was in effect during FAM Period 1, CAT LLC did not incur costs related to insurance during FAM Period 1.
• Maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups; and
• Prepared monthly and quarterly financial statements.
The public relations costs of $7,700 represent the fees paid to Peak Strategies during FAM Period 1. CAT LLC continued to employ Peak Strategies during FAM Period 1 based on, among other things, their expertise and history with the project. The fee rates for this firm were reasonable and in line with market rates for these types of services. The fees for these services during FAM Period 1 were paid by CAT LLC to Peak Strategies. During FAM Period 1, Peak Strategies continued to provide professional communications services to CAT LLC, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT LLC and already funded by Participants during Period 2 of the Financial Accountability Milestones (“FAM Period 2”),
By
(a) Industry Member reporting (excluding reporting by Small Industry Members that are not OATS reporters) for equities transactions, excluding Customer Account Information, CustomerID, and Customer Identifying Information, is developed, tested, and implemented at a 5% Error Rate or less and with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, and trade reporting facilities linkage to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system,
CAT LLC completed the requirements of FAM Period 2 by December 31, 2020. The following describes the costs for each of the categories for FAM Period 2.
CAT LLC continued to utilize AWS in FAM Period 2 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 2 Period. Accordingly, the $20,709,212 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 2. The fee arrangement for AWS described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 2 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, and Other Data, including reference data. In addition, Industry Members began reporting LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 2.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 2. Accordingly, the $9,108,700 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 2. The fee arrangement for FCAT described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, FCAT's activities with respect to the CAT included publishing the Technical Specifications for Phase 2d and overseeing the reporting of firm to firm and intrafirm linkages by Industry Members. In addition, FCAT also continued to engage in the following activities during FAM Period 2:
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the development and implementation of the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 2. Accordingly, the $1,590,298 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 2. The fee arrangement for Kingland described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build
During FAM Period 2, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 2, CAT incurred costs of $51,823 related to a change request regarding the addition of functionality for exchange Participants to report rejected messages to the CAT.
Capitalized developed technology costs for FAM Period 2 of $6,761,094 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to separate production and industry test entitlements, market maker reference data, and back-processing of exchange exception logic; (3) implementation fees; and (4) license fees.
The legal costs of $2,766,644 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 2.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, allocations, exchange activity, OTQT, initial data validation, error corrections and recordkeeping;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittees, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6 of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Assisted with third-party vendor agreements (
• Assisted with change requests; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $532,146 represent the fees paid to Deloitte as project manager during FAM Period 2. CAT LLC continued to employ Deloitte during FAM Period 2 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 2 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 2 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 2, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $976,098 represent the fees paid for insurance during FAM Period 2. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $438,523 represent the fees paid to Anchin and Grant Thornton for financial services provided during FAM Period 2.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from the Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audit by an independent auditor; and
• Reviewed historical costs from inception.
The public relations costs of $41,940 represent the fees paid to Peak Strategies during FAM Period 2. CAT LLC continued to employ Peak Strategies during FAM Period 2 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 2 were paid by CAT LLC to Peak Strategies. During FAM Period 2, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 3 of the Financial Accountability Milestones (“FAM Period 3”),
By
CAT LLC completed the requirements of FAM Period 3 by December 31, 2021. The following describes the costs for each of the categories for FAM Period 3.
CAT LLC continued to utilize AWS in FAM Period 3 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 3 Period. Accordingly, the $94,574,759 in technology costs for cloud hosting services represents costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 3. The fee arrangement for AWS described above for the earlier periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During FAM Period 3, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a, Phase 2b, Phase 2c and Phase 2d Industry Member Data (including certain linkages), SIP Data, Other Data, including reference data, and LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 3.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 3. Accordingly, the $23,106,091 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 3. The fee arrangement for FCAT described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, FCAT's activities with respect to the CAT included the following:
• Facilitated Phase 2c and Phase 2d testing for Industry Members;
• Oversaw creation of linkages of the lifecycle of order events based on the received data through Phase 2d;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement with FCAT discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 3. Accordingly, the $5,562,383 in technology costs for CAIS operating fees represents costs incurred for services provided by Kingland during FAM Period 3. The fee arrangement for Kingland described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs. The full CAIS Technical Specifications were published during FAM Period 3.
During FAM Period 3, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 3, CAT incurred costs of $396,169 related to change requests, including the following: (1) the addition of functionality for exchange Participants to report rejected messages to the CAT; (2) the migration of MIRS query engine to AWS to reduce operational costs and increase resiliency; and (3) updating the Participant Technical Specifications to allow for two-sided Participant option quote reporting.
Capitalized developed technology costs for FAM Period 3 of $10,763,372 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor, including the transition from equity data received by FINRA pursuant to various regulatory services agreements between FINRA and Participant exchanges to the equity CAT Data, and the completion of the Industry Member Phase 2d options manual and complex orders go-live requirements; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to off-exchange volume concentration, Participant 24-hour trading and an external metastore; (3) implementation fees; and (4) license fees.
The legal costs of $6,333,248 represent the fees paid for legal services provided by three law firms, WilmerHale, Pillsbury and Covington & Burling LLP (“Covington”) during FAM Period 3.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements, including, for example, verbal activity regarding Phase 2c cutover, error reports, error corrections, Phase 2d Reporting, unique Order-ID on internal route events, reporting addresses, recordkeeping, and unique CCID for foreign customers;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs, CAIS requirements, ADF, and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6(c) of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Provided assistance with change requests;
• Provided guidance and regulatory support for litigation regarding the response to the SEC's exemptive orders;
• Assisted with communications with the industry, including CAT Alerts and presentations;
• Provided guidance regarding the confidentiality of CAT Data, including third-party information requests;
• Assisted with cost management analysis and proposals; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
After Covington was hired in 2021 through the end of 2021, the firm provided legal assistance regarding the litigation with the SEC regarding the 2020 Orders. These services included researching, drafting, and filing motions to stay the 2020 orders and related materials in proceedings before the SEC, as well as researching, drafting, and filing petitions for judicial review of the 2020 Orders in proceedings before the U.S. Court of Appeals for the D.C. Circuit. Covington oversaw ongoing litigation proceedings on these matters, and also supported WilmerHale with respect to settlement negotiations with the SEC staff regarding the 2020 Orders.
In addition to these services, CAT LLC engaged Covington in November 2021 to provide assistance with respect to the SEC's disapproval of CAT NMS Plan amendments concerning a proposed limitation on liability in the event of a data breach or similar event. Covington provided advice concerning CAT's response to the SEC's disapproval order. This work accounted for a minority of Covington's fees in 2021.
The consulting costs of $1,408,209 represent the fees paid to Deloitte as project manager during FAM Period 3. CAT LLC continued to employ Deloitte during FAM Period 3 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 3 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 3 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 3, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $1,582,714 represent the fees paid for insurance during FAM Period 3. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $595,923 represent the fees paid to Anchin and Grant Thornton for financial services during FAM Period 3.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Faciliated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $92,400 represent the fees paid to Peak Strategies during FAM Period 3. CAT LLC continued to employ Peak Strategies during FAM Period 3 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 3 were paid by CAT LLC to Peak Strategies. During FAM Period 3, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would not include three categories of CAT costs (“Excluded Costs”): (1) $14,749,362 of costs related to the termination of the relationship with the Initial Plan Processor; (2) $48,874,937, which are all CAT costs incurred from November 15, 2017 through November 15, 2018; and (3) $19,628,791, which are costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when the relationship with the Initial Plan Processor was concluded. The Participants would remain responsible for 100% of these costs, which total $83,253,090. CAT LLC determined to exclude these Excluded Costs from Historical CAT Costs 1 because these costs relate to the delay in the start of reporting to the CAT and the conclusion of the relationship with the Initial Plan Processor.
First, Historical CAT Costs 1 would not include $14,749,362 of costs related to the conclusion of the relationship with the Initial Plan Processor. Such costs include costs related to the American Arbitration Association, the legal assistance of Pillsbury with regard to the arbitration with the Initial Plan Processor, and the settlement costs related to the arbitration with the Initial Plan Processor. The Participants would remain responsible for 100% of these $14,749,362 in costs.
Second, Historical CAT Costs 1 would not include all CAT costs incurred from November 15, 2017 through November 15, 2018. CAT LLC determined to exclude all costs during this one-year period of $48,874,937 from fees charged to Industry Members due to the delay in the start of reporting to the CAT. The Participants would remain responsible for 100% of these $48,874,937 in costs. The following table breaks down these costs into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The following provides additional detail regarding the Excluded Costs.
CAT LLC did not incur technology costs related to the categories of cloud hosting services, operating fees, CAIS operating fees or change requests during the period from November 15, 2017 through November 15, 2018.
Capitalized developed technology costs for the period from November 15, 2017 through November 15, 2018 include capitalizable application development costs of $37,852,083 incurred in the development of the CAT by the Initial Plan Processor. Such costs include development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Initial Plan Processor. Such costs include costs related to Industry Member technical specifications for orders and transactions, the system security plan, testing and production for Participant CAT reporting, third-party security assessment and response, query portal, onboarding of the Chief Information Security Officer, and ingestion of FINRA TRF data and FINRA data related to halts and corporate actions.
The legal costs of $6,143,278 represent the fees paid to WilmerHale for legal services from November 15, 2017 through November 15, 2018. During this period, WilmerHale provided legal assistance to the CAT, including with regard to the following:
• Provided legal support for the governance of the CAT, including governance support for the Operating Committee, Advisory Committee, Compliance Subcommittee, and CAT working groups;
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan;
• Provided assistance related to CAT security;
• Drafted exemptive requests, including requests related to PII;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided advice with regard to regulator access to the CAT;
• Assisted with the Plan Processor transition;
• Provided assistance regarding communications with the industry regarding the CAT;
• Provided advice regarding Customer Account Information and PII;
• Provided support for litigation related to SEC exemptive orders; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretative and implementation issues.
The consulting costs of $4,452,106 represent the fees paid to Deloitte for their role as project manager for the CAT from November 15, 2017 through November 15, 2018. During this period, Deloitte engaged in the following activities with respect to the CAT:
• Implemented program operations for the CAT project;
• Provided governance support to the Operating Committee, including support for Subcommittees and working groups of the Operating Committee (
• Assisted with cost and funding issues for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress.
CAT LLC did not incur costs related to insurance during the period from November 15, 2017 through November 15, 2018.
The professional and administration costs of $340,145 represent the fees paid to Anchin, Exegy and RSM from November 15, 2017 through November 15, 2018.
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $87,325 represent the fees paid to Sloane from November 15, 2017 through November 15, 2018. From the commencement of its engagment in March 2018 through November 15, 2018, Sloane provided professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, Sloane provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Third, Historical CAT Costs 1 would not include the $19,628,791 in costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when CAT LLC's relationship with the Initial Plan Processor concluded. CAT LLC determined that Historical CAT Costs 1 would not include any fees paid to the Initial Plan Processor after November 15, 2017,
CEBBs and CEBSs collectively have been invoiced for $173,075,024 of the $212,039,879.34 of Historical CAT Costs 1 via Historical CAT Assessment 1, where $86,537,512 was invoiced collectively to CEBBs and $86,537,512 was invoiced collectively to CEBSs. Accordingly, Historical CAT Assessment 1A would seek to recover the remaining $38,964,855.34 of Historical CAT Costs 1 collectively from CEBBs and CEBSs, where CEBBs collectively will be responsible for
Under the CAT NMS Plan, the Operating Committee is required to reasonably establish the length of the Historical Recovery Period used in calculating each Historical Fee Rate based upon the amount of the Historical CAT Costs to be recovered by the Historical CAT Assessment, and to describe the reasons for its length.
The Operating Committee determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable Historical Fee Rate 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans to the Participants in a timely fashion. The Operating Committee determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
The length of the Historical Recovery Period 1A and the reasons for its length are provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a Historical CAT Assessment.
The calculation of the fee rate for Historical CAT Assessment 1A also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for Historical Recovery Period 1A. 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 Historical Recovery Period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A 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 Historical CAT Assessment.
The fee rate for Historical CAT Assessment 1A would be calculated by dividing the total amount of costs to be recovered by Historical CAT Assessment 1A by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A, and dividing by 2. Specifically, the fee rate for Historical CAT Assessment 1A would be calculated by dividing $38,964,855.34 by 11,961,875,098,720.98, and then dividing by 2, which equals $0.00000162871017371542 per executed equivalent shares. Rounding this to six decimal places results in a fee rate of $0.000002 per executed equivalent share.
Participants would not be required to pay any fees associated with Historical CAT Assessment 1A as the Participants previously have paid all Past CAT Costs. The CAT NMS Plan explains that:
Because Participants previously have paid Past CAT Costs via loans to the Company, Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs and such other additional Past CAT Costs as reasonably determined by the Operating Committee will be paid by the cancellation of loans made to the Company on a pro rata basis based on
The CAT NMS Plan further states that “Historical CAT Assessments are designed to recover two-thirds of the Historical CAT Costs.”
CEBBs and CEBSs would be required to pay fees for Historical CAT Assessment 1A on a monthly basis for the period in which Historical CAT Assessment 1A is in effect.
The CAT NMS Plan states that, “[n]otwithstanding the length of the Historical Recovery Period used in calculating the Historical Fee Rate, each Historical CAT Assessment calculated using the Historical Fee Rate will remain in effect until all Historical CAT Costs for the Historical CAT Assessment are collected.”
To implement Historical CAT Assessment 1A, a new section would be added to the Exchange's fee schedule for “Consolidated Audit Trail Funding Fees”, and it would include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each month in which a Historical CAT Assessment is in effect, each CEBB and each CEBS shall pay a 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 Historical CAT Assessment for each transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Historical Fee Rate reasonably determined pursuant to paragraph (b)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(2) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(2) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for Historical CAT Assessment 1A in June 2026, which shall set forth the Historical CAT Assessment 1A fees calculated based on transactions in May 2026, and shall receive an invoice for Historical CAT Assessment 1A for each month thereafter in which Historical CAT Assessment 1A is in effect.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A 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 $0.000002 per executed equivalent share.
(C) Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time. Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).
Proposed paragraph (a)(2)(B) of the fee schedule would set forth the fee rate of $0.000002 per executed equivalent share for Historical CAT Assessment 1A, which is calculated as discussed above.
The proposed language in paragraph (a)(2)(B) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A. Specifically, CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in the prior month, that is, transactions executed in May 2026. 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)(2)(A) of the fee schedule also would describe the monthly cadence of the invoices for Historical CAT Assessment 1A. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter while Historical CAT Assessment 1A is in effect.
Proposed paragraph (a)(2)(B) of the fee schedule would describe the invoices for Historical CAT Assessment 1A. Proposed paragraph (a)(2)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A on a monthly basis.” Proposed paragraph (a)(2)(B) of the fee schedule also would describe the fees to be set forth in the invoices for Historical CAT Assessment 1A. 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
Furthermore, proposed paragraph (a)(2)(C) of the fee schedule would describe how long Historical CAT Assessment 1A would remain in effect. It would state that “Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time.” This proposed paragraph would further state that “Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.”
Historical CAT Assessment 1A will be assessed for all transactions executed in each month through the end of the month in which $38,964,855.34 is assessed, and then CAT LLC will provide notice that Historical CAT Assessment 1A is no longer in effect. Since Historical CAT Assessment 1A is a monthly fee based on transaction volume from the prior month, Historical CAT Assessment 1A may collect more than $38,964,855.34. To the extent that occurs, any excess money collected during the final month in which Historical CAT Assessment 1A is in effect will be used to offset future fees and/or to fund the reserve for the CAT.
Finally, proposed paragraph (a)(2)(D) of the fee schedule sets forth the requirement for the CAT Executing Brokers to pay the invoices for Historical CAT Assessment 1A. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).”
Paragraph (b)(1) of the “Consolidated Audit Trail Funding Fees” section of its fee schedule describes the manner of payment of Industry Member CAT fees. Paragraph (b)(1) 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.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange previously has added this requirement to the Exchange's fee schedule. Specifically, paragraph (b)(2) of the fee schedule states:
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 Historical CAT Assessment 1A.
The CAT NMS Plan states that:
Details regarding the calculation of a CAT Executing Broker's Historical CAT Assessment will be provided upon request to such CAT Executing Broker. At a minimum, such details would include each CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their Historical CAT Assessment.
In addition, CAT LLC will make certain aggregate statistics regarding Historical CAT Assessments publicly available. Specifically, the CAT NMS Plan states that, “[f]or each Historical CAT Assessment, 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 on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that Historical CAT Assessment 1A is in effect as well as the total amount invoiced for Historical CAT Assessment 1A 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 Historical CAT Assessment 1A. By reviewing statistics regarding how much has been invoiced and how much remains to be invoiced for Historical CAT Assessment 1A, Industry Members would have sufficient information to reasonably track how much longer Historical CAT Assessment 1A is likely to be in place.
To date, CAT LLC, via FCAT, has billed Industry Members for Historical CAT Assessment 1 and certain Prospective CAT Fees. Industry Members will be billed for Historical CAT Assessment 1A via the same processes established for Historical CAT Assessment 1 and the Prospective CAT Fees. Accordingly, Industry Members have substantial experience with the CAT billing processes.
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 Historical CAT Assessment until any applicable Financial Accountability Milestone described in Section 11.6 has been satisfied.”
In accordance with Section 11.6(b) of the CAT NMS Plan, Historical CAT Assessment 1A seeks to recover costs that are related to “all fees, costs, and expenses (including legal and consulting fees, costs, and expenses) incurred by or for the Company in connection with the development, implementation and operation of the CAT from the effective date of [Section 11.6 of the CAT NMS Plan] until such time as Full Implementation of CAT NMS Plan Requirements has been achieved”
The reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of both: (a) equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information; and (b) options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information.
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports.
Under the FAM Period 1 requirement of Initial Industry Member Core Equity and Options Reporting, Industry Members—excluding Small Industry Members that are not OATS reporters—were required to report two categories of data to the CAT: equites transaction data and options transaction data (both excluding Customer Account Information, Customer-ID, and Customer Identifying Information) by July 31, 2020. Pursuant to exemptive relief provided by the Commission, the Commission authorized the Participants' Compliance Rules to allow core equity reporting for Industry Members (Phase 2a) to begin on June 22, 2020 and core options reporting for Industry Members (Phase 2b) to begin on July 20, 2020.
In adopting the FAMs, the Commission stated that the equities transaction reporting required for FAM Period 1 “is consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Equities 2a file submission and data integrity validations.' ”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Equities 2a file submission and data integrity validation (Large Industry Members and Small OATS Reporters)” was completed on June 22, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information” was completed on June 22, 2020.
In adopting the FAMs, the Commission stated that the options transaction reporting required for FAM Period 1 is “consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Options 2b file submission and data integrity validations.' ”
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Options 2b file submission and data integrity validations” was completed on July 20, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information” was completed on July 20, 2020.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from June 22, 2020 through July 31, 2020. The total costs for this period, as discussed above, are $6,377,343. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($2,125,781) and CEBSs paying one-third ($2,125,781) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 2. FAM Period 2 began on August 1, 2020, and concluded on December 31, 2020, the date of the Full Implementation of Core Equity Reporting. Section 1.1 of the CAT NMS Plan defines “Full Implementation of Core Equity Reporting” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2020,
Specifically, the Full Implementation of Core Equity Reporting requires the satisfaction of two prongs. The first prong requires Participants to have fully implemented the first phase of equities transaction reporting for Industry Members (excluding Small Industry Members that are not OATS reporters) at an Error Rate of less than 5%. In addition, equities transaction data produced by the CAT at this stage must also be sufficiently interlinked so as to permit full analysis of an order's lifecycle across the national market, excluding full linkage of representative orders. As CAT LLC reported on its Quarterly Progress Reports, Phase 2a was fully implemented as of October 26, 2020, including intra-firm, inter-firm, national securities exchange, and trade
• “Production Go-Live for Equities 2a Intrafirm Linkage validations” was completed on 7/27/2020;
• “Production Go-Live for Firm to Firm Linkage validations for Equities 2a (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020; and
• “Production Go-Live for Equities 2a Exchange and TRF Linkage validations (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020.
Furthermore, as CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2020, the average overall error rate for Phase 2a Industry Member Data was less than 5% as of December 31, 2020. The average overall error rate was calculated by dividing the compliance errors by processed records.
The second prong of this FAM requires that the equities transaction data collected by the CAT at this stage be made available to regulators through two basic query tools required by the CAT NMS Plan—a targeted query tool that will enable regulators to retrieve data via an online query screen with a variety of predefined selection criteria, and a user-defined direct query tool that will provide regulators with the ability to query data using all available attributes and data sources.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from August 1, 2020 through December 31, 2020. The total costs for this period, as discussed above, are $42,976,478. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($14,325,492.70) and CEBSs paying one-third ($14,325,492.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 3. FAM Period 3 began on January 1, 2021, and concluded on December 31, 2021, the date of the Full Availability and Regulatory Utilization of Transactional Database Functionality. Section 1.1 of the CAT NMS Plan defines “Full Availability and Regulatory Utilization of Transactional Database Functionality” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2021,
Specifically, the “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires the satisfaction of five prongs. The first prong requires that reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021,
In addition to Phase 2a and Phase 2b Industry Member Data, the second and third prongs of “Full Availability and Regulatory Utilization of Transactional Database Functionality” require Industry Member reporting of Phase 2c Industry Member Data and Phase 2d Industry Member Data. The Phase 2c Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. That Order states that “Phase 2c Industry Member Data” is Industry Member Data related to Eligible Securities that are equities
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Phase 2d Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. “Phase 2d Industry Member Data” is Industry Member Data that is related to Eligible Securities that are options other than Phase 2b Industry Member Data, Industry Member Data that is related to Eligible Securities that are equities other than Phase 2a Industry Member Data or Phase 2c Industry Member Data, and Industry Member Data other than Phase 2e Industry Member Data. Phase 2d Industry Member Data includes with respect to the Eligible Securities that are options: (1) simple manual orders; (2) electronic and manual paired orders; (3) all complex orders with linkages to all CAT-reportable legs; (4) LTIDs (if applicable) for accounts with Reportable Events for Phase 2d; (5) date account opened or Account Effective Date (as applicable) for accounts with an LTID and flag indicating the Firm Designated ID type as account or relationship for such accounts; (6) Allocation Reports as required to be recorded and reported to the Central Repository pursuant to Section 6.4(d)(ii)(A)(1) of the CAT NMS Plan; (7) the modification or cancellation of an internal route of an order; and (8) linkage between a combined order and the original customer orders. Phase 2d Industry Member Data also would include electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are options and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: a listed option bid or offer which is accessible electronically by customers or other market participants and is immediately actionable (
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data will include verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Quarterly Progress Report for the fourth quarter of 2021 states that “Phase 2a was fully implemented as of October 26, 2020;” “Phase 2b was fully implemented as of January 4, 2021;” “Phase 2c was implemented as of April 26, 2021;” and “Phase 2d was fully implemented as of December 13, 2021.”
• “Production Go-Live for Equities 2c reporting requirements (Large Industry
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b and 2c (Large Industry Members)” was completed on April 26, 2021;
• “FCAT Plan Processor creates linkages of the lifecycle of order events based on the received data through Phase 2d Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2b reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Equities 2c reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2d (Large Industry Members)” was completed on December 13, 2021; and
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b, 2c and 2d (Small Industry Members)” was completed on December 13, 2021.
The third prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” also imposes an Error Rate requirement of 5% or less. The Quarterly Progress Report for the fourth quarter of 2021 states the average overall error rate was less than 5% as of December 31, 2021. The average overall error rate was calculated by dividing the compliance errors by processed records.
The fourth prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires that the data collected by the CAT at this stage be made available to regulators through an online targeted query tool and a user-defined direct query tool. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The fifth prong requires the requirements of Section 6.10(a) of the CAT NMS Plan to have been met. Section 6.10(a) of the CAT NMS Plan requires the Participants to use the tools described in Appendix D to “develop and implement a surveillance system, or enhance existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository.” The Exchange implemented a surveillance system, or enhanced existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository as of December 31, 2021 in accordance with Section 6.10(a) of the CAT NMS Plan.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2021 through December 31, 2021. The total costs for this period, as discussed above, are $144,415,268. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remain two-thirds, with CEBBs paying one-third ($48,138,422.70) and CEBSs paying one-third ($48,138,422.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
As discussed above, CAT LLC has satisfied the Financial Accountability Milestones (“FAMs”) for Periods 1 through 3.
CAT LLC does not believe that the exemptive relief relating to the reporting of electronic responses for quotes (“RFQs”) that are not immediately actionable (“NIA Electronic RFQ Responses”) affect the conclusion that FAMs 1 through 3 have been satisfied. The only reason CAT LLC pursued this relief is because certain Industry Members introduced concerns that NIA Electronic RFQ Responses could be considered “orders” reportable pursuant to Rule 613(j)(8) and some Industry Members were not prepared to report such orders to CAT. Thus, the relief was requested on behalf of Industry Members. CAT LLC itself has not taken any position on whether NIA Electronic RFQ Responses are “orders,” as the definition of “order” is an SEC rule and the trading processes for NIA Electronic RFQ Responses are the Industry Members', not those of the Participants or CAT LLC. Accordingly, CAT LLC stated in its letter that “Industry Members must determine whether trading interest falls within the definition of an `order' for CAT purposes. To the extent an NIA Electronic RFQ Response is not considered an `order” as defined in Rule 613(j)(8) and the CAT NMS Plan, it would not be reportable to CAT.”
Only “orders” as defined in SEC Rule 613(j)(8) are reportable to CAT. There is no agreement across the industry or among regulators as to whether NIA Electronic RFQ Responses are “orders” reportable to CAT. Certain Industry Members have raised the question as to whether NIA Electronic RFQ Responses are orders, but others have argued that they are not orders under Rule 613(j)(8).
As further discussed in the prior FIF letters, even if the Commission had the legal authority to require the reporting of NIA RFQ responses to CAT without an amendment to Rule 613, the Commission has not provided guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT. In subsequent discussions with industry members, Commission representatives have agreed that, prior to NIA RFQ responses being reportable to CAT, it would be necessary for the Commission to provide further guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT.
On May 20, 2024, the Commission granted CAT LLC's request for exemptive relief from certain CAT reporting requirements pertaining to NIA Electronic RFQ Responses to the extent such responses are considered “orders” reportable pursuant to Rule 613(j)(8).
When the Commission proposed the FAMs, the Participants expressed concern that, “by conditioning the ability of CAT LLC and the Participants to collect Post-Amendment Industry Member Fees on factors dependent on the efforts of Industry Members, the Commission's proposals inadvertently establish a perverse incentive for Industry Members to devote less than maximum efforts to comply with their obligations related to the CAT as they will pay less fees in such instances.”
CAT LLC does not believe that the Commission's May 19, 2023 order granting temporary exemptive relief relating to certain verbal floor activity and unstructured verbal and electronic upstairs activity (the “2023 Verbal Quotes Exemption”) affects the conclusion that FAMs 1 through 3 have been satisfied. The 2023 Verbal Quotes Exemption, which was issued on May 19, 2023, is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. The relevant exemption for this time period is the Commission's November 12, 2020 order, which granted relief for the same activity through July 31, 2023 (the “2020 Verbal Quotes Order”).
CAT LLC does not believe that the Commission's November 2, 2023 order granting relief from certain CAT NMS Plan requirements (the “November 2023 Order”) affects the conclusion that FAMs 1 through 3 have been satisfied. The November 2023 Order is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. As described in the November 2023 Order, the relevant exemptive orders for this time period were issued on December 16, 2020, which also states that “the Commission has determined that the Participants have sufficiently complied with the conditions set forth in the prior Orders and with the technical requirements for Quarterly Progress Reports set forth in section 6.6(c) of the CAT NMS Plan, including for purposes of determining compliance with any applicable Financial Accountability Milestones.”
CAT LLC also completed the requirements of FAM Period 2, including the required linkages, by December 31, 2020. Although Participant exchanges may report the Executing Broker to CAT differently in certain situations, these reporting differences are irrelevant for linkage purposes as the fields used for CAT Executing Broker are not used for linkage.
The CAT Funding Model approved by the Commission permits the recovery of reasonable costs in each of the categories of CAT costs sought to be recovered via Historical CAT Assessment 1A.
CAT LLC believes that it is reasonable to seek recovery of costs incurred prior to when the CAT NMS Plan became effective in November 2016, such as legal and consulting fees incurred to create the CAT NMS Plan. Rule 613 specifically mandates that the CAT be created, implemented and maintained, and further provides that the CAT NMS Plan include a proposed allocation of estimated costs to fund the creation, implementation and maintenance of the CAT among the Participants (referred to as “plan sponsors”), and between the Participants and Industry Members (referred to as “members of the plan sponsors”).
Accordingly, the CAT NMS Plan specifically permits the recovery of costs, including legal and consulting costs, reasonably incurred prior to November 2016 in connection with the creation and implementation of the CAT.
Furthermore, the costs incurred to create and implement the CAT prior to the effective date of the CAT NMS Plan (“Pre-Formation Costs”) were reasonable both in scope and amount, in accordance with the requirements of Section 11.1(c) of the CAT NMS Plan. During the four-year period from 2012 to 2016, a total of $13,842,881 in Pre-Formation Costs were incurred. This is an average of approximately $3.5 million per year over this period. The Pre-Formation Costs fell into three categories: legal costs, consulting costs and public relations costs. This includes legal costs of $3,196,434; consulting costs of $10,589,273; and public relations costs of $57,174. The legal, consulting and public relations services were performed by WilmerHale, Deloitte and Peppercomm, respectively. The selection considerations and fees for these three firms are described in detail above and are described further below. The Pre-Formation Costs are direct costs of CAT, which have been funded entirely by the Participants through non-interest-bearing notes. The Pre-Formation Costs do not include the significant costs incurred by each of the individual Participants in responding to the adoption of Rule 613.
The Pre-Formation Costs are reasonable and appropriate as they reflect the extensive efforts that were necessary to create the CAT NMS Plan as mandated after the SEC's adoption of Rule 613. As described in more detail below, these efforts included, among other things, developing a plan for selecting the Plan Processor, soliciting and evaluating bids, engaging a diverse set of market participants and the SEC in the development of the Plan, interacting with the SEC in their oversight of the development of the Plan, and seeking appropriate exemptive relief to address areas of concern in Rule 613.
The Participants determined to utilize an RFP to ensure that potential alternative solutions for creating the Plan could be presented and considered, and that a detailed and meaningful cost-benefit analysis could be performed. The SEC supported the use of an RFP, and approved its use as it is described in extensive detail in the CAT NMS Plan.
In the context of the SEC's adoption of Rule 613, commenters urged the Commission to utilize an RFP process to assist in the planning and design of the NMS plan.
In this regard, several commenters suggested that the Commission undergo a RFP or request for information (“RFI”) process to create and implement a consolidated audit trail. Specifically, FIF urged the Commission to perform a RFP process “to determine the best technical solution for developing a consolidated audit trail.” FIF suggested that the Commission “should outline a set of goals and guiding principles they are striving to achieve as part of the adopted CAT filing and leave the determination of data elements and
In response to these comments, the Commission modified Rule 613 to require the Participants to address certain important considerations regarding the features and details of the NMS plan and to extend the timeframe for submission of the CAT NMS Plan by the Participants from the 90 days as originally proposed to 270 days, in part, to accommodate a process that would address these considerations.
The SEC specifically recognized that the Participants planned to use an RFP when it approved the Selection Plan, and stated that the RFP was a reasonable approach.
On February 26, 2013, the Participants published an RFP soliciting bids from parties interested in serving as the plan processor for the CAT. Initially, 31 firms submitted intentions to bid. In the following months, the Participants engaged with potential bidders with respect to, among other things, the selection process, selection criteria, and potential bidders' questions and concerns. On March 21, 2014, the Participants received ten bids in response to the RFP.
On September 4, 2013, the Participants filed with the Commission a national market system plan to govern the process for Participant review of the bids submitted in response to the RFP, the procedures for evaluating the bids, and, ultimately, selection of the plan processor (the “Selection Plan”).
The Selection Plan divided the review and evaluation of bids, and the selection of the plan processor, into various stages. Specifically, pursuant to the Selection Plan, a selection committee reviewed all bids and determined which bids contained sufficient information to allow the Participants to meaningfully assess and evaluate the bids. The ten submitted bids were deemed “Qualified Bids,” and so passed to the next stage, in which each bidder presented its bids to the Participants on a confidential basis. On July 1, 2014, after conducting careful analysis and comparison of the bids, the Selection Committee voted and selected a shortlist of six eligible bidders. The Selection Committee determined which shortlisted bidders would be provided the opportunity to revise their bids. After the Selection Committee assessed and evaluated the revised bids, the Selection Committee selected the plan processor via two rounds of voting by the Participants, as described in the Selection Plan.
The Selection Plan established an Operating Committee responsible for formulating, drafting, and filing with the Commission the CAT NMS Plan and for ensuring that the Participants' joint obligations under Rule 613 were met in a timely and efficient manner. In formulating the CAT NMS Plan, the Participants also engaged multiple persons across a wide range of roles and expertise, engaged the consulting firm Deloitte as project manager, and engaged the law firm WilmerHale to serve as legal counsel in drafting the Plan. Within this structure, the Participants focused on, among other things, comparative analyses of the proposed technologies and operating models, development of funding models to support the building and operation of the CAT, and detailed review of governance considerations. Given the complexity and scope of developing the CAT NMS Plan, these efforts were extensive.
When it approved the CAT NMS Plan in 2016, the Commission reiterated its belief that the Selection Plan remains a “reasonable approach,” that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue”:
In approving the Selection Plan, the Commission stated that the Selection Plan is reasonably designed to achieve its objective of facilitating the development of the CAT NMS Plan and the selection of the Plan Processor. The Commission also found that the Selection Plan is reasonably designed to govern the process by which the SROs will formulate and submit the CAT NMS Plan, including the review, evaluation, and narrowing down of Bids in response to the RFP, and ultimately choosing the Plan Processor that will build, operate, and maintain the consolidated audit trail. The Commission believes that the process set out in the Selection Plan for selecting a Plan Processor remains a reasonable approach, which will facilitate the selection of Plan Processor through a fair, transparent and competitive process and that no modifications to the Selection Plan are required to meet the approval standard. . . . In response to the comment that offered support for a specific Bidder, the Commission agrees with the Participants that the
During the process of developing the CAT NMS Plan, the Participants engaged in extensive and meaningful dialogue with market participants and the SEC. To this end, the Participants created a website to update the public on the progress of the CAT NMS Plan, published a request for comment on multiple issues related to the Plan, held multiple public events to inform the industry of the progress of the CAT and to address inquiries, and formed, and later expanded, a DAG to solicit more input from a representative industry group.
The DAG included representatives of Participants and Industry Members and conducted meetings to discuss, among other things, technical and operational aspects the Participants were considering for the Plan. The Participants issued press releases soliciting participants for the DAG, and a wide spectrum of firms was deliberately chosen to provide insight from various industry segments affected by CAT. The DAG meetings included discussions of topics such as option market maker quote reporting, requirements for capturing Customer IDs, timestamps and clock synchronization, reporting requirements for order handling scenarios, costs and funding, error handling and corrections, and potential elimination of systems made redundant by the CAT. From the inception of the DAG through September 2014, the DAG participated in 36 meetings, as well as a variety of DAG subcommittee meetings.
Following multiple discussions between the Participants and both the DAG and the bidders, as well as among the Participants themselves, the Participants recognized that some provisions of Rule 613 would not permit certain solutions to be included in the Plan that the Participants, in coordination with the DAG, determined advisable to effectuate the most efficient and cost-effective CAT. Specifically, “the SROs reached the conclusion that additional flexibility in certain of the minimum requirements specified in Rule 613 would allow them to propose a more efficient and cost-effective approach without adversely affecting the reliability or accuracy of CAT Data, or its security and confidentiality.”
After reviewing the exemptive request, the Commission determined that it was appropriate in the public interest and consistent with the protection of investors to grant the requested exemptive relief.
[T]he Commission is persuaded to provide flexibility in the discrete areas discussed in the Exemption Request so that the alternative approaches can be included in the CAT NMS Plan and subject to notice and comment. Doing so could allow for more efficient and cost-effective approaches than otherwise would be permitted. The Commission at this stage is not deciding whether the proposed approaches detailed below are more efficient or effective than those in Rule 613. However, the Commission believes the proposed approaches should be within the permissible range of alternatives available to the SROs.
The Commission further stated that the requested exemptive relief is consistent with the protection of investors. The Commission noted that:
Doing so will provide the public an opportunity to consider and comment on whether these proposed alternative approaches would indeed be more efficient and cost-effective than those otherwise required by Rule 613, and whether such approaches would adversely affect the reliability or accuracy of CAT Data or otherwise undermine the goals of Rule 613. Moreover, if—as the SROs represent—efficiency gains and cost savings would result from including the proposed approaches in the CAT NMS Plan without adverse effects, then the resultant benefits could potentially flow to investors (
The Participants incorporated the exemptive relief into the proposed CAT NMS Plan, which was noticed for comment, and the Commission ultimately approved the CAT NMS Plan with the more efficient and cost-effective alternative approaches described in the exemptive relief. Accordingly, the Participants believe that the costs incurred in developing the exemptive request were critical to the creation of a better CAT than was originally contemplated by Rule 613, and therefore should be recoverable as part of Historical CAT Assessment 1A.
Rule 613(a)(1) under Regulation NMS required the Participants to jointly file the CAT NMS Plan on or before April 28, 2013, less than a year after the adoption of Rule 613. In recognition of the complexity of the project to create the CAT NMS Plan as well as industry interest in limiting or eliminating certain requirements of Rule 613 (
The SROs stated in their Request Letter that they do not believe that the 270-day time period provided for in Rule 613(a)(1) provides sufficient time for the development of the RFP, formulation and submission of bids, and review and evaluation of such bids. The SROs also stated that they believe additional time beyond the 270 days provided for in Rule 613(a)(1) is necessary in order to provide sufficient time for effective consultation with and input from the industry and the public on the proposed solution chosen by the SROs for the creation of the consolidated audit trail at the conclusion of the RFP process and the NMS plan itself.
In recognition of the need for additional time to refine the technical description of and requirements for the CAT and to allow for additional evaluation of the proposed cost and funding considerations, the SEC granted
This additional time to complete the RFP process should allow the SROs to engage in a more thoughtful and comprehensive process for the development of an NMS plan. In this regard, the Commission notes that the additional time to solicit comment from the industry and the public at certain key points in the development of the NMS plan could identify issues that can be resolved earlier in the development of the consolidated audit trail and prior to filing the NMS plan with the Commission.
Given the Commission's recognition of the reasonableness and value of the extension of the deadline to file the CAT NMS Plan, the Participants believe that the costs incurred in developing the extension request were important to the process of developing the CAT NMS Plan, and therefore should be recoverable as part of Historical CAT Assessment 1A.
After extensive analyses and discussions with the DAG, bidders, market participants and the SEC staff, the Participants finalized the draft of the CAT NMS Plan and filed the CAT NMS Plan with the SEC on September 30, 2014. Following additional discussions, the Participants filed several amendments to the CAT NMS Plan during 2015 and 2016. With these additional changes, the SEC published the CAT NMS Plan for notice and comment in May 2016.
The Pre-Formation Costs include legal costs of $3,196,434. The legal services were performed by WilmerHale. The selection considerations and fees for WilmerHale were described in detail above. Prior to the creation of CAT LLC, WilmerHale was engaged to represent the consortium of SROs, not the individual Participants. For administrative purposes, FINRA agreed to receive such legal bills, although such costs were shared among the Participants. Therefore, the legal costs incurred with respect to WilmerHale do not include legal costs incurred by the individual Participants. These pre-formation legal costs are described in detail above and are further described below:
• Analyzed various legal matters associated with the Selection Plan and drafted an amendment to Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the DAG;
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on the CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Drafted exemptive requests;
• Provided interpretations related to the CAT NMS Plan;
• Provided support with regard to discussions among the exchanges, FINRA and other third parties, such as Deloitte;
• Provided tax advice with regard to CAT's status as a tax-exempt organization; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The Pre-Formation Costs include consulting costs of $10,589,273. The consulting services were performed by Deloitte. The selection considerations and fees for Deloitte were described in detail above. Prior to the creation of CAT LLC, for administrative purposes, Deloitte was engaged by FINRA to provide consulting services related to CAT, but the costs were shared by the consortium of SROs per agreement. Therefore, the consulting costs incurred with respect to Deloitte do not include consulting costs incurred by the individual Participants. The pre-formation consulting costs include the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participants' independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, reviewing technical requirements of other NMS plans, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided support for industry outreach sessions, including with regard to program design and agenda development, program support and logistics and coordination; and
• Provided support in fact finding, drafting content and meeting coordination for WilmerHale with regard to the CAT and the development of the CAT NMS Plan.
Such Pre-Formation Costs did not include costs related to the Chair of the CAT NMS Plan Operating Committee, as the CAT NMS Plan had not yet been adopted.
The Pre-Formation Costs include public relations costs of $57,174. The public relations services were performed by Peppercomm. The selection considerations and fees for Peppercomm are described in detail above. The costs related to Peppercomm were shared among the SROs. Therefore, the public relations costs do not include public relations costs incurred by the individual Participants. The pre-formation public relations costs include
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs related to cloud hosting services as a part of Historical CAT Assessments. CAT LLC believes that the costs related to cloud hosting services described in detail above are reasonable and appropriate given the strict data processing timelines and storage requirements imposed by the Commission-approved CAT NMS Plan and should be recoverable as a part of Historical CAT Assessment 1A.
CAT LLC believes that the costs for the cloud hosting services are reasonable, both in terms of the level of the fees paid by CAT LLC for cloud hosting services provided by AWS and the scope of the services performed by AWS for CAT LLC. CAT LLC believes that both the scope and amount of the costs for cloud hosting services are reasonable given the current requirements of the CAT NMS Plan adopted pursuant to Rule 613, including the strict data processing timeline, storage and other technical requirements under the Commission-approved CAT NMS Plan.
CAT LLC believes that the level of fees for the cloud hosting services is 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.
CAT LLC also believes that the scope of services provided by AWS for the CAT are appropriate given the current requirements of the Commission-approved CAT NMS Plan. As described above, the cloud hosting services costs reflect a variety of factors including, among other things:
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•
•
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In addition, various requirements of the CAT NMS Plan adopted pursuant to Rule 613 contribute to the significant cloud hosting services costs, and that various Plan requirements could be amended or removed without affecting the regulatory purpose of the CAT. Indeed, CAT LLC has repeatedly sought exemptive relief and filed amendments to the CAT NMS Plan, and has even filed suit against the Commission, to seek to revise or eliminate certain costly requirements related to the CAT. However, despite these efforts, absent the Commission granting exemptive relief or approving cost savings amendments to the CAT NMS Plan, CAT LLC, the Participants and Industry Members are all required to comply with such requirements.
CAT is reasonably designed to efficiently and effectively utilize cloud computing and storage services, given the requirements of the Commission-approved CAT NMS Plan, including requirements related to security, operational reliance and quality assurance, and maintainability.
The Plan Processor uses state-of-the-art software that meets the strict security standards of the CAT NMS Plan. CAT utilizes a big data processing framework that is extensively used by large data processing companies, such as Apple, Meta, Netflix, IBM and Google. As such, it has substantial commercial support and support in the open-source community. It is also well suited for use with regard to iterative types of algorithms and query functions and analytics that the CAT requires, and it provides the heightened security necessary for the CAT.
The development and implementation of the design of CAT is not and has not been static. CAT LLC and the Plan Processor are always evaluating new innovations and service offerings from AWS and other providers to seek to maximize efficiency and cost avoidance while still satisfying the requirements of the CAT NMS Plan. These efforts have led to substantial savings to date. The cloud hosting costs for 2023 were less than the cloud hosting costs for 2022 by $8 million despite processing seven trillion more events in 2023 due to the efficiency and cost avoidance efforts for cloud hosting services. For example, when AWS introduced new storage options, FCAT adopted the cost-efficient new storage option after establishing that the new offering would satisfy the security and other standards of the CAT NMS Plan. This change led to millions of dollars of savings in storage costs. Similarly, when AWS introduced a new compute processor, FCAT adopted this new compute processor, which lead to millions of dollars in savings in compute costs. However, in other cases, new cloud technology developments could not be implemented in CAT because they would not satisfy the security or other requirements of the CAT NMS Plan.
When evaluating the design of the CAT, it must be kept in mind that the CAT is not a typical commercial technology project. The ability to make use of technology approaches that may lead to cost avoidance is also subject to the restrictive requirements of the CAT NMS Plan, such as processing timeframes, requirements for retention of data versions, query requirements, and security standards. Because such requirements are set forth in the CAT NMS Plan, any modification of such requirements are subject to the time-consuming process of amending the CAT NMS Plan or seeking an exemption from the relevant requirement. For example, CAT LLC recently has filed an amendment to address several of these expensive Plan requirements.
The CAT System also was designed to minimize the extent to which Industry Members would need to alter their systems to report to CAT. During the design process, Industry Member groups argued that it would make more sense financially for the CAT to accommodate differences in industry systems, than for all Industry Members to change their systems. Moreover, such design choices would facilitate consistency, uniformity and accuracy in reporting. Requiring the CAT to make such accommodations may increase CAT costs while accommodating CAT Reporters.
Based on the requirements in the CAT NMS Plan and/or in response to industry requests for functionality to be embedded with the Plan Processor to streamline or limit Industry Member system changes, the CAT has been designed to limit the effect on Industry Members. The following provides examples of such accommodations:
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To be clear, if OATS-like error correction tools are not made available on Day 1, hundreds of firms will be required to create and test their own tools or obtain vendor alternatives prior to the CAT Go-Live Date. Proprietary tools will require additional system builds, access to and ingestion of CAT data to perform system validation, and testing which will further stress the limited number of subject matter experts (“SMEs”) dedicated to the implementation of CAT reporting. Should this occur, inevitably firms (especially small firms who lack the necessary IT staff to write code and develop proprietary systems), may be put in the position of passing onto investors the cost required to build hundreds of redundant systems.
CAT provides various tools to help Industry Members identify and rectify errors.
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FIF CAT WG is not proposing a specific format; rather, we are proposing flexibility of input formats which includes support of existing formats (
Mandating a uniform format for reporting data to the CAT simplifies the task for the Central Repository of consolidating/storing data, but it puts the burden on each CAT Reporter to accurately translate their current (
CAT provides such a flexible input format.
The costs for cloud hosting services are appropriate and have not been adversely affected by the original design and approaches of the Initial Plan Processor. FCAT's design costs are the result of the requirements of the Commission-approved CAT NMS Plan.
When FCAT took over as the Plan Processor from Thesys, it utilized certain aspects of the technical specifications created by Thesys in its design. However, FCAT has not maintained aspects of the original design that would not be appropriate for the CAT. FCAT revised and enhanced the original technical specifications of the CAT System to increase its efficiency and efficacy, and to ensure its compliance with the CAT NMS Plan. For example, the Initial Plan Processor's approach utilized many more fields than FCAT's approach, which relies on additional linkages. With the additional linkages, the CAT System takes on more of the CAT-related burdens than the Industry Members. Such an approach serves to facilitate consistency, uniformity and accuracy in reporting.
Moreover, FCAT did not utilize the system built by the Initial Plan Processor; it rebuilt the CAT System based on revised technical specifications. For example, the Initial Plan Processor used an on-premises processing approach which was not geared toward the huge amounts of data stored in the CAT, while FCAT adopted a cloud-based solution in response to such data demands.
Furthermore, given the very short timeframe to develop the CAT System and the prior optimization of certain query tools (
CAT LLC continues to support the selection of AWS as the cloud hosting services provider for CAT given the compliance, operational, and security requirements of the CAT. Independent analyses confirm these conclusions, noting that “AWS is an excellent choice for either strategic or tactical use and recommends considering AWS for almost all cloud IaaS or IaaS+PaaS scenarios.”
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In addition, the nature of the CAT, including the amount of data it must process and the size of its data footprint, does not allow for a multi-cloud solution as this would be cost prohibitive and greatly increase the security boundary and associated risk profile of the CAT. For example, a multi-cloud hosting option would increase costs, complexity, and risk for operations with regard to, for example, DevOps, production support, and networking. Similarly, with regard to security, a multi-cloud solution would increase risk, including with regard to the need for data transfers between cloud providers and the expansion of the security boundary. With regard to labor, a multi-cloud solution would lose economies of scale due to the need to support unique cloud requirements. Accordingly, the use of a single-cloud solution continues to provide advantages with regard to cost, complexity, and risk. Indeed, “[t]he best practice is to focus on a single primary strategic provider.”
Furthermore, if another cloud service provider were determined to be a better match for the CAT at some future date, switching cloud service providers would be a very significant, expensive and time-consuming effort. Such an effort would likely be a 10-to-15-year commitment at a substantial expense. Such a move would require the replication or redesign of the underlying cloud environments (
CAT LLC believes that the recovery of costs related to the development of the funding model is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
Funding the CAT is a critical aspect of Rule 613 and the CAT NMS Plan. Article XI of the CAT NMS Plan describes in detail the requirements for funding the CAT, and the Participants are required to comply with and enforce compliance with the funding requirements of the CAT NMS Plan, just as with other aspects of the Plan. Accordingly, the development and implementation of a funding model for the CAT is as much a part of the requirements of the CAT NMS Plan as the development and operation of the CAT System. CAT LLC sees no reason to distinguish the efforts to develop a funding model from, for example, efforts to develop the CAT System, in seeking to recover reasonable CAT costs.
Moreover, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . legal costs.”
In addition, the legal costs incurred for the assistance in developing the CAT Funding Model are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at negotiated rates for such services that reflect both the extent of the services and market rates. Moreover, the scope of the legal costs associated with the development of the funding model reflect the complexity of the task in satisfying the detailed requirements of the CAT NMS Plan, the standards of the Exchange Act, and the many perspectives of the different market constituents potentially affected by or interested in the funding model, including Industry Members, Participants and investors. The many and varied comments by market participants on CAT funding over the years demonstrate the complexity of the task.
CAT LLC believes that the recovery of legal costs related to the litigation with the SEC regarding the CAT NMS Plan is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
The conditional exemptive relief in this Order allows for the implementation of alternative regulatory solutions that continue to advance the regulatory goals that Rule 613 and the CAT NMS Plan were intended to promote, while reducing the implementation and operational costs, burdens, and/or difficulties that would otherwise be incurred by the Participants and Industry Members that must fund the CAT.
CAT LLC believes it is reasonable and appropriate to incur costs to limit the need to incur even greater costs due to certain interpretations of the Plan.
In addition, the legal costs incurred during the litigation are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at market rates for such services. As such, the legal costs related to this litigation incurred during the period covered by Historical CAT Assessment 1A were reasonable.
Finally, Industry Members will directly benefit from the result of the litigation because it has addressed CAT NMS Plan requirements that would have imposed significantly greater costs on the CAT. Accordingly, it is reasonable and appropriate that the costs of such litigation be included in Historical CAT Costs 1.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017, which was the date by which Participants were required to begin reporting to the CAT, due to the delay in the commencement of reporting to the CAT. As discussed above, the Participants determined to exclude all CAT costs incurred from November 15, 2017 through November 15, 2018, which includes $37,852,083 in Thesys costs incurred from November 15, 2017 through November 15, 2018 (as well as other CAT costs during this period). The remaining Thesys costs incurred after November 15, 2018 are the $19,628,791 in capitalized developed technology costs for the period from November 16, 2018 through February 2019 incurred in the development of the CAT by the Initial Plan Processor, as well as a transition fee for the transition from the Initial Plan Processor to the successor Plan Processor. The Participants would remain responsible for 100% of these $19,628,791 in costs.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017. CAT LLC notes that the development and implementation of the CAT System, while unprecedented in scope and design, is like any other large and innovative technology project in that, inevitably, there were adjustments and refinements in the technical approach as the project developed, even with substantial planning efforts and oversight prior to the build. This is even more likely when the project faces a very tight implementation schedule, such as the one imposed by the Commission in Rule 613 and the CAT NMS Plan. However, an adjusted approach does not mean that the funds were not valid expenditures and should not be recovered.
The reasonableness of Thesys costs should be evaluated by the Commission as of the time they were incurred, not in hindsight. As detailed above, the Commission concluded in 2016 that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue.”
As noted in the CAT Funding Model Approval Order, the Commission recognized that “[t]he CAT NMS Plan contemplates that the costs of the CAT are to be allocated between the Participants and Industry Members.”
CAT LLC believes that the recovery of CAIS-related costs is appropriate, and that the amount and scope of such costs, as described above, are reasonable, and that the reasonableness of historical costs should be evaluated by the Commission as of the time they were incurred, not in hindsight.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable CAIS operating costs as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . CAIS operating fees.”
In addition, CAT LLC determined that the CAIS operating fees described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The “CAIS Operating Costs” for Historical CAT Costs 1 total $9,480,587, with Pre-FAM costs of $2,072,908, FAM 1 costs of $254,998, FAM 2 costs of $1,590,298, and FAM 3 costs of $5,562,383. As described above, the CAIS operating fees were incurred with regard to two categories of CAIS-related efforts: (1) the acceleration of the reporting of LTIDs; and (2) the development of the CAIS Technical Specifications and the building of CAIS. These two categories of costs are discussed in more detail below.
(i) LTID Reporting
During the period covered by Historical CAT Assessment 1A, the CAIS operating costs included costs related to the acceleration of the reporting of LTIDs earlier than originally contemplated during this period at the request of the SEC and in accordance with exemptive relief granted by the SEC.
• After FCAT developed the LTID Technical Specifications, the LTID Technical Specifications were published on January 31, 2020, with additional updates provided to the LTID Technical Specifications through April 2021.
• The LTID account information testing environment opened on August 24, 2020.
• The LTID account information reporting production environment opened on December 14, 2020.
• CAT Reporters were required to request their production readiness certification for account information related to LTIDs by the deadline of April 9, 2021.
• The LTID account information reporting for Phases 2a, 2b and 2c for Large Industry Members went live on April 26, 2021.
• The LTID account information reporting for Phases 2d for Large Industry Members went live on December 13, 2021.
• The LTID account information reporting for Phases 2a, 2b, 2c and 2d for Small Industry Members went live on April 26, 2021.
Throughout this project, FCAT and CAT LLC worked closely with the industry on LTID and CAIS reporting. Between December 2019 and December 2021, at least 57 checkpoint calls, webinars, and technical working group meetings with industry representatives were hosted to address issues and to educate CAT Reporters regarding LTID and CAIS reporting.
The LTID reporting project was successfully completed in a timely fashion, and the fees related to the project were reasonable. Accordingly, CAT LLC appropriately seeks to recover such costs via Historical CAT Assessment 1A.
During the period covered by Historical CAT Assessment 1A, FCAT began the development of the full CAIS Technical Specifications and the building of CAIS. The CAIS Technical Specifications were developed during this period as follows:
• Iterative drafts of the CAIS Technical Specifications were published on June 30, 2020, December 1, 2020, and January 1, 2021.
• The full, final CAIS Technical Specifications were published on January 29, 2021.
• Updated versions of the CAIS Technical Specifications were published throughout 2021.
As discussed above, FCAT and CAT LLC frequently engaged with the industry regarding the development of CAIS, hosting regular checkpoint calls, webinars, and technical working group meetings with industry representatives to address any issues, including addressing the interplay between Industry Members' existing customer systems and CAIS, and to educate CAT Reporters regarding LTID and CAIS reporting. Such engagement was critical to the CAIS development process as the CAIS project was unprecedented in terms of its content, scope and complexity.
During this period, FCAT also commenced the building of the CAIS system in accordance with the CAIS Technical Specifications during the period covered by Historical CAT Assessment 1A. The CAIS system was ready for industry testing shortly after the end of this period in January 2022.
The CAIS Technical Specifications and the CAIS system, as developed during this period, continue to be used. Industry Members have been required to report, and have continuously reported, required data to CAIS on a daily basis since November 7, 2022, consistent with interim reporting obligations. The CAIS system accepts and validates the CAIS data submitted by Industry Members and provides Industry Members with initial feedback on data errors. In light of the unprecedented nature of the CAIS system, certain changes to the system, such as changes related to error corrections and the CAIS regulatory portal, were necessary to finalize CAIS reporting. FCAT worked to address these remaining issues,
CAT LLC believes that the recovery of public relations costs is appropriate and that the amount and scope of such costs, as described above, are reasonable.
The Commission has long recognized that external public relations costs are reasonably associated with creating, implementing and maintaining the CAT. In the CAT NMS Plan Approval Order, the Commission estimated that the Participants had collectively spent approximately $2,400,000 in preparation of the CAT NMS Plan on external public relations, legal, and consulting costs, and estimated that the Participants would continue to incur external public relations costs associated with maintaining the CAT upon approval of the CAT NMS Plan.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for public relations services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . public relations costs.”
In addition, CAT LLC determined that the public relations costs described above are reasonable in both amount
CAT LLC believes that the recovery of legal costs related to the limitation of liability provision, including costs related to the proceedings before the SEC and costs related to the proposed amendment to the Consolidated Audit Trail Reporter Agreement and the Consolidated Audit Trail Reporting Agent Agreement (the “Reporting Agreements”) is appropriate and that the amount and scope of such costs as described above are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
Moreover, it is critical that CAT LLC, which has no employees of its own, have the ability to fund a legal defense in litigation and other legal proceedings against it. In response to CAT LLC requiring Industry Members to agree to the limitation of liability provision to submit data to the CAT, SIFMA filed an application for review of actions taken by CAT LLC and the Participants pursuant to Sections 19(d) and 19(f) of the Exchange Act. Contemporaneously with the filing of this proceeding, SIFMA moved for a stay of the requirement that Industry Members sign a Reporter Agreement, or in the alternative, asked the Commission to further delay the launch of CAT reporting on June 22, 2020. CAT LLC must have the resources to defend itself from litigious actions by others, like these.
Although a limitation of liability provision ultimately was not adopted as proposed, it was a reasonable provision to propose for the CAT Reporter Agreements, given that such provisions are in accordance with industry norms. Limitations of liability are ubiquitous within the securities industry and have long governed the economic relationships between self-regulatory organizations and the entities that they regulate. For example, U.S. securities exchanges have adopted rules to limit their liability for losses that Industry Members incur through their use of exchange facilities.
Furthermore, as described above, the specialized services were performed by experienced counsel at market rates for such services. Accordingly, the legal costs for the efforts related to the limitation of liability provision were reasonable.
CAT LLC believes that the recovery of consulting costs related to the Chair of the CAT Operating Committee is appropriate and that the amount and scope of such costs are reasonable.
As a preliminary matter, the selection of the Chair of the Operating Committee complies with the requirements of Section 4.2 of the CAT NMS Plan. The initial Chair that served during the period covered by Historical CAT Assessment 1A was designated by a Participant as the Participant's alternate voting member. Accordingly, the Chair is a representative of the Participants, as required by the CAT NMS Plan.
In addition, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for consulting as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . consulting . . . ” costs.
The Participants determined that the position of the Chair was a critical role for the implementation of the CAT, and an independent Chair would appropriately consider and address the views of each of the Participants. The Participants also determined that it was important to have a Chair with a strong background regarding issues related to the regulatory obligations of self-regulatory organizations, including their obligations under national market system plans. The compensation paid to the Chair is appropriate for a person with such background and skills. The average annual amount paid to the Chair from 2017 through the end of FAM 3 was $292,733.30. Separate from the Chair, CAT LLC relies upon a Leadership Team of representatives of the SROs to oversee the day-to-day implementation of the CAT NMS Plan. CAT LLC does not compensate any member of the Leadership Team.
CAT LLC understands that there are three types of reconciliation processes related to the invoices:
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As discussed further below, CAT LLC only considers the first type of process to be a “reconciliation” and the only type of process that is required under the CAT NMS Plan. CAT LLC provides the means to reconcile the CAT invoice amount to the underlying trades provided by CAT.
The CAT NMS Plan does not require CAT LLC to facilitate the second type of process: matching underlying trades for a CAT invoice with a firm's internal books and records. CAT LLC has access only to the underlying trades provided by CAT; it does not have access to a firm's internal books and records. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
The CAT NMS Plan also does not require CAT LLC to provide the ability to identify the order originator for the underlying trades for the CAT invoices. Accordingly, the billing guidance and processes do not provide CAT Reporters with the ability to identify the order originator for the underlying trades provided by CAT with CAT invoices. CAT LLC has been working closely with CAT Reporters to explain its billing approach and to address any outstanding billing questions. But, it should not be lost that CAT LLC provides information sufficient to allow CAT Reporters to reconcile CAT invoice amounts with the underlying trades provided by CAT LLC.
The CAT NMS Plan does not require CAT LLC to facilitate the matching of underlying trades for a CAT invoice with a firm's internal books and records, which may consist of trading data from various sources external to CAT. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
In this regard, it is important to recognize that CAT LLC has developed a billing approach that greatly improves upon existing billing practices for similar regulatory fees (
To facilitate the introduction of CAT fees, CAT LLC has worked with FCAT to develop an approach to CAT billing that is consistent with existing billing constructs used with regard to Section 31-related sales values fees, subject to certain enhancements. Under this billing approach, FCAT is providing additional linkage elements, not necessarily provided in the Section 31-sales value fee context, to facilitate CAT Reporters' ability to match the underlying trades provided by CAT with their internal books and records and to reduce the complexity of that process. Specifically, FCAT is providing various key elements of the trade itself, such as the tradeID and branch sequence,
With the Additional Trade Details, CAT LLC and FCAT believe that the overwhelming majority of underlying trades provided by CAT bills can be matched with a CAT Reporter's internal books and records. CAT LLC recognizes that there may be certain cases in which such matching is more difficult given various firm-specific considerations, but believes that such instances are significantly more limited than with regard to the SRO fees charged in relation to Section 31.
Similar to other regulatory fees, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Accordingly, Historical CAT Assessment 1A does not address the process by which any CAT Reporters may pass through the fee to their customers. Likewise, the CAT billing approach provided by the Plan Processor is designed to address the needs of CAT Reporters with regard to the reconciliation of CAT invoices with the underlying trades provided by CAT LLC with the invoices; they are not designed to address issues related to any pass-through fees. Accordingly, facilitating CAT Reporters' ability to pass through fees to their clients is outside the scope of this fee filing. Nevertheless, as described below, CAT LLC and the Plan Processor have expended significant efforts to provide technical assistance to Industry Members regarding the implementation of Historical CAT Assessment 1A, including providing Additional Trade Details that provide significant details about each underlying trade.
In its approval of the CAT Funding Model, the Commission approved charging CAT fees to the CAT Executing Broker, rather than the originating broker. This fee filing must comply with the requirements of the CAT Funding Model, and, therefore, charges the Historical CAT Assessment 1A to CAT Executing Brokers.
Moreover, charging originating brokers would introduce significant
As noted, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT Fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Nevertheless, the Additional Trade Details provided with regard to the underlying trades on CAT invoices may assist with this process. Like with Section 31-related sales value fees, however, it is not always possible to trace every fee on a transaction back to the originating party. Industry Members have faced these issues under Section 31-related sales values fees for many years.
CAT LLC has worked with FCAT to provide significant technical assistance to Industry Members to allow the Industry Members to understand how Historical CAT Assessments will be implemented and billed, including webinars, CAT alerts, mock invoices, and responses to questions posed to the FCAT Help Desk.
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By providing such detailed and sustained assistance to Industry Members regarding CAT fees and billing, CAT LLC has successfully
In keeping with past practice, CAT LLC provided notice of the proposed Historical CAT Assessment 1A via CAT Fee Alert on April 1, 2026,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the Historical CAT Assessment 1A fees to be collected are directly associated with the 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 Exchange has already incurred such development and implementation costs and the proposed Historical CAT Assessment 1A fees, therefore, would allow the Exchange to collect certain of such costs in a fair and reasonable manner from Industry Members, as contemplated by the CAT NMS Plan.
The proposed Historical CAT Assessment 1A fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining Historical CAT Assessments as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Historical
The formula for calculating a Historical Fee Rate requires the amount of Historical CAT Costs to be recovered. Specifically, Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Historical CAT Costs 1 for each of these categories of costs above.
Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the Historical CAT Costs are reasonable and appropriate.” As discussed below, the Exchange believes that the amounts set forth in this filing for each of these cost categories is “reasonable and appropriate.” Each of the costs included in Historical CAT Costs 1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover costs related to cloud hosting services as a part of Historical CAT Assessments.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and an amendment to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to CAIS operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to change request fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to capitalized developed technology costs as a part of Historical CAT Assessments.
These costs involve the activity of both the Initial Plan Processor and FCAT, as the successor Plan Processor.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to legal fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover consulting costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover insurance costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover professional and administration costs as a part of Historical CAT Assessments.
CAT LLC determined to hire a financial advisory firm, Anchin, to assist with financial matters for the CAT. CAT LLC interviewed Anchin as well as other potential financial advisory firms to assist with the CAT project, considering a variety of factors in its analysis, including the firm's relevant expertise and fees.
CAT LLC also determined to engage an independent accounting firm, Grant Thornton, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC interviewed this firm as well as another potential accounting firm to audit CAT LLC's financial statements, considering a variety of factors in its analysis, including the relevant expertise and fees of each of the firms. CAT LLC determined that Grant Thornton was well-qualified for the role given the balance of these considerations.
The professional and administrative costs also include costs related to the receipt of certain market data from Exegy. After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy. Exegy provided the data elements required by the CAT NMS Plan, and the fees were reasonable
The professional and administrative costs also include costs related to a third party security assessment of the CAT performed by RSM. The assessment was designed to verify and validate the effective design, implementation and operation of the controls specified by NIST Special Publication 800-53, Revision 4 and related standards and guidelines. Such a security assessment is in line with industry practice and important given the data included in the CAT. CAT LLC determined to engage RSM to perform the security assessment, after considering a variety of factors in its analysis, including the firm's relevant expertise and fees. The fees were reasonable and in line with market rates for such an assessment.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover public relations costs as a part of Historical CAT Assessments.
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 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 will count executed equivalent shares for CAT billing purposes.
CAT LLC has determined to establish a Historical Recovery Period of 24 months for Historical CAT Assessment 1A and that such length is reasonable. CAT LLC determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable fee rate for Historical CAT Assessment 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans notes to the Participants in a timely fashion. CAT LLC determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
As noted in the Plan amendment for the CAT Funding Model, as a practical matter, the fee filing for a Historical CAT Assessment would provide the exact fee per executed equivalent share to be paid for each Historical CAT Assessment, and describe the relevant number of decimal places for the fee rate.
The Exchange believes that imposing Historical CAT Assessment 1A with a fee rate of $0.000002 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the remaining Historical CAT Costs 1 and such costs would be spread out over an appropriate recovery period, as discussed above. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, Historical CAT Assessment 1A is significantly lower than fees assessed pursuant to Section 31 (
Historical CAT Assessment 1A 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 Historical CAT Assessments as well as the Industry Members to be
Historical CAT Assessment 1A provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. For example, as described above, the calculation of Historical CAT Assessment 1A complies with the formula set forth in Section 11.3(b) of the CAT NMS Plan. In addition, Historical CAT Assessment 1A would be charged to CEBBs and CEBSs in accordance with Section 11.3(b) of the CAT NMS Plan. Furthermore, the Participants would continue to remain responsible for their designated share of Past CAT Costs through the cancellation of loans made by the Participants to CAT LLC.
In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A—Historical CAT Costs 1 (including Excluded Costs) and the exclusion of costs previously invoiced via Historical CAT Assessment 1, the count for the executed equivalent share volume for the prior 12 months, the length of the Historical Recovery Period, and the projected executed equivalent share volume for the Historical Recovery Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for Historical CAT Assessment 1A 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.
Historical CAT Assessment 1A is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of Historical CAT Assessments 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. Historical CAT Assessment 1A complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A and the resulting fee rate for Historical CAT Assessment 1A is reasonable. Therefore, Historical CAT Assessment 1A does not impose an unfairly discriminatory fee on Industry Members.
Finally, 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 specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce Historical CAT Assessment 1A on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A is reasonable and the resulting fee rate for Historical CAT Assessment 1A calculated in accordance with the CAT Funding Model is reasonable. Therefore, Historical CAT Assessment 1A would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to establish fees for Industry Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“Prospective CAT Costs” fees).
Under the CAT Funding Model, “[t]he Operating Committee will establish one or more fees (each a `Historical CAT Assessment') to be payable by Industry Members with regard to CAT costs previously paid by the Participants (`Past CAT Costs').”
Each Historical CAT Assessment to be paid by CEBBs and CEBSs is designed to contribute toward the recovery of two-thirds of the Historical CAT Costs. Because the Participants previously have paid Past CAT Costs via loans to the Company, the Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs will be paid by the cancellation of loans made by the Participants to the Company on a pro rata basis based on the outstanding loan amounts due under the loans, instead of through the payment of a CAT fee.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) Historical CAT Assessment 1A to recover certain historical CAT costs incurred prior to January 1, 2022, 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.' ”
The Exchange, along with the other Participants in the CAT, previously filed a fee filing to implement Historical CAT Assessment 1.
Historical CAT Assessment 1A will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an
In addition, the following fields of the Participant Technical Specifications would
The Operating Committee determined the fee rate to be used in calculating Historical
Under the CAT NMS Plan, for purposes of calculating each Historical CAT Assessment, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he Operating Committee will reasonably determine the Historical CAT Costs sought to be recovered by each Historical CAT Assessment, where the Historical CAT Costs will be Past CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT Costs by the Operating Committee. Each Historical CAT Assessment will seek to recover from CAT Executing Brokers two-thirds of Historical CAT Costs incurred during the period covered by the Historical CAT Assessment.”
The following describes in detail Historical CAT Costs 1 with regard to four separate historical time periods as well as Past CAT Costs excluded from Historical CAT Costs 1 (“Excluded Costs”). The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing “a brief description of the amount and type of Historical CAT Costs, 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.”
Historical CAT Costs 1 would include costs incurred by CAT prior to June 22, 2020 (“Pre-FAM Period”) and already funded by the Participants, excluding Excluded Costs (described further below). Historical CAT Costs 1 would include costs for the Pre-FAM Period of $124,290,730. The Participants would remain responsible for one-third of this cost (which they have previously paid) ($41,430,243.33), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($41,430,243.33) and CEBSs paying one-third ($41,430,243.33). These costs do not include Excluded Costs, as discussed further below. The following table breaks down Historical CAT Costs 1 for the Pre-FAM Period into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The Pre-FAM
The $10,268,840 in technology costs for cloud hosting services represent costs incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the Pre-FAM Period.
As part of its proposal for acting as the successor Plan Processor for the CAT, FCAT selected AWS as a subcontractor to provide cloud hosting services. In 2019, after reviewing the capabilities of other cloud services providers, FCAT determined that AWS was the only cloud services provider at that time sufficiently mature and capable of providing the full suite of necessary cloud services for the CAT, including, for example, the security, resiliency and complexity necessary for the CAT computing requirements. The use of cloud hosting services is standard for this type of high-volume data activity and reasonable and necessary for implementation of the CAT, particularly given the substantial data volumes associated with the CAT.
Under the Plan Processor Agreement with FCAT, 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 cost 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. The fees for cloud hosting services during the Pre-FAM Period were paid to FCAT by CAT NMS,
AWS was engaged by FCAT to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools). AWS also was engaged to provide various environments for CAT, such as development, performance testing, test and production environments.
The cost for AWS services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to the CAT. During the Pre-FAM Period from the engagement of AWS in February 2019 through June 2020, AWS provided 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,”
The $21,085,485 in technology costs related to operating fees represent costs incurred with regard to activities of FCAT as the Plan Processor. 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 (
FCAT was selected to assume the role of the successor Plan Processor. Prior to this selection, the Participants engaged in discussions with two prior Bidders
The Selection Subcommittee considered factors including, but not limited to, the following, in recommending FINRA to the Operating Committee as the successor Plan Processor:
a. FINRA's specialized technical expertise and capabilities in the area of broker-dealer technology;
b. The need to appoint a successor Plan Processor with specialized expertise to develop, implement, and maintain the CAT System in accordance with the CAT NMS Plan and SEC Rule 613;
c. FINRA's detailed proposal in response to CATLLC's recent inquiries; and
d. FINRA's data query and analytics systems demonstration to the Participants.
Based on these and other factors, the Selection Subcommittee determined that FINRA was the most appropriate Bidder to become the successor Plan Processor.
On February 26, 2019, the Operating Committee (with FINRA recusing itself) voted to select FINRA as the successor Plan Processor pursuant to Section 6.1(t) of the CAT NMS Plan.
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. The operating fees during the Pre-FAM Period were paid to FCAT by CAT LLC.
From March 29, 2019 (the commencement of the Plan Processor Agreement with FCAT) through June 22, 2020 (the end of the Pre-FAM Period), the Plan Processor's activities with respect to the CAT included the following:
• Commenced user acceptance testing with market data provided by Exegy Incorporated (“Exegy”), a market data provider;
• Published Technical Specifications and related reporting scenarios documents for Phase 2a, 2b and 2c reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated testing for Phase 2a and 2b reporting for Industry Members;
• Began developing Technical Specifications and related reporting scenarios documents for Phase 2d reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published Central Repository Access Technical Specifications, and provided regulator access to test data from Industry Members;
• Facilitated Participant exchanges that support options market makers sending Quote Sent Time to the CAT;
• Facilitated the introduction of OPRA and Options NBBO Other Data to CAT;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing requirements under Regulation SCI;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants, the SEC and its staff;
• Operated the FINRA CAT Helpdesk, which is the primary source for answers to questions about CAT, including questions regarding: clock synchronization, firm reporting responsibilities, interpretive questions, technical specifications for reporting to CAT and more;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content;
• Provided 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.
The $2,072,908 in technology costs related to CAIS operating fees represent the fees paid for FCAT's subcontractor charged with the development and operation of CAT's Customer and Account Information System (“CAIS”). 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.
During the Pre-FAM Period, the CAIS-related services were provided by the Plan Processor through the Plan Processor's subcontractor, Kingland Systems Incorporation (“Kingland”). Kingland had experience operating in the securities regulatory technology space, and as a part of its proposal for acting as the Plan Processor for the CAT, FCAT selected Kingland as a subcontractor to provide certain CAIS-related services.
Under the Plan Processor Agreement with FCAT, CAT LLC was required to pay to the Plan Processor the fees incurred by FCAT for CAIS-related services provided by FCAT through Kingland on a monthly basis. FCAT negotiated the fees for Kingland'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. The fees for CAIS-related services during the Pre-FAM Period were paid by CAT LLC to FCAT. FCAT, in turn, paid Kingland.
During the Pre-FAM Period, Kingland began development of the CAIS Technical Specifications and the building of CAIS. In addition, Kingland also worked on the build related to the CCID Alternative, an alternative approach to customer information that was not included in the CAT NMS Plan as originally adopted.
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 change to the functionality or service is necessary and appropriate,
This category of costs includes capitalizable application development costs incurred in the development of the CAT. The capitalized developed technology costs for the Pre-FAM Period of $51,847,150 relate to technology provided by the Initial Plan Processor and the successor Plan Processor.
On January 17, 2017, the Selection Committee of the CAT NMS Plan selected the Initial Plan Processor, Thesys Technologies, LLC, for the CAT NMS Plan pursuant to Article V of the CAT NMS Plan.
From January 17, 2017 through January 30, 2019, the time in which Thesys CAT was engaged for the CAT, but excluding the period from November 15, 2017 through January 30, 2019, the Initial Plan Processor engaged in various activities with respect to the CAT, including preparing iterative drafts of Participant Technical Specifications, Industry Member Technical Specifications and the Central Repository Access Technical Specifications. In addition, Thesys CAT also developed CAT technology, addressed compliance items, including drafting CAT policies and procedures, addressing Regulation SCI requirements, establishing a CAT Compliance Officer and a Chief Information Security Officer, addressed security-related matters for the CAT, and worked towards the initiation of Participant reporting per the Participant Technical Specifications.
The legal costs of $19,674,463 represent the fees paid for legal services provided by two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), during the Pre-FAM Period. The legal costs exclude those costs incurred from November 15, 2017 through November 15, 2018.
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. WilmerHale's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading law firms for similar work.
The legal costs for WilmerHale during the Pre-FAM Period included costs incurred from 2013 until June 22, 2020 to address corporate and regulatory legal matters related to the CAT. The legal fees for this law firm during the period from February 2013 until the formation of the CAT NMS, LLC on November 15, 2016 were paid directly by the exchanges and FINRA to WilmerHale. After the formation of CAT NMS LLC, the legal fees were paid by CAT LLC to WilmerHale.
After WilmerHale was engaged in 2013 through the end of the Pre-FAM Period on June 22, 2020 (excluding the legal costs from November 15, 2017 through November 15, 2018), WilmerHale provided legal assistance to the CAT on a variety of matters, including with regard to the following:
• Analyzed various legal matters associated with the Selection Plan, and drafted an amendment to the Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the Development Advisory Group (“DAG”);
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan and related filings;
• Negotiated and drafted the plan processor agreements with the Initial Plan Processor and the successor Plan Processor;
• Provided assistance with compliance with Regulation SCI;
• Assisted with clock synchronization study;
• Provided assistance with respect to the establishment of CAT security;
• Drafted exemptive requests from CAT NMS Plan requirements, including with regard to options market maker quotes, Customer IDs, CAT Reporter IDs, linking allocations to executions, CAT reporting timeline, FDIDs, customer and account information, timestamp granularity, small industry members, data facility reporting and linkage, allocation reports, SRO-assigned market participant identifiers and cancelled trade indicators, thereby seeking to implement changes that would be cost effective and benefit Industry Members and Participants;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided advice regarding CAT policies and procedures;
• Analyzed the SEC's amendment of the CAT NMS Plan regarding financial accountability;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues; and
• Assisted with third-party vendor agreements.
The consulting costs of $17,013,414 represent the fees paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the Pre-FAM Period, from October 2012 until June 22, 2020. 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.
To help facilitate project management given the unprecedented complexity and scope of the CAT project, the Participants determined it was necessary to engage a consulting firm to assist with the CAT project in 2012, following the adoption of Rule 613. A variety of factors were considered in the analysis of prospective consulting firms, including (1) the firm's qualifications, resources, and expertise; (2) the firm's relevant experience and understanding of the regulatory issues raised by the CAT and in coordinating matters of similar scope; (3) the composition of the consulting team; and (4) professional fees. Following a series of interviews, the exchanges and FINRA as a consortium determined that Deloitte was well qualified given the balance of these considerations and engaged Deloitte on October 1, 2012.
Deloitte's fee rates are negotiated on an annual basis and are in line with market rates for this type of specialized consulting work. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. Deloitte's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading consulting firms for similar work.
The consulting costs for CAT during the period from 2012 until the formation of the CAT NMS, LLC were paid directly by the Participants to Deloitte. After the formation of CAT NMS, LLC, the consulting fees were paid by CAT LLC to Deloitte. CAT LLC reviewed the consulting fees each month and approved the invoices.
After Deloitte was hired in 2012 through the end of the Pre-FAM Period on June 22, 2020 (excluding the consulting costs from November 15, 2017 through November 15, 2018), Deloitte provided a variety of consulting services, including the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participant's independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Assisted with cost and funding-related activities for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided 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;
• Assisted with industry outreach and communications regarding the CAT, including assistance with industry outreach events, the development of the CAT website, frequently asked questions, and coordinating with the CAT LLC's public relations firm;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress;
• Coordinated efforts regarding the selection of the successor Plan Processor;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor, including support for the Operating Committee and successor Plan Processor for the new role; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $880,419 represent the cost incurred for insurance for CAT during the Pre-FAM Period. Commencing in 2020, CAT LLC performed an evaluation of various potential alternatives for CAT insurance policies, which included engaging in discussions with different insurance companies and conducting cost comparisons of various alternative approaches to insurance. Based on an analysis of a variety of factors, including coverage and premiums, CAT LLC determined to purchase cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance from USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
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.
After Anchin was hired in April 2018 through the end of the Pre-FAM Period on June 22, 2020 (excluding the period from April 2018 through November 15, 2018), Anchin provided a variety of services, including the following:
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial reporting matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy from July 2018 through March 2019. CAT LLC determined that, unlike certain other vendors, Exegy provided market data that included all data elements required by the CAT NMS Plan.
Upon the termination of the contract between CAT LLC and Exegy, FCAT entered into a contract with Exegy to purchase the required market data from Exegy in July 2019. All costs under the contract were treated as a direct pass through cost to CAT LLC. Therefore, the fees for the market data were paid by CAT LLC to FCAT, who, in turn, paid Exegy for the market data.
The public relations costs of $224,669 represent the fees paid to public relations firms during the Pre-FAM Period for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC was better positioned to understand and address CAT matters to the benefit of all market participants. Specifically, the public relations firms provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
The services performed by each of the public relations firms were comparable. The fees for such services were reasonable and in line with market rates. Only one public relations firm was engaged at a time; the three firms were engaged sequentially as the primary public relations contact moved among the three firms during this time period.
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 1 of the Financial Accountability Milestones (“FAM Period 1”),
By the
CAT LLC continued to utilize AWS in FAM Period 1 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 1 Period. Accordingly, the $2,642,122 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 1. The fee arrangement for AWS described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. Moreover, CAT LLC continued to believe that AWS's maturity in the cloud services space as well as the significant cost and time necessary to move the CAT to a different cloud services provider supported the continued engagement of AWS.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 1 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, reference data and other types of Other Data. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 1.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 1. Accordingly, the $1,099,680 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 1. The fee arrangement for FCAT described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, FCAT's activities with respect to the CAT included the following:
• Published iterative drafts of draft Technical Specifications for Phase 2d, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published iterative drafts of CAIS Technical Specifications, after substantial engagement with SEC staff,
• Facilitated Industry Member reporting of Quote Sent Time on Options Market Maker quotes;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 1. Accordingly, the $254,998 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 1. The fee arrangement for Kingland described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to CCID Alternative, as well as the acceleration of the reporting of LTIDs.
CAT LLC did not incur costs related to change requests during FAM Period 1.
Capitalized developed technology costs for FAM Period 1 of $1,684,870 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include: (1) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including separate production and industry test entitlements, and reprocessing of exchange event timestamps; (2) implementation fees; and (3) license fees.
The legal costs of $481,687 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 1.
• Assisted with the development of the CAT funding model and drafted related amendments and fee filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, verbal activity, options market maker quote sent time, TRF linkages, and allocations;
• Provided interpretations related to CAT NMS Plan requirements, including the Financial Accountability Milestone amendment;
• Assisted with compliance with Regulation SCI;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the drafting of the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Assisted with communications and presentations for the industry regarding CAIS;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding CAT technical specifications;
• Assisted with third-party vendor agreements; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $137,209 represent the fees paid to Deloitte as project manager during FAM Period 1. CAT LLC continued to employ Deloitte during FAM Period 1 based on, among other things, their expertise and cumulative experience with the CAT. The fee rates for Deloitte during FAM Period 1 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 1 were paid by CAT LLC to the consulting firm. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 1, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
Although insurance was in effect during FAM Period 1, CAT LLC did not incur costs related to insurance during FAM Period 1.
• Maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups; and
• Prepared monthly and quarterly financial statements.
The public relations costs of $7,700 represent the fees paid to Peak Strategies during FAM Period 1. CAT LLC continued to employ Peak Strategies during FAM Period 1 based on, among other things, their expertise and history with the project. The fee rates for this firm were reasonable and in line with market rates for these types of services. The fees for these services during FAM Period 1 were paid by CAT LLC to Peak Strategies. During FAM Period 1, Peak Strategies continued to provide professional communications services to CAT LLC, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT LLC and already funded by Participants during Period 2 of the Financial Accountability Milestones (“FAM Period 2”),
By the completion of FAM Period 2, CAT LLC was required to implement the following with regard to the CAT:
(a) Industry Member reporting (excluding reporting by Small Industry Members that are not OATS reporters) for equities transactions, excluding Customer Account Information, CustomerID, and Customer Identifying Information, is developed, tested, and implemented at a 5% Error Rate or less and with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, and trade reporting facilities linkage to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system, excluding linkage of representative orders, from order origination through order execution or order cancellation; and (b) the query tool functionality required by Section 6.10(c)(i)(A) and Appendix D, Sections 8.1.1-8.1.3 and Section 8.2.1 incorporates the Industry Member equities transaction data described in condition (a) and is available to the Participants and to the Commission.
CAT LLC completed the requirements of FAM Period 2 by December 31, 2020. The following describes the costs for each of the categories for FAM Period 2.
CAT LLC continued to utilize AWS in FAM Period 2 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 2 Period. Accordingly, the $20,709,212 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 2. The fee arrangement for AWS described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 2 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, and Other Data, including reference data. In addition, Industry Members began reporting LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 2.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 2. Accordingly, the $9,108,700 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 2. The fee arrangement for FCAT described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, FCAT's activities with respect to the CAT included publishing the Technical Specifications for Phase 2d and overseeing the reporting of firm to firm and intrafirm linkages by Industry Members. In addition, FCAT also continued to engage in the following activities during FAM Period 2:
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the development and implementation of the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and
During FAM Period 2, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 2, CAT incurred costs of $51,823 related to a change request regarding the addition of functionality for exchange Participants to report rejected messages to the CAT.
Capitalized developed technology costs for FAM Period 2 of $6,761,094 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to separate production and industry test entitlements, market maker reference data, and back-processing of exchange exception logic; (3) implementation fees; and (4) license fees.
The legal costs of $2,766,644 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 2.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, allocations, exchange activity, OTQT, initial data validation, error corrections and recordkeeping;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittees, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6 of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Assisted with third-party vendor agreements (
• Assisted with change requests; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $532,146 represent the fees paid to Deloitte as project manager during FAM Period 2. CAT LLC continued to employ Deloitte during FAM Period 2 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 2 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 2 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 2, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $976,098 represent the fees paid for insurance during FAM Period 2. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $438,523 represent the fees paid to Anchin and Grant Thornton for financial services provided during FAM Period 2.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from the Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audit by an independent auditor; and
• Reviewed historical costs from inception.
The public relations costs of $41,940 represent the fees paid to Peak Strategies during FAM Period 2. CAT LLC continued to employ Peak Strategies during FAM Period 2 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 2 were paid by CAT LLC to Peak Strategies. During FAM Period 2, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 3 of the Financial Accountability Milestones (“FAM Period 3”),
By the
(a) reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders; (b) Industry Member reporting for equities transactions and simple electronic options transactions, excluding Customer Account Information, Customer-ID, and Customer Identifying Information, with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, trade reporting facilities linkage, and representative order linkages (including any equities allocation information provided in an Allocation Report) to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, is developed, tested, and implemented at a 5% Error Rate or less; (c) Industry Member reporting for manual options transactions and complex options transactions, excluding Customer Account Information, Customer-ID, and Customer Identifying Information, with all required linkages to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system, from order origination through order execution or order cancellation, including any options allocation information provided in an Allocation Report, is developed, tested, and fully implemented; (d) the query tool functionality required by Section 6.10(c)(i)(A) and Appendix D, Sections 8.1.1-8.1.3, Section 8.2.1, and Section 8.5 incorporates the data described in conditions (b)-(c) and is available to the Participants and to the Commission; and (e) the requirements of Section 6.10(a) are met.
CAT LLC completed the requirements of FAM Period 3 by December 31, 2021. The following describes the costs for each of the categories for FAM Period 3.
CAT LLC continued to utilize AWS in FAM Period 3 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 3 Period. Accordingly, the $94,574,759 in technology costs for cloud hosting services represents costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 3. The fee arrangement for AWS described above for the earlier periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During FAM Period 3, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a, Phase 2b, Phase 2c and Phase 2d Industry Member Data (including certain linkages), SIP Data, Other Data, including reference data, and LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 3.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 3. Accordingly, the $23,106,091 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 3. The fee arrangement for FCAT described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, FCAT's activities with respect to the CAT included the following:
• Facilitated Phase 2c and Phase 2d testing for Industry Members;
• Oversaw creation of linkages of the lifecycle of order events based on the received data through Phase 2d;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement with FCAT discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 3. Accordingly, the $5,562,383 in technology costs for CAIS operating fees represents costs incurred for services provided by Kingland during FAM Period 3. The fee arrangement for Kingland described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs. The full CAIS Technical Specifications were published during FAM Period 3.
During FAM Period 3, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 3, CAT incurred costs of $396,169 related to change requests, including the following: (1) the addition of functionality for exchange Participants to report rejected messages to the CAT; (2) the migration of MIRS query engine to AWS to reduce operational costs and increase resiliency; and (3) updating the Participant Technical Specifications to allow for two-sided Participant option quote reporting.
Capitalized developed technology costs for FAM Period 3 of $10,763,372 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor, including the transition from equity data received by FINRA pursuant to various regulatory services agreements between FINRA and Participant exchanges to the equity CAT Data, and the completion of the Industry Member Phase 2d options manual and complex orders go-live requirements; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to off-exchange volume concentration, Participant 24-hour trading and an external metastore; (3) implementation fees; and (4) license fees.
The legal costs of $6,333,248 represent the fees paid for legal services provided by three law firms, WilmerHale, Pillsbury and Covington & Burling LLP (“Covington”) during FAM Period 3.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements, including, for example, verbal activity regarding Phase 2c cutover, error reports, error corrections, Phase 2d Reporting, unique Order-ID on internal route events, reporting addresses, recordkeeping, and unique CCID for foreign customers;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs, CAIS requirements, ADF, and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6(c) of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Provided assistance with change requests;
• Provided guidance and regulatory support for litigation regarding the response to the SEC's exemptive orders;
• Assisted with communications with the industry, including CAT Alerts and presentations;
• Provided guidance regarding the confidentiality of CAT Data, including third-party information requests;
• Assisted with cost management analysis and proposals; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
After Covington was hired in 2021 through the end of 2021, the firm provided legal assistance regarding the litigation with the SEC regarding the 2020 Orders. These services included researching, drafting, and filing motions to stay the 2020 orders and related materials in proceedings before the SEC, as well as researching, drafting, and filing petitions for judicial review of the 2020 Orders in proceedings before the U.S. Court of Appeals for the D.C. Circuit. Covington oversaw ongoing litigation proceedings on these matters, and also supported WilmerHale with respect to settlement negotiations with the SEC staff regarding the 2020 Orders.
In addition to these services, CAT LLC engaged Covington in November 2021 to provide assistance with respect to the SEC's disapproval of CAT NMS Plan amendments concerning a proposed limitation on liability in the event of a data breach or similar event. Covington provided advice concerning CAT's response to the SEC's disapproval order. This work accounted for a minority of Covington's fees in 2021.
The consulting costs of $1,408,209 represent the fees paid to Deloitte as project manager during FAM Period 3. CAT LLC continued to employ Deloitte during FAM Period 3 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 3 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 3 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 3, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $1,582,714 represent the fees paid for insurance during FAM Period 3. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $595,923 represent the fees paid to Anchin and Grant Thornton for financial services during FAM Period 3.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Faciliated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $92,400 represent the fees paid to Peak Strategies during FAM Period 3. CAT LLC continued to employ Peak Strategies during FAM Period 3 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 3 were paid by CAT LLC to Peak Strategies. During FAM Period 3, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution.
Historical CAT Costs 1 would not include three categories of CAT costs (“Excluded Costs”): (1) $14,749,362 of costs related to the termination of the relationship with the Initial Plan Processor; (2) $48,874,937, which are all CAT costs incurred from November 15, 2017 through November 15, 2018; and (3) $19,628,791, which are costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when the relationship with the Initial Plan Processor was concluded. The Participants would remain responsible for 100% of these costs, which total $83,253,090. CAT LLC determined to exclude these Excluded Costs from Historical CAT Costs 1 because these costs relate to the delay in the start of reporting to the CAT and the conclusion of the relationship with the Initial Plan Processor.
First, Historical CAT Costs 1 would not include $14,749,362 of costs related to the conclusion of the relationship with the Initial Plan Processor. Such costs include costs related to the American Arbitration Association, the legal assistance of Pillsbury with regard to the arbitration with the Initial Plan Processor, and the settlement costs related to the arbitration with the Initial Plan Processor. The Participants would remain responsible for 100% of these $14,749,362 in costs.
Second, Historical CAT Costs 1 would not include all CAT costs incurred from November 15, 2017 through November 15, 2018. CAT LLC determined to exclude all costs during this one-year period of $48,874,937 from fees charged to Industry Members due to the delay in the start of reporting to the CAT. The Participants would remain responsible for 100% of these $48,874,937 in costs. The following table breaks down these costs into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The following provides additional detail regarding the Excluded Costs.
CAT LLC did not incur technology costs related to the categories of cloud hosting services, operating fees, CAIS operating fees or change requests during the period from November 15, 2017 through November 15, 2018.
Capitalized developed technology costs for the period from November 15, 2017 through November 15, 2018 include capitalizable application development costs of $37,852,083 incurred in the development of the CAT by the Initial Plan Processor. Such costs include development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Initial Plan Processor. Such costs include costs related to Industry Member technical specifications for orders and transactions, the system security plan, testing and production for Participant CAT reporting, third-party security assessment and response, query portal, onboarding of the Chief Information Security Officer, and ingestion of FINRA TRF data and FINRA data related to halts and corporate actions.
The legal costs of $6,143,278 represent the fees paid to WilmerHale for legal services from November 15, 2017 through November 15, 2018. During this period, WilmerHale
• Provided legal support for the governance of the CAT, including governance support for the Operating Committee, Advisory Committee, Compliance Subcommittee, and CAT working groups;
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan;
• Provided assistance related to CAT security;
• Drafted exemptive requests, including requests related to PII;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided advice with regard to regulator access to the CAT;
• Assisted with the Plan Processor transition;
• Provided assistance regarding communications with the industry regarding the CAT;
• Provided advice regarding Customer Account Information and PII;
• Provided support for litigation related to SEC exemptive orders; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretative and implementation issues.
The consulting costs of $4,452,106 represent the fees paid to Deloitte for their role as project manager for the CAT from November 15, 2017 through November 15, 2018. During this period, Deloitte engaged in the following activities with respect to the CAT:
• Implemented program operations for the CAT project;
• Provided governance support to the Operating Committee, including support for Subcommittees and working groups of the Operating Committee (
• Assisted with cost and funding issues for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress.
CAT LLC did not incur costs related to insurance during the period from November 15, 2017 through November 15, 2018.
The professional and administration costs of $340,145 represent the fees paid to Anchin, Exegy and RSM from November 15, 2017 through November 15, 2018.
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $87,325 represent the fees paid to Sloane from November 15, 2017 through November 15, 2018. From the commencement of its engagment in March 2018 through November 15, 2018, Sloane provided professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, Sloane provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Third, Historical CAT Costs 1 would not include the $19,628,791 in costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when CAT LLC's relationship with the Initial Plan Processor concluded. CAT LLC determined that Historical CAT Costs 1 would not include any fees paid to the Initial Plan Processor after November 15, 2017,
CEBBs and CEBSs collectively have been invoiced for $173,075,024 of the $212,039,879.34 of Historical CAT Costs 1 via Historical CAT Assessment 1, where $86,537,512 was invoiced collectively to CEBBs and $86,537,512 was invoiced collectively to CEBSs. Accordingly, Historical CAT Assessment 1A would seek to recover the remaining $38,964,855.34 of Historical CAT Costs 1 collectively from CEBBs and CEBSs, where CEBBs collectively will be responsible for $19,482,427.67, and CEBSs collectively will be responsible for $19,482,427.67.
Under the CAT NMS Plan, the Operating Committee is required to reasonably establish the length of the Historical Recovery Period used in calculating each Historical Fee Rate based upon the amount of the Historical CAT Costs to be recovered by the Historical CAT Assessment, and to describe the reasons for its length.
The Operating Committee determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable Historical Fee Rate 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans to the Participants in a timely fashion. The Operating Committee determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
The length of the Historical Recovery Period 1A and the reasons for its length are provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a Historical CAT Assessment.
The calculation of the fee rate for Historical CAT Assessment 1A also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for Historical Recovery Period 1A. 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 Historical Recovery Period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A 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 Historical CAT Assessment.
The fee rate for Historical CAT Assessment 1A would be calculated by dividing the total amount of costs to be recovered by Historical CAT Assessment 1A by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A, and dividing by 2. Specifically, the fee rate for Historical CAT Assessment 1A would be calculated by dividing $38,964,855.34 by 11,961,875,098,720.98, and then dividing by 2, which equals $0.00000162871017371542 per executed equivalent shares. Rounding this to six decimal places results in a fee rate of $0.000002 per executed equivalent share.
Participants would not be required to pay any fees associated with Historical CAT Assessment 1A as the Participants previously have paid all Past CAT Costs. The CAT NMS Plan explains that:
Because Participants previously have paid Past CAT Costs via loans to the Company, Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs and such other additional Past CAT Costs as reasonably determined by the Operating Committee will be paid by the cancellation of loans made to the Company on a pro rata basis based on the outstanding loan amounts due under the loans.
The CAT NMS Plan further states that “Historical CAT Assessments are designed to recover two-thirds of the Historical CAT Costs.”
CEBBs and CEBSs would be required to pay fees for Historical CAT Assessment 1A on a monthly basis for the period in which Historical CAT Assessment 1A is in effect.
The CAT NMS Plan states that, “[n]otwithstanding the length of the Historical Recovery Period used in calculating the Historical Fee Rate, each Historical CAT Assessment calculated using the Historical Fee Rate will remain in effect until all Historical CAT Costs for the Historical CAT Assessment are collected.”
To implement Historical CAT Assessment 1A, a new section would be added to the Exchange's fee schedule for “Consolidated Audit Trail Funding Fees”, and it would include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each month in which a Historical CAT Assessment is in effect, each CEBB and each CEBS shall pay a 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 Historical CAT Assessment for each transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Historical Fee Rate reasonably determined pursuant to paragraph (b)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(2) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(2) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for Historical CAT Assessment 1A in June 2026, which shall set forth the Historical CAT Assessment 1A fees calculated based on transactions in May 2026, and shall receive an invoice for Historical CAT Assessment 1A for each month thereafter in which Historical CAT Assessment 1A is in effect.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A 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 $0.000002 per executed equivalent share.
(C) Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time. Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).
Proposed paragraph (a)(2)(B) of the fee schedule would set forth the fee rate of $0.000002 per executed equivalent share for Historical CAT Assessment 1A, which is calculated as discussed above.
The proposed language in paragraph (a)(2)(B) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A. Specifically, CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in the prior month, that is, transactions executed in May 2026. 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)(2)(A) of the fee schedule also would describe the monthly cadence of the invoices for Historical CAT Assessment 1A. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter
Proposed paragraph (a)(2)(B) of the fee schedule would describe the invoices for Historical CAT Assessment 1A. Proposed paragraph (a)(2)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A on a monthly basis.” Proposed paragraph (a)(2)(B) of the fee schedule also would describe the fees to be set forth in the invoices for Historical CAT Assessment 1A. 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 $0.000002 per executed equivalent share.”
Furthermore, proposed paragraph (a)(2)(C) of the fee schedule would describe how long Historical CAT Assessment 1A would remain in effect. It would state that “Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time.” This proposed paragraph would further state that “Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.”
Historical CAT Assessment 1A will be assessed for all transactions executed in each month through the end of the month in which $38,964,855.34 is assessed, and then CAT LLC will provide notice that Historical CAT Assessment 1A is no longer in effect. Since Historical CAT Assessment 1A is a monthly fee based on transaction volume from the prior month, Historical CAT Assessment 1A may collect more than $38,964,855.34. To the extent that occurs, any excess money collected during the final month in which Historical CAT Assessment 1A is in effect will be used to offset future fees and/or to fund the reserve for the CAT.
Finally, proposed paragraph (a)(2)(D) of the fee schedule sets forth the requirement for the CAT Executing Brokers to pay the invoices for Historical CAT Assessment 1A. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).”
Paragraph (b)(1) of the “Consolidated Audit Trail Funding Fees” section of its fee schedule describes the manner of payment of Industry Member CAT fees. Paragraph (b)(1) 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.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange previously has added this requirement to the Exchange's fee schedule. Specifically, paragraph (b)(2) of the fee schedule states:
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 Historical CAT Assessment 1A.
The CAT NMS Plan states that:
Details regarding the calculation of a CAT Executing Broker's Historical CAT Assessment will be provided upon request to such CAT Executing Broker. At a minimum, such details would include each CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their Historical CAT Assessment.
In addition, CAT LLC will make certain aggregate statistics regarding Historical CAT Assessments publicly available. Specifically, the CAT NMS Plan states that, “[f]or each Historical CAT Assessment, 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 on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that Historical CAT Assessment 1A is in effect as well as the total amount invoiced for Historical CAT Assessment 1A 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 Historical CAT Assessment 1A. By reviewing statistics regarding how much has been invoiced and how much remains to be invoiced for Historical CAT Assessment 1A, Industry Members would have sufficient information to reasonably track how much longer Historical CAT Assessment 1A is likely to be in place.
To date, CAT LLC, via FCAT, has billed Industry Members for Historical CAT Assessment 1 and certain Prospective CAT Fees. Industry Members will be billed for Historical CAT Assessment 1A via the same processes established for Historical CAT Assessment 1 and the Prospective CAT Fees. Accordingly, Industry Members have substantial experience with the CAT billing processes.
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 Historical CAT Assessment until any applicable Financial Accountability Milestone described in Section 11.6 has been satisfied.”
In accordance with Section 11.6(b) of the CAT NMS Plan, Historical CAT Assessment 1A seeks to recover costs that are related to “all fees, costs, and expenses (including legal and consulting fees, costs, and expenses) incurred by or for the Company in connection with the development, implementation and operation of the CAT from the effective date of [Section 11.6 of the CAT NMS Plan] until such time as Full Implementation of CAT NMS Plan Requirements has been achieved”
The reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of both: (a) equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information; and (b) options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information.
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports.
Under the FAM Period 1 requirement of Initial Industry Member Core Equity and Options Reporting, Industry Members—excluding Small Industry Members that are not OATS reporters—were required to report two categories of data to the CAT: equites transaction data and options transaction data (both excluding Customer Account Information, Customer-ID, and Customer Identifying Information) by July 31, 2020. Pursuant to exemptive relief provided by the Commission, the Commission authorized the Participants' Compliance Rules to allow core equity reporting for Industry Members (Phase 2a) to begin on June 22, 2020 and core options reporting for Industry Members (Phase 2b) to begin on July 20, 2020.
In adopting the FAMs, the Commission stated that the equities transaction reporting required for FAM Period 1 “is consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Equities 2a file submission and data integrity validations.' ”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Equities 2a file submission and data integrity validation (Large Industry Members and Small OATS Reporters)” was completed on June 22, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information” was completed on June 22, 2020.
In adopting the FAMs, the Commission stated that the options transaction reporting required for FAM Period 1 is “consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Options 2b file submission and data integrity validations.' ”
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Options 2b file submission and data integrity validations” was completed on July 20, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information” was completed on July 20, 2020.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from June 22, 2020 through July 31, 2020. The total costs for this period, as discussed above, are $6,377,343. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($2,125,781) and CEBSs paying one-third ($2,125,781) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 2. FAM Period 2 began on August 1, 2020, and concluded on December 31, 2020, the date of the Full Implementation of Core Equity Reporting. Section 1.1 of the CAT NMS Plan defines “Full Implementation of Core Equity Reporting” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2020,
Specifically, the Full Implementation of Core Equity Reporting requires the
• “Production Go-Live for Equities 2a Intrafirm Linkage validations” was completed on 7/27/2020;
• “Production Go-Live for Firm to Firm Linkage validations for Equities 2a (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020; and
• “Production Go-Live for Equities 2a Exchange and TRF Linkage validations (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020.
Furthermore, as CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2020, the average overall error rate for Phase 2a Industry Member Data was less than 5% as of December 31, 2020. The average overall error rate was calculated by dividing the compliance errors by processed records.
The second prong of this FAM requires that the equities transaction data collected by the CAT at this stage be made available to regulators through two basic query tools required by the CAT NMS Plan—a targeted query tool that will enable regulators to retrieve data via an online query screen with a variety of predefined selection criteria, and a user-defined direct query tool that will provide regulators with the ability to query data using all available attributes and data sources.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from August 1, 2020 through December 31, 2020. The total costs for this period, as discussed above, are $42,976,478. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($14,325,492.70) and CEBSs paying one-third ($14,325,492.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 3. FAM Period 3 began on January 1, 2021, and concluded on December 31, 2021, the date of the Full Availability and Regulatory Utilization of Transactional Database Functionality. Section 1.1 of the CAT NMS Plan defines “Full Availability and Regulatory Utilization of Transactional Database Functionality” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2021,
Specifically, the “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires the satisfaction of five prongs. The first prong requires that reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021,
In addition to Phase 2a and Phase 2b Industry Member Data, the second and third prongs of “Full Availability and Regulatory Utilization of Transactional Database Functionality” require Industry Member reporting of Phase 2c Industry Member Data and Phase 2d Industry Member Data. The Phase 2c Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. That Order states that “Phase 2c Industry Member Data” is Industry Member Data related to Eligible Securities that are equities other than Phase 2a Industry Member Data, Phase 2d Industry Member Data, or Phase 2e Industry Member Data. Specifically, the Phase 2c Industry Member Data includes Industry Member Data that is related to Eligible Securities that are equities and that is related to: (1) Allocation Reports as required to be recorded and reported to the Central Repository pursuant to Section 6.4(d)(ii)(A)(1) of the CAT NMS Plan; (2) quotes in unlisted Eligible Securities sent to an IDQS operated by a CAT Reporter (reportable by the Industry Member sending the quotes) (except for quotes reportable in Phase 2d, as discussed below); (3) electronic quotes in listed equity Eligible Securities (
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Phase 2d Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. “Phase 2d Industry Member Data” is Industry Member Data that is related to Eligible Securities that are options other than Phase 2b Industry Member Data, Industry Member Data that is related to Eligible Securities that are equities other than Phase 2a Industry Member Data or Phase 2c Industry Member Data, and Industry Member Data other than Phase 2e Industry Member Data. Phase 2d Industry Member Data includes with respect to the Eligible Securities that are options: (1) simple manual orders; (2) electronic and manual paired orders; (3) all complex orders with linkages to all CAT-reportable legs; (4) LTIDs (if applicable) for accounts with Reportable Events for Phase 2d; (5) date account opened or Account Effective Date (as applicable) for accounts with an LTID and flag indicating the Firm Designated ID type as account or relationship for such accounts; (6) Allocation Reports as required to be recorded and reported to the Central Repository pursuant to Section 6.4(d)(ii)(A)(1) of the CAT NMS Plan; (7) the modification or cancellation of an internal route of an order; and (8) linkage between a combined order and the original customer orders. Phase 2d Industry Member Data also would include electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are options and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: a listed option bid or offer which is accessible electronically by customers or other market participants and is immediately actionable (
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data will include verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Quarterly Progress Report for the fourth quarter of 2021 states that “Phase 2a was fully implemented as of October 26, 2020;” “Phase 2b was fully implemented as of January 4, 2021;” “Phase 2c was implemented as of April 26, 2021;” and “Phase 2d was fully implemented as of December 13, 2021.”
• “Production Go-Live for Equities 2c reporting requirements (Large Industry Members)” was completed on April 26, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b and 2c (Large Industry Members)” was completed on April 26, 2021;
• “FCAT Plan Processor creates linkages of the lifecycle of order events based on the received data through Phase 2d Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2b reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Equities 2c reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2d (Large Industry Members)” was completed on December 13, 2021; and
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b, 2c and 2d (Small Industry Members)” was completed on December 13, 2021.
The third prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” also imposes an Error Rate requirement of 5% or less. The Quarterly Progress Report for the fourth quarter of 2021 states the average overall error rate was less than 5% as of December 31, 2021. The average overall error rate was calculated by dividing the compliance errors by processed records.
The fourth prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires that the data collected by the CAT at this stage be made available to regulators through an online targeted query tool and a user-defined direct query tool. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The fifth prong requires the requirements of Section 6.10(a) of the CAT NMS Plan to have been met. Section 6.10(a) of the CAT NMS Plan requires the Participants to use the tools described in Appendix D to “develop and implement a surveillance system, or enhance existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository.” The Exchange implemented a surveillance system, or enhanced existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository as of December 31, 2021 in accordance with Section 6.10(a) of the CAT NMS Plan.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2021 through December 31, 2021. The total costs for this period, as discussed above, are $144,415,268. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remain two-thirds, with CEBBs paying one-third ($48,138,422.70) and CEBSs paying one-third ($48,138,422.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
As discussed above, CAT LLC has satisfied the Financial Accountability Milestones (“FAMs”) for Periods 1 through 3.
CAT LLC does not believe that the exemptive relief relating to the reporting of electronic responses for quotes (“RFQs”) that are not immediately actionable (“NIA Electronic RFQ Responses”) affect the conclusion that FAMs 1 through 3 have been satisfied. The only reason CAT LLC pursued this relief is because certain Industry Members introduced concerns that NIA Electronic RFQ Responses could be considered “orders” reportable pursuant to Rule 613(j)(8) and some Industry Members were not prepared to report such orders to CAT. Thus, the relief was requested on behalf of Industry Members. CAT LLC itself has not taken any position on whether NIA Electronic RFQ Responses are “orders,” as the definition of “order” is an SEC rule and the trading processes for NIA Electronic RFQ Responses are the Industry Members', not those of the Participants or CAT LLC. Accordingly, CAT LLC stated in its letter that “Industry Members must determine whether trading interest falls within the definition of an `order' for CAT purposes. To the extent an NIA Electronic RFQ Response is not considered an `order” as defined in Rule 613(j)(8) and the CAT NMS Plan, it would not be reportable to CAT.”
Only “orders” as defined in SEC Rule 613(j)(8) are reportable to CAT. There is no agreement across the industry or
As further discussed in the prior FIF letters, even if the Commission had the legal authority to require the reporting of NIA RFQ responses to CAT without an amendment to Rule 613, the Commission has not provided guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT. In subsequent discussions with industry members, Commission representatives have agreed that, prior to NIA RFQ responses being reportable to CAT, it would be necessary for the Commission to provide further guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT.
On May 20, 2024, the Commission granted CAT LLC's request for exemptive relief from certain CAT reporting requirements pertaining to NIA Electronic RFQ Responses to the extent such responses are considered “orders” reportable pursuant to Rule 613(j)(8).
When the Commission proposed the FAMs, the Participants expressed concern that, “by conditioning the ability of CAT LLC and the Participants to collect Post-Amendment Industry Member Fees on factors dependent on the efforts of Industry Members, the Commission's proposals inadvertently establish a perverse incentive for Industry Members to devote less than maximum efforts to comply with their obligations related to the CAT as they will pay less fees in such instances.”
CAT LLC does not believe that the Commission's May 19, 2023 order granting temporary exemptive relief relating to certain verbal floor activity and unstructured verbal and electronic upstairs activity (the “2023 Verbal Quotes Exemption”) affects the conclusion that FAMs 1 through 3 have been satisfied. The 2023 Verbal Quotes Exemption, which was issued on May 19, 2023, is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. The relevant exemption for this time period is the Commission's November 12, 2020 order, which granted relief for the same activity through July 31, 2023 (the “2020 Verbal Quotes Order”).
CAT LLC does not believe that the Commission's November 2, 2023 order granting relief from certain CAT NMS Plan requirements (the “November 2023 Order”) affects the conclusion that FAMs 1 through 3 have been satisfied. The November 2023 Order is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. As described in the November 2023 Order, the relevant exemptive orders for this time period were issued on December 16, 2020, which also states that “the Commission has determined that the Participants have sufficiently complied with the conditions set forth in the prior Orders and with the technical requirements for Quarterly Progress Reports set forth in section 6.6(c) of the CAT NMS Plan, including for purposes of determining compliance with any applicable Financial Accountability Milestones.”
CAT LLC also completed the requirements of FAM Period 2, including the required linkages, by December 31, 2020. Although Participant exchanges may report the Executing Broker to CAT differently in certain situations, these reporting differences are irrelevant for linkage purposes as the fields used for CAT Executing Broker are not used for linkage.
The CAT Funding Model approved by the Commission permits the recovery of reasonable costs in each of the categories of CAT costs sought to be recovered via Historical CAT Assessment 1A.
CAT LLC believes that it is reasonable to seek recovery of costs incurred prior to when the CAT NMS Plan became effective in November 2016, such as legal and consulting fees incurred to create the CAT NMS Plan. Rule 613 specifically mandates that the CAT be created, implemented and maintained, and further provides that the CAT NMS Plan include a proposed allocation of estimated costs to fund the creation, implementation and maintenance of the CAT among the Participants (referred to as “plan sponsors”), and between the Participants and Industry Members (referred to as “members of the plan sponsors”).
Accordingly, the CAT NMS Plan specifically permits the recovery of costs, including legal and consulting costs, reasonably incurred prior to November 2016 in connection with the creation and implementation of the CAT.
Furthermore, the costs incurred to create and implement the CAT prior to the effective date of the CAT NMS Plan (“Pre-Formation Costs”) were reasonable both in scope and amount, in accordance with the requirements of Section 11.1(c) of the CAT NMS Plan. During the four-year period from 2012 to 2016, a total of $13,842,881 in Pre-Formation Costs were incurred. This is an average of approximately $3.5 million per year over this period. The Pre-Formation Costs fell into three categories: legal costs, consulting costs and public relations costs. This includes legal costs of $3,196,434; consulting costs of $10,589,273; and public relations costs of $57,174. The legal, consulting and public relations services were performed by WilmerHale, Deloitte and Peppercomm, respectively. The selection considerations and fees for these three firms are described in detail above and are described further below. The Pre-Formation Costs are direct costs of CAT, which have been funded entirely by the Participants through non-interest-bearing notes. The Pre-Formation Costs do not include the significant costs incurred by each of the individual Participants in responding to the adoption of Rule 613.
The Pre-Formation Costs are reasonable and appropriate as they reflect the extensive efforts that were necessary to create the CAT NMS Plan as mandated after the SEC's adoption of Rule 613. As described in more detail below, these efforts included, among other things, developing a plan for selecting the Plan Processor, soliciting and evaluating bids, engaging a diverse set of market participants and the SEC in the development of the Plan, interacting with the SEC in their oversight of the development of the Plan, and seeking appropriate exemptive relief to address areas of concern in Rule 613.
The Participants determined to utilize an RFP to ensure that potential alternative solutions for creating the Plan could be presented and considered, and that a detailed and meaningful cost-benefit analysis could be performed. The SEC supported the use of an RFP, and approved its use as it is described in extensive detail in the CAT NMS Plan.
In the context of the SEC's adoption of Rule 613, commenters urged the Commission to utilize an RFP process to assist in the planning and design of the NMS plan.
In this regard, several commenters suggested that the Commission undergo a RFP or request for information (“RFI”) process to create and implement a consolidated audit trail. Specifically, FIF urged the Commission to perform a RFP process “to determine the best technical solution for developing a consolidated audit trail.” FIF suggested that the Commission “should outline a set of goals and guiding principles they are striving to achieve as part of the adopted CAT filing and leave the determination of data elements and other technical requirements to [an] industry working group.” Similarly, Direct Edge suggested that Commission staff should form and engage in a working group to develop an RFP for publication by the Commission. DirectEdge explained that an RFP process would facilitate the identification of the costs and benefits of the audit trail, as well as the consideration of a wider range of technological solutions. Further, commenters, including Broadridge Financial Solutions, Inc., a technology provider, also requested more specific information about the audit trail system to better assess the Commission's initial cost estimates and to determine the best approach to the consolidated audit trail.
In response to these comments, the Commission modified Rule 613 to require the Participants to address certain important considerations regarding the features and details of the NMS plan and to extend the timeframe for submission of the CAT NMS Plan by the Participants from the 90 days as originally proposed to 270 days, in part, to accommodate a process that would address these considerations.
The SEC specifically recognized that the Participants planned to use an RFP when it approved the Selection Plan, and stated that the RFP was a reasonable approach.
On February 26, 2013, the Participants published an RFP soliciting bids from parties interested in serving as the plan processor for the CAT. Initially, 31 firms submitted intentions to bid. In the following months, the Participants engaged with potential bidders with respect to, among other things, the selection process, selection criteria, and potential bidders' questions and concerns. On March 21, 2014, the Participants received ten bids in response to the RFP.
On September 4, 2013, the Participants filed with the Commission a national market system plan to govern the process for Participant review of the bids submitted in response to the RFP, the procedures for evaluating the bids, and, ultimately, selection of the plan processor (the “Selection Plan”).
The Selection Plan divided the review and evaluation of bids, and the selection of the plan processor, into various stages. Specifically, pursuant to the Selection Plan, a selection committee reviewed all bids and determined which bids contained sufficient information to allow the Participants to meaningfully assess and evaluate the bids. The ten submitted bids were deemed “Qualified Bids,” and so passed to the next stage, in which each bidder presented its bids to the Participants on a confidential basis. On July 1, 2014, after conducting careful analysis and comparison of the bids, the Selection Committee voted and selected a shortlist of six eligible bidders. The Selection Committee determined which shortlisted bidders would be provided the opportunity to revise their bids. After the Selection Committee assessed and evaluated the revised bids, the Selection Committee selected the plan processor via two rounds of voting by the Participants, as described in the Selection Plan.
The Selection Plan established an Operating Committee responsible for formulating, drafting, and filing with the Commission the CAT NMS Plan and for ensuring that the Participants' joint obligations under Rule 613 were met in a timely and efficient manner. In formulating the CAT NMS Plan, the Participants also engaged multiple persons across a wide range of roles and expertise, engaged the consulting firm Deloitte as project manager, and engaged the law firm WilmerHale to serve as legal counsel in drafting the Plan. Within this structure, the Participants focused on, among other things, comparative analyses of the proposed technologies and operating models, development of funding models to support the building and operation of the CAT, and detailed review of governance considerations. Given the complexity and scope of developing the CAT NMS Plan, these efforts were extensive.
When it approved the CAT NMS Plan in 2016, the Commission reiterated its belief that the Selection Plan remains a “reasonable approach,” that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue”:
In approving the Selection Plan, the Commission stated that the Selection Plan is reasonably designed to achieve its objective of facilitating the development of the CAT NMS Plan and the selection of the Plan Processor. The Commission also found that the Selection Plan is reasonably designed to govern the process by which the SROs will formulate and submit the CAT NMS Plan, including the review, evaluation, and narrowing down of Bids in response to the RFP, and ultimately choosing the Plan Processor that will
During the process of developing the CAT NMS Plan, the Participants engaged in extensive and meaningful dialogue with market participants and the SEC. To this end, the Participants created a website to update the public on the progress of the CAT NMS Plan, published a request for comment on multiple issues related to the Plan, held multiple public events to inform the industry of the progress of the CAT and to address inquiries, and formed, and later expanded, a DAG to solicit more input from a representative industry group.
The DAG included representatives of Participants and Industry Members and conducted meetings to discuss, among other things, technical and operational aspects the Participants were considering for the Plan. The Participants issued press releases soliciting participants for the DAG, and a wide spectrum of firms was deliberately chosen to provide insight from various industry segments affected by CAT. The DAG meetings included discussions of topics such as option market maker quote reporting, requirements for capturing Customer IDs, timestamps and clock synchronization, reporting requirements for order handling scenarios, costs and funding, error handling and corrections, and potential elimination of systems made redundant by the CAT. From the inception of the DAG through September 2014, the DAG participated in 36 meetings, as well as a variety of DAG subcommittee meetings.
Following multiple discussions between the Participants and both the DAG and the bidders, as well as among the Participants themselves, the Participants recognized that some provisions of Rule 613 would not permit certain solutions to be included in the Plan that the Participants, in coordination with the DAG, determined advisable to effectuate the most efficient and cost-effective CAT. Specifically, “the SROs reached the conclusion that additional flexibility in certain of the minimum requirements specified in Rule 613 would allow them to propose a more efficient and cost-effective approach without adversely affecting the reliability or accuracy of CAT Data, or its security and confidentiality.”
After reviewing the exemptive request, the Commission determined that it was appropriate in the public interest and consistent with the protection of investors to grant the requested exemptive relief.
[T]he Commission is persuaded to provide flexibility in the discrete areas discussed in the Exemption Request so that the alternative approaches can be included in the CAT NMS Plan and subject to notice and comment. Doing so could allow for more efficient and cost-effective approaches than otherwise would be permitted. The Commission at this stage is not deciding whether the proposed approaches detailed below are more efficient or effective than those in Rule 613. However, the Commission believes the proposed approaches should be within the permissible range of alternatives available to the SROs.
The Commission further stated that the requested exemptive relief is consistent with the protection of investors. The Commission noted that:
Doing so will provide the public an opportunity to consider and comment on whether these proposed alternative approaches would indeed be more efficient and cost-effective than those otherwise required by Rule 613, and whether such approaches would adversely affect the reliability or accuracy of CAT Data or otherwise undermine the goals of Rule 613. Moreover, if—as the SROs represent—efficiency gains and cost savings would result from including the proposed approaches in the CAT NMS Plan without adverse effects, then the resultant benefits could potentially flow to investors (
The Participants incorporated the exemptive relief into the proposed CAT NMS Plan, which was noticed for comment, and the Commission ultimately approved the CAT NMS Plan with the more efficient and cost-effective alternative approaches described in the exemptive relief. Accordingly, the Participants believe that the costs incurred in developing the exemptive request were critical to the creation of a better CAT than was originally contemplated by Rule 613, and therefore should be recoverable as part of Historical CAT Assessment 1A.
Rule 613(a)(1) under Regulation NMS required the Participants to jointly file the CAT NMS Plan on or before April 28, 2013, less than a year after the adoption of Rule 613. In recognition of the complexity of the project to create the CAT NMS Plan as well as industry interest in limiting or eliminating certain requirements of Rule 613 (
The SROs stated in their Request Letter that they do not believe that the 270-day time period provided for in Rule 613(a)(1) provides sufficient time for the development of the RFP, formulation and submission of bids, and review and evaluation of such bids. The SROs also stated that they believe additional time beyond the 270 days provided for in Rule 613(a)(1) is necessary in order to provide sufficient time for effective consultation with and input from the industry and the public
In recognition of the need for additional time to refine the technical description of and requirements for the CAT and to allow for additional evaluation of the proposed cost and funding considerations, the SEC granted two extensions of this deadline.
This additional time to complete the RFP process should allow the SROs to engage in a more thoughtful and comprehensive process for the development of an NMS plan. In this regard, the Commission notes that the additional time to solicit comment from the industry and the public at certain key points in the development of the NMS plan could identify issues that can be resolved earlier in the development of the consolidated audit trail and prior to filing the NMS plan with the Commission.
Given the Commission's recognition of the reasonableness and value of the extension of the deadline to file the CAT NMS Plan, the Participants believe that the costs incurred in developing the extension request were important to the process of developing the CAT NMS Plan, and therefore should be recoverable as part of Historical CAT Assessment 1A.
After extensive analyses and discussions with the DAG, bidders, market participants and the SEC staff, the Participants finalized the draft of the CAT NMS Plan and filed the CAT NMS Plan with the SEC on September 30, 2014. Following additional discussions, the Participants filed several amendments to the CAT NMS Plan during 2015 and 2016. With these additional changes, the SEC published the CAT NMS Plan for notice and comment in May 2016.
The Pre-Formation Costs include legal costs of $3,196,434. The legal services were performed by WilmerHale. The selection considerations and fees for WilmerHale were described in detail above. Prior to the creation of CAT LLC, WilmerHale was engaged to represent the consortium of SROs, not the individual Participants. For administrative purposes, FINRA agreed to receive such legal bills, although such costs were shared among the Participants. Therefore, the legal costs incurred with respect to WilmerHale do not include legal costs incurred by the individual Participants. These pre-formation legal costs are described in detail above and are further described below:
• Analyzed various legal matters associated with the Selection Plan and drafted an amendment to Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the DAG;
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on the CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Drafted exemptive requests;
• Provided interpretations related to the CAT NMS Plan;
• Provided support with regard to discussions among the exchanges, FINRA and other third parties, such as Deloitte;
• Provided tax advice with regard to CAT's status as a tax-exempt organization; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The Pre-Formation Costs include consulting costs of $10,589,273. The consulting services were performed by Deloitte. The selection considerations and fees for Deloitte were described in detail above. Prior to the creation of CAT LLC, for administrative purposes, Deloitte was engaged by FINRA to provide consulting services related to CAT, but the costs were shared by the consortium of SROs per agreement. Therefore, the consulting costs incurred with respect to Deloitte do not include consulting costs incurred by the individual Participants. The pre-formation consulting costs include the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participants' independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, reviewing technical requirements of other NMS plans, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided support for industry outreach sessions, including with regard to program design and agenda development, program support and logistics and coordination; and
• Provided support in fact finding, drafting content and meeting coordination for WilmerHale with regard to the CAT and the development of the CAT NMS Plan.
Such Pre-Formation Costs did not include costs related to the Chair of the CAT NMS Plan Operating Committee, as the CAT NMS Plan had not yet been adopted.
The Pre-Formation Costs include public relations costs of $57,174. The public relations services were performed by Peppercomm. The selection considerations and fees for Peppercomm are described in detail above. The costs related to Peppercomm were shared among the SROs. Therefore, the public relations costs do not include public relations costs incurred by the individual Participants. The pre-formation public relations costs include services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs related to cloud hosting services as a part of Historical CAT Assessments. CAT LLC believes that the costs related to cloud hosting services described in detail above are reasonable and appropriate given the strict data processing timelines and storage requirements imposed by the Commission-approved CAT NMS Plan and should be recoverable as a part of Historical CAT Assessment 1A.
CAT LLC believes that the costs for the cloud hosting services are reasonable, both in terms of the level of the fees paid by CAT LLC for cloud hosting services provided by AWS and the scope of the services performed by AWS for CAT LLC. CAT LLC believes that both the scope and amount of the costs for cloud hosting services are reasonable given the current requirements of the CAT NMS Plan adopted pursuant to Rule 613, including the strict data processing timeline, storage and other technical requirements under the Commission-approved CAT NMS Plan.
CAT LLC believes that the level of fees for the cloud hosting services is 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.
CAT LLC also believes that the scope of services provided by AWS for the CAT are appropriate given the current requirements of the Commission-approved CAT NMS Plan. As described above, the cloud hosting services costs reflect a variety of factors including, among other things:
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In addition, various requirements of the CAT NMS Plan adopted pursuant to Rule 613 contribute to the significant cloud hosting services costs, and that various Plan requirements could be amended or removed without affecting the regulatory purpose of the CAT. Indeed, CAT LLC has repeatedly sought exemptive relief and filed amendments to the CAT NMS Plan, and has even filed suit against the Commission, to seek to revise or eliminate certain costly requirements related to the CAT. However, despite these efforts, absent the Commission granting exemptive relief or approving cost savings amendments to the CAT NMS Plan, CAT LLC, the Participants and Industry Members are all required to comply with such requirements.
CAT is reasonably designed to efficiently and effectively utilize cloud computing and storage services, given the requirements of the Commission-approved CAT NMS Plan, including requirements related to security, operational reliance and quality assurance, and maintainability.
The Plan Processor uses state-of-the-art software that meets the strict security standards of the CAT NMS Plan. CAT utilizes a big data processing framework that is extensively used by large data processing companies, such as Apple, Meta, Netflix, IBM and Google. As such, it has substantial commercial support and support in the open-source community. It is also well suited for use with regard to iterative types of algorithms and query functions and analytics that the CAT requires, and it provides the heightened security necessary for the CAT.
The development and implementation of the design of CAT is not and has not been static. CAT LLC and the Plan Processor are always evaluating new innovations and service offerings from AWS and other providers to seek to maximize efficiency and cost avoidance while still satisfying the requirements of the CAT NMS Plan. These efforts have led to substantial savings to date. The cloud hosting costs for 2023 were less than the cloud hosting costs for 2022 by $8 million despite processing seven trillion more events in 2023 due to the efficiency and cost avoidance efforts for cloud hosting services. For example, when AWS introduced new storage options, FCAT adopted the cost-efficient new storage option after establishing that the new offering would satisfy the security and other standards of the CAT NMS Plan. This change led to millions of dollars of savings in storage costs. Similarly, when AWS introduced a new compute processor, FCAT adopted this new compute processor, which lead to millions of dollars in savings in compute costs. However, in other cases, new cloud technology developments could not be implemented in CAT because they would not satisfy the security or other requirements of the CAT NMS Plan.
When evaluating the design of the CAT, it must be kept in mind that the CAT is not a typical commercial technology project. The ability to make use of technology approaches that may lead to cost avoidance is also subject to the restrictive requirements of the CAT NMS Plan, such as processing timeframes, requirements for retention of data versions, query requirements,
The CAT System also was designed to minimize the extent to which Industry Members would need to alter their systems to report to CAT. During the design process, Industry Member groups argued that it would make more sense financially for the CAT to accommodate differences in industry systems, than for all Industry Members to change their systems. Moreover, such design choices would facilitate consistency, uniformity and accuracy in reporting. Requiring the CAT to make such accommodations may increase CAT costs while accommodating CAT Reporters.
Based on the requirements in the CAT NMS Plan and/or in response to industry requests for functionality to be embedded with the Plan Processor to streamline or limit Industry Member system changes, the CAT has been designed to limit the effect on Industry Members. The following provides examples of such accommodations:
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To be clear, if OATS-like error correction tools are not made available on Day 1, hundreds of firms will be required to create and test their own tools or obtain vendor alternatives prior to the CAT Go-Live Date. Proprietary tools will require additional system builds, access to and ingestion of CAT data to perform system validation, and testing which will further stress the limited number of subject matter experts (“SMEs”) dedicated to the implementation of CAT reporting. Should this occur, inevitably firms (especially small firms who lack the necessary IT staff to write code and develop proprietary systems), may be put in the position of passing onto investors the cost required to build hundreds of redundant systems.
CAT provides various tools to help Industry Members identify and rectify errors.
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FIF CAT WG is not proposing a specific format; rather, we are proposing flexibility of input formats which includes support of existing formats (
Mandating a uniform format for reporting data to the CAT simplifies the task for the Central Repository of consolidating/storing data, but it puts the burden on each CAT Reporter to accurately translate their current (
CAT provides such a flexible input format.
The costs for cloud hosting services are appropriate and have not been adversely affected by the original design and approaches of the Initial Plan Processor. FCAT's design costs are the result of the requirements of the Commission-approved CAT NMS Plan.
When FCAT took over as the Plan Processor from Thesys, it utilized certain aspects of the technical specifications created by Thesys in its design. However, FCAT has not maintained aspects of the original design that would not be appropriate for the CAT. FCAT revised and enhanced the original technical specifications of the CAT System to increase its efficiency and efficacy, and to ensure its compliance with the CAT NMS Plan. For example, the Initial Plan Processor's approach utilized many more fields than FCAT's approach, which relies on additional linkages. With the additional linkages, the CAT System takes on more of the CAT-related burdens than the Industry Members. Such an approach serves to facilitate consistency, uniformity and accuracy in reporting.
Moreover, FCAT did not utilize the system built by the Initial Plan Processor; it rebuilt the CAT System based on revised technical specifications. For example, the Initial Plan Processor used an on-premises processing approach which was not
Furthermore, given the very short timeframe to develop the CAT System and the prior optimization of certain query tools (
CAT LLC continues to support the selection of AWS as the cloud hosting services provider for CAT given the compliance, operational, and security requirements of the CAT. Independent analyses confirm these conclusions, noting that “AWS is an excellent choice for either strategic or tactical use and recommends considering AWS for almost all cloud IaaS or IaaS+PaaS scenarios.”
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In addition, the nature of the CAT, including the amount of data it must process and the size of its data footprint, does not allow for a multi-cloud solution as this would be cost prohibitive and greatly increase the security boundary and associated risk profile of the CAT. For example, a multi-cloud hosting option would increase costs, complexity, and risk for operations with regard to, for example, DevOps, production support, and networking. Similarly, with regard to security, a multi-cloud solution would increase risk, including with regard to the need for data transfers between cloud providers and the expansion of the security boundary. With regard to labor, a multi-cloud solution would lose economies of scale due to the need to support unique cloud requirements. Accordingly, the use of a single-cloud solution continues to provide advantages with regard to cost, complexity, and risk. Indeed, “[t]he best practice is to focus on a single primary strategic provider.”
Furthermore, if another cloud service provider were determined to be a better match for the CAT at some future date, switching cloud service providers would be a very significant, expensive and time-consuming effort. Such an effort would likely be a 10-to-15-year commitment at a substantial expense. Such a move would require the replication or redesign of the underlying cloud environments (
CAT LLC believes that the recovery of costs related to the development of the funding model is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
Funding the CAT is a critical aspect of Rule 613 and the CAT NMS Plan. Article XI of the CAT NMS Plan describes in detail the requirements for funding the CAT, and the Participants are required to comply with and enforce compliance with the funding requirements of the CAT NMS Plan, just as with other aspects of the Plan. Accordingly, the development and implementation of a funding model for the CAT is as much a part of the requirements of the CAT NMS Plan as the development and operation of the CAT System. CAT LLC sees no reason to distinguish the efforts to develop a funding model from, for example, efforts to develop the CAT System, in seeking to recover reasonable CAT costs.
Moreover, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . legal costs.”
In addition, the legal costs incurred for the assistance in developing the CAT Funding Model are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at negotiated rates for such services that reflect both the extent of the services and market rates. Moreover, the scope of the legal costs associated with the development of the funding model reflect the complexity of the task in satisfying the detailed requirements of the CAT NMS Plan, the standards of the Exchange Act, and the many perspectives of the different market constituents potentially affected by or interested in the funding model, including Industry Members, Participants and investors. The many and varied comments by market participants on CAT funding over the years demonstrate the complexity of the task.
CAT LLC believes that the recovery of legal costs related to the litigation with the SEC regarding the CAT NMS Plan is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that
The conditional exemptive relief in this Order allows for the implementation of alternative regulatory solutions that continue to advance the regulatory goals that Rule 613 and the CAT NMS Plan were intended to promote, while reducing the implementation and operational costs, burdens, and/or difficulties that would otherwise be incurred by the Participants and Industry Members that must fund the CAT.
CAT LLC believes it is reasonable and appropriate to incur costs to limit the need to incur even greater costs due to certain interpretations of the Plan.
In addition, the legal costs incurred during the litigation are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at market rates for such services. As such, the legal costs related to this litigation incurred during the period covered by Historical CAT Assessment 1A were reasonable.
Finally, Industry Members will directly benefit from the result of the litigation because it has addressed CAT NMS Plan requirements that would have imposed significantly greater costs on the CAT. Accordingly, it is reasonable and appropriate that the costs of such litigation be included in Historical CAT Costs 1.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017, which was the date by which Participants were required to begin reporting to the CAT, due to the delay in the commencement of reporting to the CAT. As discussed above, the Participants determined to exclude all CAT costs incurred from November 15, 2017 through November 15, 2018, which includes $37,852,083 in Thesys costs incurred from November 15, 2017 through November 15, 2018 (as well as other CAT costs during this period). The remaining Thesys costs incurred after November 15, 2018 are the $19,628,791 in capitalized developed technology costs for the period from November 16, 2018 through February 2019 incurred in the development of the CAT by the Initial Plan Processor, as well as a transition fee for the transition from the Initial Plan Processor to the successor Plan Processor. The Participants would remain responsible for 100% of these $19,628,791 in costs.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017. CAT LLC notes that the development and implementation of the CAT System, while unprecedented in scope and design, is like any other large and innovative technology project in that, inevitably, there were adjustments and refinements in the technical approach as the project developed, even with substantial planning efforts and oversight prior to the build. This is even more likely when the project faces a very tight implementation schedule, such as the one imposed by the Commission in Rule 613 and the CAT NMS Plan. However, an adjusted approach does not mean that the funds were not valid expenditures and should not be recovered.
The reasonableness of Thesys costs should be evaluated by the Commission as of the time they were incurred, not in hindsight. As detailed above, the Commission concluded in 2016 that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue.”
As noted in the CAT Funding Model Approval Order, the Commission recognized that “[t]he CAT NMS Plan contemplates that the costs of the CAT are to be allocated between the Participants and Industry Members.”
CAT LLC believes that the recovery of CAIS-related costs is appropriate, and that the amount and scope of such costs, as described above, are reasonable, and that the reasonableness of historical costs should be evaluated by the Commission as of the time they were incurred, not in hindsight.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable CAIS operating costs as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . CAIS operating fees.”
In addition, CAT LLC determined that the CAIS operating fees described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A.
During the period covered by Historical CAT Assessment 1A, the CAIS operating costs included costs related to the acceleration of the reporting of LTIDs earlier than originally contemplated during this period at the request of the SEC and in accordance with exemptive relief granted by the SEC.
• After FCAT developed the LTID Technical Specifications, the LTID Technical Specifications were published on January 31, 2020, with additional updates provided to the LTID Technical Specifications through April 2021.
• The LTID account information testing environment opened on August 24, 2020.
• The LTID account information reporting production environment opened on December 14, 2020.
• CAT Reporters were required to request their production readiness certification for account information related to LTIDs by the deadline of April 9, 2021.
• The LTID account information reporting for Phases 2a, 2b and 2c for Large Industry Members went live on April 26, 2021.
• The LTID account information reporting for Phases 2d for Large Industry Members went live on December 13, 2021.
• The LTID account information reporting for Phases 2a, 2b, 2c and 2d for Small Industry Members went live on April 26, 2021.
Throughout this project, FCAT and CAT LLC worked closely with the industry on LTID and CAIS reporting. Between December 2019 and December 2021, at least 57 checkpoint calls, webinars, and technical working group meetings with industry representatives were hosted to address issues and to educate CAT Reporters regarding LTID and CAIS reporting.
The LTID reporting project was successfully completed in a timely fashion, and the fees related to the project were reasonable. Accordingly, CAT LLC appropriately seeks to recover such costs via Historical CAT Assessment 1A.
During the period covered by Historical CAT Assessment 1A, FCAT began the development of the full CAIS Technical Specifications and the building of CAIS. The CAIS Technical Specifications were developed during this period as follows:
• Iterative drafts of the CAIS Technical Specifications were published on June 30, 2020, December 1, 2020, and January 1, 2021.
• The full, final CAIS Technical Specifications were published on January 29, 2021.
• Updated versions of the CAIS Technical Specifications were published throughout 2021.
As discussed above, FCAT and CAT LLC frequently engaged with the industry regarding the development of CAIS, hosting regular checkpoint calls, webinars, and technical working group meetings with industry representatives to address any issues, including addressing the interplay between Industry Members' existing customer systems and CAIS, and to educate CAT Reporters regarding LTID and CAIS reporting. Such engagement was critical to the CAIS development process as the CAIS project was unprecedented in terms of its content, scope and complexity.
During this period, FCAT also commenced the building of the CAIS system in accordance with the CAIS Technical Specifications during the period covered by Historical CAT Assessment 1A. The CAIS system was ready for industry testing shortly after the end of this period in January 2022.
The CAIS Technical Specifications and the CAIS system, as developed during this period, continue to be used. Industry Members have been required to report, and have continuously reported, required data to CAIS on a daily basis since November 7, 2022, consistent with interim reporting obligations. The CAIS system accepts and validates the CAIS data submitted by Industry Members and provides Industry Members with initial feedback on data errors. In light of the unprecedented nature of the CAIS system, certain changes to the system, such as changes related to error corrections and the CAIS regulatory portal, were necessary to finalize CAIS reporting. FCAT worked to address these remaining issues,
CAT LLC believes that the recovery of public relations costs is appropriate and that the amount and scope of such costs, as described above, are reasonable.
The Commission has long recognized that external public relations costs are reasonably associated with creating, implementing and maintaining the CAT. In the CAT NMS Plan Approval Order, the Commission estimated that the Participants had collectively spent approximately $2,400,000 in preparation of the CAT NMS Plan on external public relations, legal, and consulting costs, and estimated that the Participants would continue to incur external public relations costs associated with maintaining the CAT upon approval of the CAT NMS Plan.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for public relations services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . .
In addition, CAT LLC determined that the public relations costs described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The services performed by the public relations firms through 2021 were limited in scope to assist CAT LLC, which has no employees of its own, to be better positioned to understand and address CAT matters to the benefit of all market participants and to communicate on important CAT topics with the public. In addition, the costs for these services were appropriately limited. During the 10-year period covered by Historical CAT Assessment 1A, the average cost per year for these services was approximately $36,000.
CAT LLC believes that the recovery of legal costs related to the limitation of liability provision, including costs related to the proceedings before the SEC and costs related to the proposed amendment to the Consolidated Audit Trail Reporter Agreement and the Consolidated Audit Trail Reporting Agent Agreement (the “Reporting Agreements”) is appropriate and that the amount and scope of such costs as described above are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
Moreover, it is critical that CAT LLC, which has no employees of its own, have the ability to fund a legal defense in litigation and other legal proceedings against it. In response to CAT LLC requiring Industry Members to agree to the limitation of liability provision to submit data to the CAT, SIFMA filed an application for review of actions taken by CAT LLC and the Participants pursuant to Sections 19(d) and 19(f) of the Exchange Act. Contemporaneously with the filing of this proceeding, SIFMA moved for a stay of the requirement that Industry Members sign a Reporter Agreement, or in the alternative, asked the Commission to further delay the launch of CAT reporting on June 22, 2020. CAT LLC must have the resources to defend itself from litigious actions by others, like these.
Although a limitation of liability provision ultimately was not adopted as proposed, it was a reasonable provision to propose for the CAT Reporter Agreements, given that such provisions are in accordance with industry norms. Limitations of liability are ubiquitous within the securities industry and have long governed the economic relationships between self-regulatory organizations and the entities that they regulate. For example, U.S. securities exchanges have adopted rules to limit their liability for losses that Industry Members incur through their use of exchange facilities.
Furthermore, as described above, the specialized services were performed by experienced counsel at market rates for such services. Accordingly, the legal costs for the efforts related to the limitation of liability provision were reasonable.
CAT LLC believes that the recovery of consulting costs related to the Chair of the CAT Operating Committee is appropriate and that the amount and scope of such costs are reasonable.
As a preliminary matter, the selection of the Chair of the Operating Committee complies with the requirements of Section 4.2 of the CAT NMS Plan. The initial Chair that served during the period covered by Historical CAT Assessment 1A was designated by a Participant as the Participant's alternate voting member. Accordingly, the Chair is a representative of the Participants, as required by the CAT NMS Plan.
In addition, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for consulting as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . consulting . . . ” costs.
The Participants determined that the position of the Chair was a critical role for the implementation of the CAT, and an independent Chair would appropriately consider and address the views of each of the Participants. The Participants also determined that it was important to have a Chair with a strong background regarding issues related to the regulatory obligations of self-regulatory organizations, including their obligations under national market system plans. The compensation paid to the Chair is appropriate for a person with such background and skills. The average annual amount paid to the Chair from 2017 through the end of FAM 3 was $292,733.30. Separate from the Chair, CAT LLC relies upon a Leadership Team of representatives of the SROs to oversee the day-to-day implementation of the CAT NMS Plan. CAT LLC does not compensate any member of the Leadership Team.
CAT LLC understands that there are three types of reconciliation processes related to the invoices:
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As discussed further below, CAT LLC only considers the first type of process to be a “reconciliation” and the only type of process that is required under the CAT NMS Plan. CAT LLC provides the means to reconcile the CAT invoice amount to the underlying trades provided by CAT.
The CAT NMS Plan does not require CAT LLC to facilitate the second type of process: matching underlying trades for a CAT invoice with a firm's internal books and records. CAT LLC has access only to the underlying trades provided by CAT; it does not have access to a firm's internal books and records. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
The CAT NMS Plan also does not require CAT LLC to provide the ability to identify the order originator for the underlying trades for the CAT invoices. Accordingly, the billing guidance and processes do not provide CAT Reporters with the ability to identify the order originator for the underlying trades provided by CAT with CAT invoices. CAT LLC has been working closely with CAT Reporters to explain its billing approach and to address any outstanding billing questions. But, it should not be lost that CAT LLC provides information sufficient to allow CAT Reporters to reconcile CAT invoice amounts with the underlying trades provided by CAT LLC.
The CAT NMS Plan does not require CAT LLC to facilitate the matching of underlying trades for a CAT invoice with a firm's internal books and records, which may consist of trading data from various sources external to CAT. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
In this regard, it is important to recognize that CAT LLC has developed a billing approach that greatly improves upon existing billing practices for similar regulatory fees (
To facilitate the introduction of CAT fees, CAT LLC has worked with FCAT to develop an approach to CAT billing that is consistent with existing billing constructs used with regard to Section 31-related sales values fees, subject to certain enhancements. Under this billing approach, FCAT is providing additional linkage elements, not necessarily provided in the Section 31-sales value fee context, to facilitate CAT Reporters' ability to match the underlying trades provided by CAT with their internal books and records and to reduce the complexity of that process. Specifically, FCAT is providing various key elements of the trade itself, such as the tradeID and branch sequence,
With the Additional Trade Details, CAT LLC and FCAT believe that the overwhelming majority of underlying trades provided by CAT bills can be matched with a CAT Reporter's internal books and records. CAT LLC recognizes that there may be certain cases in which such matching is more difficult given various firm-specific considerations, but believes that such instances are significantly more limited than with regard to the SRO fees charged in relation to Section 31.
Similar to other regulatory fees, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Accordingly, Historical CAT Assessment 1A does not address the process by which any CAT Reporters may pass through the fee to their customers. Likewise, the CAT billing approach provided by the Plan Processor is designed to address the needs of CAT Reporters with regard to the reconciliation of CAT invoices with the underlying trades provided by CAT LLC with the invoices; they are not designed to address issues related to any pass-through fees. Accordingly, facilitating CAT Reporters' ability to pass through fees to their clients is outside the scope of this fee filing. Nevertheless, as described below, CAT LLC and the Plan Processor have expended significant efforts to provide
In its approval of the CAT Funding Model, the Commission approved charging CAT fees to the CAT Executing Broker, rather than the originating broker. This fee filing must comply with the requirements of the CAT Funding Model, and, therefore, charges the Historical CAT Assessment 1A to CAT Executing Brokers.
Moreover, charging originating brokers would introduce significant complexity to the billing process from the CAT's perspective, and would increase the costs of implementing CAT fees. Charging the CAT Executing Broker is simple and straightforward, and leverages a one-to-one relationship between billable events (trades) and billable parties, similar to other transaction-based fees. In contrast, for a single trade event, there may be many originating brokers, and each trade must be broken down on a pro-rata basis, to account for one or more layers of aggregation, disaggregation, and representation of the underlying orders. While CAT is indeed designed to capture and unwind complex aggregation scenarios, the data and linkages are structured to facilitate regulatory use, and not a billing mechanism that assesses fees on a distinct set of executed trades; it is not simply a matter of using existing CAT linkages. Furthermore, charging originating brokers would implicate issues related to lifecycle linkage rates, and issues related to corrections, cancellations and allocations, while charging CAT Executing Brokers would avoid such issues.
As noted, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT Fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Nevertheless, the Additional Trade Details provided with regard to the underlying trades on CAT invoices may assist with this process. Like with Section 31-related sales value fees, however, it is not always possible to trace every fee on a transaction back to the originating party. Industry Members have faced these issues under Section 31-related sales values fees for many years.
CAT LLC has worked with FCAT to provide significant technical assistance to Industry Members to allow the Industry Members to understand how Historical CAT Assessments will be implemented and billed, including webinars, CAT alerts, mock invoices, and responses to questions posed to the FCAT Help Desk.
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By providing such detailed and sustained assistance to Industry Members regarding CAT fees and billing, CAT LLC has successfully addressed questions raised by Industry Members regarding the CAT fees and billing processes.
In keeping with past practice, CAT LLC provided notice of the proposed Historical CAT Assessment 1A via CAT Fee Alert on April 1, 2026,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the Historical CAT Assessment 1A fees to be collected are directly associated with the 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 Exchange has already incurred such development and implementation costs and the proposed Historical CAT Assessment 1A fees, therefore, would allow the Exchange to collect certain of such costs in a fair and reasonable manner from Industry Members, as contemplated by the CAT NMS Plan.
The proposed Historical CAT Assessment 1A fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining Historical CAT Assessments as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Historical Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for the Historical CAT Assessment, is reasonable and satisfies the Exchange Act.
The formula for calculating a Historical Fee Rate requires the amount of Historical CAT Costs to be recovered. Specifically, Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Historical CAT Costs 1 for each of these categories of costs above.
Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the Historical CAT Costs are reasonable and appropriate.” As discussed below, the Exchange believes that the amounts set forth in this filing for each of these cost categories is “reasonable and appropriate.” Each of the costs included in Historical CAT Costs 1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover costs related to cloud hosting services as a part of Historical CAT Assessments.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and an amendment to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to CAIS operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to change request fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to capitalized developed technology costs as a part of Historical CAT Assessments.
These costs involve the activity of both the Initial Plan Processor and FCAT, as the successor Plan Processor.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to legal fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover consulting costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover insurance costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover professional and administration costs as a part of Historical CAT Assessments.
CAT LLC determined to hire a financial advisory firm, Anchin, to assist with financial matters for the CAT. CAT LLC interviewed Anchin as well as other potential financial advisory firms to assist with the CAT project, considering a variety of factors in its analysis, including the firm's relevant expertise and fees.
CAT LLC also determined to engage an independent accounting firm, Grant Thornton, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC interviewed this firm as well as another potential accounting firm to audit CAT LLC's financial statements, considering a variety of factors in its analysis, including the relevant expertise and fees of each of the firms. CAT LLC determined that Grant Thornton was well-qualified for the role given the balance of these considerations.
The professional and administrative costs also include costs related to the receipt of certain market data from Exegy. After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy. Exegy provided the data elements required by the CAT NMS Plan, and the fees were reasonable and in line with market rates for the market data received.
The professional and administrative costs also include costs related to a third party security assessment of the CAT performed by RSM. The assessment was designed to verify and validate the effective design, implementation and operation of the controls specified by NIST Special Publication 800-53, Revision 4 and related standards and guidelines. Such a security assessment is in line with industry practice and important given the data included in the CAT. CAT LLC determined to engage RSM to perform the security assessment, after considering a variety of factors in its analysis, including the firm's relevant expertise and fees. The fees were reasonable and in line with market rates for such an assessment.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover public relations costs as a part of Historical CAT Assessments.
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 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 will count executed equivalent shares for CAT billing purposes.
CAT LLC has determined to establish a Historical Recovery Period of 24 months for Historical CAT Assessment 1A and that such length is reasonable. CAT LLC determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable fee rate for Historical CAT Assessment 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans notes to the Participants in a timely fashion. CAT LLC determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
As noted in the Plan amendment for the CAT Funding Model, as a practical matter, the fee filing for a Historical CAT Assessment would provide the exact fee per executed equivalent share to be paid for each Historical CAT Assessment, and describe the relevant number of decimal places for the fee rate.
The Exchange believes that imposing Historical CAT Assessment 1A with a fee rate of $0.000002 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the remaining Historical CAT Costs 1 and such costs would be spread out over an appropriate recovery period, as discussed above. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, Historical CAT Assessment 1A is significantly lower than fees assessed pursuant to Section 31 (
Historical CAT Assessment 1A 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 Historical CAT Assessments as well as the Industry Members to be charged the Historical CAT Assessments.
Historical CAT Assessment 1A provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. For example, as described above, the calculation of Historical CAT Assessment 1A complies with the formula set forth in Section 11.3(b) of the CAT NMS Plan. In addition, Historical CAT Assessment 1A would be charged to CEBBs and CEBSs in accordance with Section 11.3(b) of the CAT NMS Plan. Furthermore, the Participants would continue to remain responsible for their designated share of Past CAT Costs through the cancellation of loans made by the Participants to CAT LLC.
In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A—Historical CAT Costs 1 (including Excluded Costs) and the exclusion of costs previously invoiced via Historical CAT Assessment 1, the count for the executed equivalent share volume for the prior 12 months, the length of the Historical Recovery Period, and the projected executed equivalent share volume for the Historical Recovery Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for Historical CAT Assessment 1A 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.
Historical CAT Assessment 1A is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of Historical CAT Assessments 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. Historical CAT Assessment 1A complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A and the resulting fee rate for Historical CAT Assessment 1A is reasonable. Therefore, Historical CAT Assessment 1A does not impose an unfairly discriminatory fee on Industry Members.
Finally, 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 specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce Historical CAT Assessment 1A on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A is reasonable and the resulting fee rate for Historical CAT Assessment 1A calculated in accordance with the CAT Funding Model is reasonable. Therefore, Historical CAT Assessment 1A would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to establish fees for Industry Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“Prospective CAT Costs” fees).
Under the CAT Funding Model, “[t]he Operating Committee will establish one or more fees (each a `Historical CAT Assessment') to be payable by Industry Members with regard to CAT costs previously paid by the Participants (`Past CAT Costs').”
Each Historical CAT Assessment to be paid by CEBBs and CEBSs is designed to contribute toward the recovery of two-thirds of the Historical CAT Costs. Because the Participants previously have paid Past CAT Costs via loans to the Company, the Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs will be paid by the cancellation of loans made by the Participants to the Company on a pro rata basis based on the outstanding loan amounts due under the loans, instead of through the payment of a CAT fee.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) Historical CAT Assessment 1A to recover certain historical CAT costs incurred prior to January 1, 2022, 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.' ”
The Exchange, along with the other Participants in the CAT, previously filed a fee filing to implement Historical CAT Assessment 1.
Historical CAT Assessment 1A will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange.
In addition, the following fields of the Participant Technical Specifications would indicate the CAT Executing Brokers for the transactions executed otherwise than on an exchange.
The Operating Committee determined the fee rate to be used in calculating Historical CAT Assessment 1A based on the Historical CAT Costs for Historical CAT Assessment 1A and the projected total executed share volume of all transactions in Eligible Securities for the Historical Recovery Period for Historical CAT Assessment 1A (“Historical Recovery Period 1A”), as discussed in detail below. Based on this calculation, the Operating Committee has determined that the fee rate for Historical CAT Assessment 1A would be $0.000002, as discussed in detail below.
Under the CAT NMS Plan, for purposes of calculating each Historical CAT Assessment, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he Operating Committee will reasonably determine the Historical CAT Costs sought to be recovered by each Historical CAT Assessment, where the Historical CAT Costs will be Past CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT Costs by the Operating Committee. Each Historical CAT Assessment will seek to recover from CAT Executing Brokers two-thirds of Historical CAT Costs incurred during the period covered by the Historical CAT Assessment.”
The following describes in detail Historical CAT Costs 1 with regard to four separate historical time periods as well as Past CAT Costs excluded from Historical CAT Costs 1 (“Excluded Costs”). The following cost details are provided in accordance with the requirement in the CAT NMS Plan to provide in the fee filing “a brief description of the amount and type of Historical CAT Costs, 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.”
Historical CAT Costs 1 would include costs incurred by CAT prior to June 22, 2020 (“Pre-FAM Period”) and already funded by the Participants, excluding Excluded Costs (described further below). Historical CAT Costs 1 would include costs for the Pre-FAM Period of $124,290,730. The Participants would remain responsible for one-third of this cost (which they have previously paid) ($41,430,243.33), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($41,430,243.33) and CEBSs paying one-third ($41,430,243.33). These costs do not include Excluded Costs, as discussed further below. The following table breaks down Historical CAT Costs 1 for the Pre-FAM Period into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The
The $10,268,840 in technology costs for cloud hosting services represent costs incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the Pre-FAM Period.
As part of its proposal for acting as the successor Plan Processor for the CAT, FCAT selected AWS as a subcontractor to provide cloud hosting services. In 2019, after reviewing the capabilities of other cloud services providers, FCAT determined that AWS was the only cloud services provider at that time sufficiently mature and capable of providing the full suite of necessary cloud services for the CAT, including, for example, the security, resiliency and complexity necessary for the CAT computing requirements. The use of cloud hosting services is standard for this type of high-volume data activity and reasonable and necessary for implementation of the CAT, particularly given the substantial data volumes associated with the CAT.
Under the Plan Processor Agreement with FCAT, 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 cost 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. The fees for cloud hosting services during the Pre-FAM Period were paid to FCAT by CAT NMS,
AWS was engaged by FCAT to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools). AWS also was engaged to provide various environments for CAT, such as development, performance testing, test and production environments.
The cost for AWS services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to the CAT. During the Pre-FAM Period from the engagement of AWS in February 2019 through June 2020, AWS provided 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,”
The $21,085,485 in technology costs related to operating fees represent costs incurred with regard to activities of FCAT as the Plan Processor. 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 (
FCAT was selected to assume the role of the successor Plan Processor. Prior to this selection, the Participants engaged in discussions with two prior Bidders
The Selection Subcommittee considered factors including, but not limited to, the following, in recommending FINRA to the Operating Committee as the successor Plan Processor:
a. FINRA's specialized technical expertise and capabilities in the area of broker-dealer technology;
b. The need to appoint a successor Plan Processor with specialized expertise to develop, implement, and maintain the CAT System in accordance with the CAT NMS Plan and SEC Rule 613;
c. FINRA's detailed proposal in response to CATLLC's recent inquiries; and
d. FINRA's data query and analytics systems demonstration to the Participants.
Based on these and other factors, the Selection Subcommittee determined that FINRA was the most appropriate
On February 26, 2019, the Operating Committee (with FINRA recusing itself) voted to select FINRA as the successor Plan Processor
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. The operating fees during the Pre-FAM Period were paid to FCAT by CAT LLC.
From March 29, 2019 (the commencement of the Plan Processor Agreement with FCAT) through June 22, 2020 (the end of the Pre-FAM Period), the Plan Processor's activities with respect to the CAT included the following:
• Commenced user acceptance testing with market data provided by Exegy Incorporated (“Exegy”), a market data provider;
• Published Technical Specifications and related reporting scenarios documents for Phase 2a, 2b and 2c reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated testing for Phase 2a and 2b reporting for Industry Members;
• Began developing Technical Specifications and related reporting scenarios documents for Phase 2d reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published Central Repository Access Technical Specifications, and provided regulator access to test data from Industry Members;
• Facilitated Participant exchanges that support options market makers sending Quote Sent Time to the CAT;
• Facilitated the introduction of OPRA and Options NBBO Other Data to CAT;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing requirements under Regulation SCI;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants, the SEC and its staff;
• Operated the FINRA CAT Helpdesk, which is the primary source for answers to questions about CAT, including questions regarding: clock synchronization, firm reporting responsibilities, interpretive questions, technical specifications for reporting to CAT and more;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content;
• Provided 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.
The $2,072,908 in technology costs related to CAIS operating fees represent the fees paid for FCAT's subcontractor charged with the development and operation of CAT's Customer and Account Information System (“CAIS”). 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.
During the Pre-FAM Period, the CAIS-related services were provided by the Plan Processor through the Plan Processor's subcontractor, Kingland Systems Incorporation (“Kingland”). Kingland had experience operating in the securities regulatory technology space, and as a part of its proposal for acting as the Plan Processor for the CAT, FCAT selected Kingland as a subcontractor to provide certain CAIS-related services.
Under the Plan Processor Agreement with FCAT, CAT LLC was required to pay to the Plan Processor the fees incurred by FCAT for CAIS-related services provided by FCAT through Kingland on a monthly basis. FCAT negotiated the fees for Kingland'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. The fees for CAIS-related services during the Pre-FAM Period were paid by CAT LLC to FCAT. FCAT, in turn, paid Kingland.
During the Pre-FAM Period, Kingland began development of the CAIS Technical Specifications and the building of CAIS. In addition, Kingland also worked on the build related to the CCID Alternative, an alternative approach to customer information that was not included in the CAT NMS Plan as originally adopted.
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 change 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 costs were paid by CAT LLC to FCAT.
This category of costs includes capitalizable application development costs incurred in the development of the CAT. The capitalized developed technology costs for the Pre-FAM Period of $51,847,150 relate to technology provided by the Initial Plan Processor and the successor Plan Processor.
On January 17, 2017, the Selection Committee of the CAT NMS Plan selected the Initial Plan Processor, Thesys Technologies, LLC, for the CAT NMS Plan pursuant to Article V of the CAT NMS Plan.
From January 17, 2017 through January 30, 2019, the time in which Thesys CAT was engaged for the CAT, but excluding the period from November 15, 2017 through January 30, 2019, the Initial Plan Processor engaged in various activities with respect to the CAT, including preparing iterative drafts of Participant Technical Specifications, Industry Member Technical Specifications and the Central Repository Access Technical Specifications. In addition, Thesys CAT also developed CAT technology, addressed compliance items, including drafting CAT policies and procedures, addressing Regulation SCI requirements, establishing a CAT Compliance Officer and a Chief Information Security Officer, addressed security-related matters for the CAT, and worked towards the initiation of Participant reporting per the Participant Technical Specifications.
The legal costs of $19,674,463 represent the fees paid for legal services provided by two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), during the Pre-FAM Period. The legal costs exclude those costs incurred from November 15, 2017 through November 15, 2018.
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. WilmerHale's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading law firms for similar work.
The legal costs for WilmerHale during the Pre-FAM Period included costs incurred from 2013 until June 22, 2020 to address corporate and regulatory legal matters related to the CAT. The legal fees for this law firm during the period from February 2013 until the formation of the CAT NMS, LLC on November 15, 2016 were paid directly by the exchanges and FINRA to WilmerHale. After the formation of CAT NMS LLC, the legal fees were paid by CAT LLC to WilmerHale.
After WilmerHale was engaged in 2013 through the end of the Pre-FAM Period on June 22, 2020 (excluding the legal costs from November 15, 2017 through November 15, 2018), WilmerHale provided legal assistance to the CAT on a variety of matters, including with regard to the following:
• Analyzed various legal matters associated with the Selection Plan, and drafted an amendment to the Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the Development Advisory Group (“DAG”);
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan and related filings;
• Negotiated and drafted the plan processor agreements with the Initial Plan Processor and the successor Plan Processor;
• Provided assistance with compliance with Regulation SCI;
• Assisted with clock synchronization study;
• Provided assistance with respect to the establishment of CAT security;
• Drafted exemptive requests from CAT NMS Plan requirements, including with regard to options market maker quotes, Customer IDs, CAT Reporter IDs, linking allocations to executions, CAT reporting timeline, FDIDs, customer and account information, timestamp granularity, small industry members, data facility reporting and linkage, allocation reports, SRO-assigned market participant identifiers and cancelled trade indicators, thereby seeking to implement changes that would be cost effective and benefit Industry Members and Participants;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided advice regarding CAT policies and procedures;
• Analyzed the SEC's amendment of the CAT NMS Plan regarding financial accountability;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues; and
• Assisted with third-party vendor agreements.
The consulting costs of $17,013,414 represent the fees paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the Pre-FAM Period, from October 2012 until June 22, 2020. 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.
To help facilitate project management given the unprecedented complexity and scope of the CAT project, the Participants determined it was necessary to engage a consulting firm to assist with the CAT project in 2012, following the adoption of Rule 613. A variety of factors were considered in the analysis of prospective consulting firms, including (1) the firm's qualifications, resources, and expertise; (2) the firm's relevant experience and understanding of the regulatory issues raised by the CAT and in coordinating matters of similar scope; (3) the composition of the consulting team; and (4) professional fees. Following a series of interviews, the exchanges and FINRA as a consortium determined that Deloitte was well qualified given the balance of these considerations and engaged Deloitte on October 1, 2012.
Deloitte's fee rates are negotiated on an annual basis and are in line with market rates for this type of specialized consulting work. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. Deloitte's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading consulting firms for similar work.
The consulting costs for CAT during the period from 2012 until the formation of the CAT NMS, LLC were paid directly by the Participants to Deloitte. After the formation of CAT NMS, LLC, the consulting fees were paid by CAT LLC to Deloitte. CAT LLC reviewed the consulting fees each month and approved the invoices.
After Deloitte was hired in 2012 through the end of the Pre-FAM Period on June 22, 2020 (excluding the consulting costs from November 15, 2017 through November 15, 2018), Deloitte provided a variety of consulting services, including the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participant's independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Assisted with cost and funding-related activities for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA
• Provided 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;
• Assisted with industry outreach and communications regarding the CAT, including assistance with industry outreach events, the development of the CAT website, frequently asked questions, and coordinating with the CAT LLC's public relations firm;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress;
• Coordinated efforts regarding the selection of the successor Plan Processor;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor, including support for the Operating Committee and successor Plan Processor for the new role; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $880,419 represent the cost incurred for insurance for CAT during the Pre-FAM Period. Commencing in 2020, CAT LLC performed an evaluation of various potential alternatives for CAT insurance policies, which included engaging in discussions with different insurance companies and conducting cost comparisons of various alternative approaches to insurance. Based on an analysis of a variety of factors, including coverage and premiums, CAT LLC determined to purchase cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance from USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
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.
After Anchin was hired in April 2018 through the end of the Pre-FAM Period on June 22, 2020 (excluding the period from April 2018 through November 15, 2018), Anchin provided a variety of services, including the following:
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial reporting matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase
Upon the termination of the contract between CAT LLC and Exegy, FCAT entered into a contract with Exegy to purchase the required market data from Exegy in July 2019. All costs under the contract were treated as a direct pass through cost to CAT LLC. Therefore, the fees for the market data were paid by CAT LLC to FCAT, who, in turn, paid Exegy for the market data.
The public relations costs of $224,669 represent the fees paid to public relations firms during the Pre-FAM Period for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC was better positioned to understand and address CAT matters to the benefit of all market participants. Specifically, the public relations firms provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
The services performed by each of the public relations firms were comparable. The fees for such services were reasonable and in line with market rates. Only one public relations firm was engaged at a time; the three firms were engaged sequentially as the primary public relations contact moved among the three firms during this time period.
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 1 of the Financial Accountability Milestones (“FAM Period 1”),
By the
CAT LLC continued to utilize AWS in FAM Period 1 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 1 Period. Accordingly, the $2,642,122 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 1. The fee arrangement for AWS described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. Moreover, CAT LLC continued to believe that AWS's maturity in the cloud services space as well as the significant cost and time necessary to move the CAT to a different cloud services provider supported the continued engagement of AWS.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 1 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, reference data and other types of Other Data. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 1.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 1. Accordingly, the $1,099,680 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 1. The fee arrangement for FCAT described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, FCAT's activities with respect to the CAT included the following:
• Published iterative drafts of draft Technical Specifications for Phase 2d, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published iterative drafts of CAIS Technical Specifications, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated Industry Member reporting of Quote Sent Time on Options Market Maker quotes;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 1. Accordingly, the $254,998 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 1. The fee arrangement for Kingland described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to CCID Alternative, as well as the acceleration of the reporting of LTIDs.
CAT LLC did not incur costs related to change requests during FAM Period 1.
Capitalized developed technology costs for FAM Period 1 of $1,684,870 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include: (1) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including separate production and industry test entitlements, and reprocessing of exchange event timestamps; (2) implementation fees; and (3) license fees.
The legal costs of $481,687 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 1.
• Assisted with the development of the CAT funding model and drafted related amendments and fee filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, verbal activity, options market maker quote sent time, TRF linkages, and allocations;
• Provided interpretations related to CAT NMS Plan requirements, including the Financial Accountability Milestone amendment;
• Assisted with compliance with Regulation SCI;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the drafting of the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Assisted with communications and presentations for the industry regarding CAIS;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding CAT technical specifications;
• Assisted with third-party vendor agreements; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $137,209 represent the fees paid to Deloitte as project manager during FAM Period 1. CAT LLC continued to employ Deloitte during FAM Period 1 based on, among other things, their expertise and cumulative experience with the CAT. The fee rates for Deloitte during FAM Period 1 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 1 were paid by CAT LLC to the consulting firm. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 1, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
Although insurance was in effect during FAM Period 1, CAT LLC did not incur costs related to insurance during FAM Period 1.
• Maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups; and
• Prepared monthly and quarterly financial statements.
The public relations costs of $7,700 represent the fees paid to Peak Strategies during FAM Period 1. CAT LLC continued to employ Peak Strategies during FAM Period 1 based on, among other things, their expertise and history with the project. The fee rates for this firm were reasonable and in line with market rates for these types of services. The fees for these services during FAM Period 1 were paid by CAT LLC to Peak Strategies. During FAM Period 1, Peak Strategies continued to provide professional communications services to CAT LLC, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT LLC and already funded by Participants during Period 2 of the Financial Accountability Milestones (“FAM Period 2”),
By the completion
(a) Industry Member reporting (excluding reporting by Small Industry Members that are not OATS reporters) for equities transactions, excluding Customer Account Information, CustomerID, and Customer Identifying Information, is developed, tested, and implemented at a 5% Error Rate or less and with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, and trade reporting facilities linkage to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system, excluding linkage of representative orders, from order origination through order execution or order cancellation; and (b) the query tool functionality
CAT LLC completed the requirements of FAM Period 2 by December 31, 2020. The following describes the costs for each of the categories for FAM Period 2.
CAT LLC continued to utilize AWS in FAM Period 2 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 2 Period. Accordingly, the $20,709,212 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 2. The fee arrangement for AWS described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 2 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, and Other Data, including reference data. In addition, Industry Members began reporting LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 2.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 2. Accordingly, the $9,108,700 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 2. The fee arrangement for FCAT described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, FCAT's activities with respect to the CAT included publishing the Technical Specifications for Phase 2d and overseeing the reporting of firm to firm and intrafirm linkages by Industry Members. In addition, FCAT also continued to engage in the following activities during FAM Period 2:
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the development and implementation of the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 2. Accordingly, the $1,590,298 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 2. The fee arrangement for Kingland described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs.
During FAM Period 2, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 2, CAT incurred costs of $51,823 related to a change request regarding the addition of functionality for exchange Participants to report rejected messages to the CAT.
Capitalized developed technology costs for FAM Period 2 of $6,761,094 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to separate production and industry test entitlements, market maker reference data, and back-processing of exchange exception logic; (3) implementation fees; and (4) license fees.
The legal costs of $2,766,644 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 2.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, allocations, exchange activity, OTQT, initial data validation, error corrections and recordkeeping;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittees, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6 of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Assisted with third-party vendor agreements (
• Assisted with change requests; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $532,146 represent the fees paid to Deloitte as project manager during FAM Period 2. CAT LLC continued to employ Deloitte during FAM Period 2 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 2 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 2 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 2, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $976,098 represent the fees paid for insurance during FAM Period 2. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $438,523 represent the fees paid to Anchin and Grant Thornton for financial services provided during FAM Period 2.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from the Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audit by an independent auditor; and
• Reviewed historical costs from inception.
The public relations costs of $41,940 represent the fees paid to Peak Strategies during FAM Period 2. CAT LLC continued to employ Peak Strategies during FAM Period 2 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 2 were paid by CAT LLC to Peak Strategies. During FAM Period 2, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 3 of the Financial Accountability Milestones (“FAM Period 3”),
By the
(a) reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders; (b) Industry Member reporting for equities transactions and simple electronic options transactions, excluding Customer Account Information, Customer-ID, and Customer Identifying Information, with
CAT LLC completed the requirements of FAM Period 3 by December 31, 2021. The following describes the costs for each of the categories for FAM Period 3.
CAT LLC continued to utilize AWS in FAM Period 3 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 3 Period. Accordingly, the $94,574,759 in technology costs for cloud hosting services represents costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 3. The fee arrangement for AWS described above for the earlier periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During FAM Period 3, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a, Phase 2b, Phase 2c and Phase 2d Industry Member Data (including certain linkages), SIP Data, Other Data, including reference data, and LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 3.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 3. Accordingly, the $23,106,091 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 3. The fee arrangement for FCAT described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, FCAT's activities with respect to the CAT included the following:
• Facilitated Phase 2c and Phase 2d testing for Industry Members;
• Oversaw creation of linkages of the lifecycle of order events based on the received data through Phase 2d;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement with FCAT discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 3. Accordingly, the $5,562,383 in technology costs for CAIS operating fees represents costs incurred for services provided by Kingland during FAM Period 3. The fee arrangement for Kingland described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs. The full CAIS Technical Specifications were published during FAM Period 3.
During FAM Period 3, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 3, CAT incurred costs of $396,169 related to change requests, including the following: (1) the addition of functionality for exchange Participants to report rejected messages to the CAT; (2) the migration of MIRS query engine to AWS to reduce operational costs and increase resiliency; and (3) updating the Participant Technical Specifications to allow for two-sided Participant option quote reporting.
Capitalized developed technology costs for FAM Period 3 of $10,763,372 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor, including the transition from equity data received by FINRA pursuant to various regulatory services agreements between FINRA and Participant exchanges to the equity CAT Data, and the completion of the Industry Member Phase 2d options manual and complex orders go-live requirements; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to off-exchange volume concentration, Participant 24-hour trading and an external metastore; (3) implementation fees; and (4) license fees.
The legal costs of $6,333,248 represent the fees paid for legal services provided by three law firms, WilmerHale, Pillsbury and Covington & Burling LLP (“Covington”) during FAM Period 3.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements, including, for example, verbal activity regarding Phase 2c cutover, error reports, error corrections, Phase 2d Reporting, unique Order-ID on internal route events, reporting addresses, recordkeeping, and unique CCID for foreign customers;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs, CAIS requirements, ADF, and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6(c) of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Provided assistance with change requests;
• Provided guidance and regulatory support for litigation regarding the response to the SEC's exemptive orders;
• Assisted with communications with the industry, including CAT Alerts and presentations;
• Provided guidance regarding the confidentiality of CAT Data, including third-party information requests;
• Assisted with cost management analysis and proposals; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
After Covington was hired in 2021 through the end of 2021, the firm provided legal assistance regarding the litigation with the SEC regarding the 2020 Orders. These services included researching, drafting, and filing motions to stay the 2020 orders and related materials in proceedings before the SEC, as well as researching, drafting, and filing petitions for judicial review of the 2020 Orders in proceedings before the U.S. Court of Appeals for the D.C. Circuit. Covington oversaw ongoing litigation proceedings on these matters, and also supported WilmerHale with respect to settlement negotiations with the SEC staff regarding the 2020 Orders.
In addition to these services, CAT LLC engaged Covington in November 2021 to provide assistance with respect to the SEC's disapproval of CAT NMS Plan amendments concerning a proposed limitation on liability in the event of a data breach or similar event. Covington provided advice concerning CAT's response to the SEC's disapproval order. This work accounted for a minority of Covington's fees in 2021.
The consulting costs of $1,408,209 represent the fees paid to Deloitte as project manager during FAM Period 3. CAT LLC continued to employ Deloitte during FAM Period 3 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 3 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 3 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 3, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $1,582,714 represent the fees paid for insurance during FAM Period 3. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $595,923 represent the fees paid to Anchin and Grant Thornton for financial services during FAM Period 3.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Faciliated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $92,400 represent the fees paid to Peak Strategies during FAM Period 3. CAT LLC continued to employ Peak Strategies during FAM Period 3 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 3 were paid by CAT LLC to Peak Strategies. During FAM Period 3, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would not include three categories of CAT costs (“Excluded Costs”): (1) $14,749,362 of costs related to the termination of the relationship with the Initial Plan Processor; (2) $48,874,937, which are all CAT costs incurred from November 15, 2017 through November 15, 2018; and (3) $19,628,791, which are costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when the relationship with the Initial Plan Processor was concluded. The Participants would remain responsible for 100% of these costs, which total $83,253,090. CAT LLC determined to exclude these Excluded Costs from Historical CAT Costs 1 because these costs relate to the delay in the start of reporting to the CAT and the conclusion of the relationship with the Initial Plan Processor.
First, Historical CAT Costs 1 would not include $14,749,362 of costs related to the conclusion of the relationship with the Initial Plan Processor. Such costs include costs related to the American Arbitration Association, the legal assistance of Pillsbury with regard to the arbitration with the Initial Plan Processor, and the settlement costs related to the arbitration with the Initial Plan Processor. The Participants would remain responsible for 100% of these $14,749,362 in costs.
Second, Historical CAT Costs 1 would not include all CAT costs incurred from November 15, 2017 through November 15, 2018. CAT LLC determined to exclude all costs during this one-year period of $48,874,937 from fees charged to Industry Members due to the delay in the start of reporting to the CAT. The Participants would remain responsible for 100% of these $48,874,937 in costs. The following table breaks down these costs into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The following provides additional detail regarding the Excluded Costs.
(a) Technology Costs—Cloud Hosting Services, Operating Fees, CAIS Operating Fees and Change Request Fees CAT LLC did not incur technology costs related to the categories of cloud hosting services, operating fees, CAIS operating fees or change requests during the period from November 15, 2017 through November 15, 2018.
Capitalized developed technology costs for the period from November 15, 2017 through November 15, 2018 include capitalizable application development costs of $37,852,083 incurred in the development of the CAT by the Initial Plan Processor. Such costs include development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Initial Plan Processor. Such costs include costs related to Industry Member technical specifications for orders and transactions, the system security plan, testing and production for Participant CAT reporting, third-party security assessment and response, query portal, onboarding of the Chief Information Security Officer, and ingestion of FINRA TRF data and FINRA data related to halts and corporate actions.
The legal costs of $6,143,278 represent the fees paid to WilmerHale for legal services from November 15, 2017 through November 15, 2018. During this period, WilmerHale provided legal assistance to the CAT, including with regard to the following:
• Provided legal support for the governance of the CAT, including governance support for the Operating Committee, Advisory Committee, Compliance Subcommittee, and CAT working groups;
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan;
• Provided assistance related to CAT security;
• Drafted exemptive requests, including requests related to PII;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided advice with regard to regulator access to the CAT;
• Assisted with the Plan Processor transition;
• Provided assistance regarding communications with the industry regarding the CAT;
• Provided advice regarding Customer Account Information and PII;
• Provided support for litigation related to SEC exemptive orders; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretative and implementation issues.
The consulting costs of $4,452,106 represent the fees paid to Deloitte for their role as project manager for the CAT from November 15, 2017 through November 15, 2018. During this period, Deloitte engaged in the following activities with respect to the CAT:
• Implemented program operations for the CAT project;
• Provided governance support to the Operating Committee, including support for Subcommittees and working groups of the Operating Committee (
• Assisted with cost and funding issues for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress.
CAT LLC did not incur costs related to insurance during the period from November 15, 2017 through November 15, 2018.
The professional and administration costs of $340,145 represent the fees paid to Anchin, Exegy and RSM from November 15, 2017 through November 15, 2018.
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $87,325 represent the fees paid to Sloane from November 15, 2017 through November 15, 2018. From the commencement of its engagment in March 2018 through November 15, 2018, Sloane provided professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, Sloane provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Third, Historical CAT Costs 1 would not include the $19,628,791 in costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when CAT LLC's relationship with the Initial Plan Processor concluded. CAT LLC determined that Historical CAT Costs 1 would not include any fees paid to the Initial Plan Processor after November 15, 2017,
CEBBs and CEBSs collectively have been invoiced for $173,075,024 of the $212,039,879.34 of Historical CAT Costs 1 via Historical CAT Assessment 1, where $86,537,512 was invoiced collectively to CEBBs and $86,537,512 was invoiced collectively to CEBSs. Accordingly, Historical CAT Assessment 1A would seek to recover the remaining $38,964,855.34 of Historical CAT Costs 1 collectively from CEBBs and CEBSs, where CEBBs collectively will be responsible for $19,482,427.67, and CEBSs collectively will be responsible for $19,482,427.67.
Under the CAT NMS Plan, the Operating Committee is required to
The Operating Committee determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable Historical Fee Rate 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans to the Participants in a timely fashion. The Operating Committee determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
The length of the Historical Recovery Period 1A and the reasons for its length are provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a Historical CAT Assessment.
The calculation of the fee rate for Historical CAT Assessment 1A also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for Historical Recovery Period 1A. 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 Historical Recovery Period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A 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 Historical CAT Assessment.
The fee rate for Historical CAT Assessment 1A would be calculated by dividing the total amount of costs to be recovered by Historical CAT Assessment 1A by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A, and dividing by 2. Specifically, the fee rate for Historical CAT Assessment 1A would be calculated by dividing $38,964,855.34 by 11,961,875,098,720.98, and then dividing by 2, which equals $0.00000162871017371542 per executed equivalent shares. Rounding this to six decimal places results in a fee rate of $0.000002 per executed equivalent share.
Participants would not be required to pay any fees associated with Historical CAT Assessment 1A as the Participants previously have paid all Past CAT Costs. The CAT NMS Plan explains that:
Because Participants previously have paid Past CAT Costs via loans to the Company, Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs and such other additional Past CAT Costs as reasonably determined by the Operating Committee will be paid by the cancellation of loans made to the Company on a pro rata basis based on the outstanding loan amounts due under the loans.
The CAT NMS Plan further states that “Historical CAT Assessments are
CEBBs and CEBSs would be required to pay fees for Historical CAT Assessment 1A on a monthly basis for the period in which Historical CAT Assessment 1A is in effect.
The CAT NMS Plan states that, “[n]otwithstanding the length of the Historical Recovery Period used in calculating the Historical Fee Rate, each Historical CAT Assessment calculated using the Historical Fee Rate will remain in effect until all Historical CAT Costs for the Historical CAT Assessment are collected.”
To implement Historical CAT Assessment 1A, a new section would be added to the Exchange's fee schedule for “Consolidated Audit Trail Funding Fees”, and it would include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each month in which a Historical CAT Assessment is in effect, each CEBB and each CEBS shall pay a 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 Historical CAT Assessment for each transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Historical Fee Rate reasonably determined pursuant to paragraph (b)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(2) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(2) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for Historical CAT Assessment 1A in June 2026, which shall set forth the Historical CAT Assessment 1A fees calculated based on transactions in May 2026, and shall receive an invoice for Historical CAT Assessment 1A for each month thereafter in which Historical CAT Assessment 1A is in effect.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A 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 $0.000002 per executed equivalent share.
(C) Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time. Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).
Proposed paragraph (a)(2)(B) of the fee schedule would set forth the fee rate of $0.000002 per executed equivalent share for Historical CAT Assessment 1A, which is calculated as discussed above.
The proposed language in paragraph (a)(2)(B) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A. Specifically, CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in the prior month, that is, transactions executed in May 2026. 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)(2)(A) of the fee schedule also would describe the monthly cadence of the invoices for Historical CAT Assessment 1A. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter while Historical CAT Assessment 1A is in effect.
Proposed paragraph (a)(2)(B) of the fee schedule would describe the invoices for Historical CAT Assessment 1A. Proposed paragraph (a)(2)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A on a monthly basis.” Proposed paragraph (a)(2)(B) of the fee schedule also would describe the fees to be set forth in the invoices for Historical CAT Assessment 1A. 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
Furthermore, proposed paragraph (a)(2)(C) of the fee schedule would describe how long Historical CAT Assessment 1A would remain in effect. It would state that “Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time.” This proposed paragraph would further state that “Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.”
Historical CAT Assessment 1A will be assessed for all transactions executed in each month through the end of the month in which $38,964,855.34 is assessed, and then CAT LLC will provide notice that Historical CAT Assessment 1A is no longer in effect. Since Historical CAT Assessment 1A is a monthly fee based on transaction volume from the prior month, Historical CAT Assessment 1A may collect more than $38,964,855.34. To the extent that occurs, any excess money collected during the final month in which Historical CAT Assessment 1A is in effect will be used to offset future fees and/or to fund the reserve for the CAT.
Finally, proposed paragraph (a)(2)(D) of the fee schedule sets forth the requirement for the CAT Executing Brokers to pay the invoices for Historical CAT Assessment 1A. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).”
Paragraph (b)(1) of the “Consolidated Audit Trail Funding Fees” section of its fee schedule describes the manner of payment of Industry Member CAT fees. Paragraph (b)(1) 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.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange previously has added this requirement to the Exchange's fee schedule. Specifically, paragraph (b)(2) of the fee schedule states:
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 Historical CAT Assessment 1A.
The CAT NMS Plan states that:
Details regarding the calculation of a CAT Executing Broker's Historical CAT Assessment will be provided upon request to such CAT Executing Broker. At a minimum, such details would include each CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their Historical CAT Assessment.
In addition, CAT LLC will make certain aggregate statistics regarding Historical CAT Assessments publicly available. Specifically, the CAT NMS Plan states that, “[f]or each Historical CAT Assessment, 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 on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that Historical CAT Assessment 1A is in effect as well as the total amount invoiced for Historical CAT Assessment 1A 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 Historical CAT Assessment 1A. By reviewing statistics regarding how much has been invoiced and how much remains to be invoiced for Historical CAT Assessment 1A, Industry Members would have sufficient information to reasonably track how much longer Historical CAT Assessment 1A is likely to be in place.
To date, CAT LLC, via FCAT, has billed Industry Members for Historical CAT Assessment 1 and certain
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 Historical CAT Assessment until any applicable Financial Accountability Milestone described in Section 11.6 has been satisfied.”
In accordance with Section 11.6(b) of the CAT NMS Plan, Historical CAT Assessment 1A seeks to recover costs that are related to “all fees, costs, and expenses (including legal and consulting fees, costs, and expenses) incurred by or for the Company in connection with the development, implementation and operation of the CAT from the effective date of [Section 11.6 of the CAT NMS Plan] until such time as Full Implementation of CAT NMS Plan Requirements has been achieved”
The reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of both: (a) equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information; and (b) options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information.
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports.
Under the FAM Period 1 requirement of Initial Industry Member Core Equity and Options Reporting, Industry Members—excluding Small Industry Members that are not OATS reporters—were required to report two categories of data to the CAT: equites transaction data and options transaction data (both excluding Customer Account Information, Customer-ID, and Customer Identifying Information) by July 31, 2020. Pursuant to exemptive relief provided by the Commission, the Commission authorized the Participants' Compliance Rules to allow core equity reporting for Industry Members (Phase 2a) to begin on June 22, 2020 and core options reporting for Industry Members (Phase 2b) to begin on July 20, 2020.
In adopting the FAMs, the Commission stated that the equities transaction reporting required for FAM Period 1 “is consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Equities 2a file submission and data integrity validations.' ”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Equities 2a file submission and data integrity validation (Large Industry Members and Small OATS Reporters)” was completed on June 22, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information” was completed on June 22, 2020.
In adopting the FAMs, the Commission stated that the options transaction reporting required for FAM Period 1 is “consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Options 2b file submission and data integrity validations.' ”
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Options 2b file submission and data integrity validations” was completed on July 20, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information” was completed on July 20, 2020.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from June 22, 2020 through July 31, 2020. The total costs for this period, as discussed above, are $6,377,343. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($2,125,781) and CEBSs paying one-third ($2,125,781) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 2. FAM Period 2 began on August 1, 2020, and concluded on December 31, 2020, the date of the Full Implementation of Core Equity Reporting. Section 1.1 of the CAT NMS Plan defines “Full Implementation of Core Equity Reporting” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2020,
Specifically, the Full Implementation of Core Equity Reporting requires the satisfaction of two prongs. The first prong requires Participants to have fully implemented the first phase of equities transaction reporting for Industry Members (excluding Small Industry Members that are not OATS reporters) at an Error Rate of less than 5%. In addition, equities transaction data produced by the CAT at this stage must also be sufficiently interlinked so as to permit full analysis of an order's lifecycle across the national market, excluding full linkage of representative orders. As CAT LLC reported on its Quarterly Progress Reports, Phase 2a was fully implemented as of October 26, 2020, including intra-firm, inter-firm, national securities exchange, and trade reporting facilities linkages.
• “Production Go-Live for Equities 2a Intrafirm Linkage validations” was completed on 7/27/2020;
• “Production Go-Live for Firm to Firm Linkage validations for Equities 2a (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020; and
• “Production Go-Live for Equities 2a Exchange and TRF Linkage validations (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020.
Furthermore, as CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2020, the average overall error rate for Phase 2a Industry Member Data was less than 5% as of December 31, 2020. The average overall error rate was calculated by dividing the compliance errors by processed records.
The second prong of this FAM requires that the equities transaction data collected by the CAT at this stage be made available to regulators through two basic query tools required by the CAT NMS Plan—a targeted query tool that will enable regulators to retrieve data via an online query screen with a variety of predefined selection criteria, and a user-defined direct query tool that will provide regulators with the ability to query data using all available attributes and data sources.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from August 1, 2020 through December 31, 2020. The total costs for this period, as discussed above, are $42,976,478. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($14,325,492.70) and CEBSs paying one-third ($14,325,492.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 3. FAM Period 3 began on January 1, 2021, and concluded on December 31, 2021, the date of the Full Availability and Regulatory Utilization of Transactional Database Functionality. Section 1.1 of the CAT NMS Plan defines “Full Availability and Regulatory Utilization of Transactional Database Functionality” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2021,
Specifically, the “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires the satisfaction of five prongs. The first prong requires that reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021,
In addition to Phase 2a and Phase 2b Industry Member Data, the second and third prongs of “Full Availability and Regulatory Utilization of Transactional Database Functionality” require Industry Member reporting of Phase 2c Industry Member Data and Phase 2d Industry Member Data. The Phase 2c Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. That Order states that “Phase 2c Industry Member Data” is Industry Member Data related to Eligible Securities that are equities other than Phase 2a Industry Member Data, Phase 2d Industry Member Data, or Phase 2e Industry Member Data. Specifically, the Phase 2c Industry
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Phase 2d Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. “Phase 2d Industry Member Data” is Industry Member Data that is related to Eligible Securities that are options other than Phase 2b Industry Member Data, Industry Member Data that is related to Eligible Securities that are equities other than Phase 2a Industry Member Data or Phase 2c Industry Member Data, and Industry Member Data other than Phase 2e Industry Member Data. Phase 2d Industry Member Data includes with respect to the Eligible Securities that are options: (1) simple manual orders; (2) electronic and manual paired orders; (3) all complex orders with linkages to all CAT-reportable legs; (4) LTIDs (if applicable) for accounts with Reportable Events for Phase 2d; (5) date account opened or Account Effective Date (as applicable) for accounts with an LTID and flag indicating the Firm Designated ID type as account or relationship for such accounts; (6) Allocation Reports as required to be recorded and reported to the Central Repository pursuant to Section 6.4(d)(ii)(A)(1) of the CAT NMS Plan; (7) the modification or cancellation of an internal route of an order; and (8) linkage between a combined order and the original customer orders. Phase 2d Industry Member Data also would include electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are options and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: a listed option bid or offer which is accessible electronically by customers or other market participants and is immediately actionable (
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data will include verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Quarterly Progress Report for the fourth quarter of 2021 states that “Phase 2a was fully implemented as of October 26, 2020;” “Phase 2b was fully implemented as of January 4, 2021;” “Phase 2c was implemented as of April 26, 2021;” and “Phase 2d was fully implemented as of December 13, 2021.”
• “Production Go-Live for Equities 2c reporting requirements (Large Industry Members)” was completed on April 26, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b and
• “FCAT Plan Processor creates linkages of the lifecycle of order events based on the received data through Phase 2d Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2b reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Equities 2c reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2d (Large Industry Members)” was completed on December 13, 2021; and
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b, 2c and 2d (Small Industry Members)” was completed on December 13, 2021.
The third prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” also imposes an Error Rate requirement of 5% or less. The Quarterly Progress Report for the fourth quarter of 2021 states the average overall error rate was less than 5% as of December 31, 2021. The average overall error rate was calculated by dividing the compliance errors by processed records.
The fourth prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires that the data collected by the CAT at this stage be made available to regulators through an online targeted query tool and a user-defined direct query tool. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The fifth prong requires the requirements of Section 6.10(a) of the CAT NMS Plan to have been met. Section 6.10(a) of the CAT NMS Plan requires the Participants to use the tools described in Appendix D to “develop and implement a surveillance system, or enhance existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository.” The Exchange implemented a surveillance system, or enhanced existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository as of December 31, 2021 in accordance with Section 6.10(a) of the CAT NMS Plan.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2021 through December 31, 2021. The total costs for this period, as discussed above, are $144,415,268. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remain two-thirds, with CEBBs paying one-third ($48,138,422.70) and CEBSs paying one-third ($48,138,422.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
As discussed above, CAT LLC has satisfied the Financial Accountability Milestones (“FAMs”) for Periods 1 through 3.
CAT LLC does not believe that the exemptive relief relating to the reporting of electronic responses for quotes (“RFQs”) that are not immediately actionable (“NIA Electronic RFQ Responses”) affect the conclusion that FAMs 1 through 3 have been satisfied. The only reason CAT LLC pursued this relief is because certain Industry Members introduced concerns that NIA Electronic RFQ Responses could be considered “orders” reportable pursuant to Rule 613(j)(8) and some Industry Members were not prepared to report such orders to CAT. Thus, the relief was requested on behalf of Industry Members. CAT LLC itself has not taken any position on whether NIA Electronic RFQ Responses are “orders,” as the definition of “order” is an SEC rule and the trading processes for NIA Electronic RFQ Responses are the Industry Members', not those of the Participants or CAT LLC. Accordingly, CAT LLC stated in its letter that “Industry Members must determine whether trading interest falls within the definition of an `order' for CAT purposes. To the extent an NIA Electronic RFQ Response is not considered an `order” as defined in Rule 613(j)(8) and the CAT NMS Plan, it would not be reportable to CAT.”
Only “orders” as defined in SEC Rule 613(j)(8) are reportable to CAT. There is no agreement across the industry or among regulators as to whether NIA Electronic RFQ Responses are “orders” reportable to CAT. Certain Industry Members have raised the question as to whether NIA Electronic RFQ Responses are orders, but others have argued that they are not orders under Rule 613(j)(8).
As further discussed in the prior FIF letters, even if the Commission had the legal authority to require the reporting of NIA RFQ responses to CAT without an amendment to Rule 613, the Commission has not provided guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT. In subsequent discussions with industry members, Commission representatives have agreed that, prior to NIA RFQ responses being reportable to CAT, it would be necessary for the Commission to provide further guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT.
On May 20, 2024, the Commission granted CAT LLC's request for exemptive relief from certain CAT reporting requirements pertaining to NIA Electronic RFQ Responses to the extent such responses are considered “orders” reportable pursuant to Rule 613(j)(8).
When the Commission proposed the FAMs, the Participants expressed concern that, “by conditioning the ability of CAT LLC and the Participants to collect Post-Amendment Industry Member Fees on factors dependent on the efforts of Industry Members, the Commission's proposals inadvertently establish a perverse incentive for Industry Members to devote less than maximum efforts to comply with their obligations related to the CAT as they will pay less fees in such instances.”
CAT LLC does not believe that the Commission's May 19, 2023 order granting temporary exemptive relief relating to certain verbal floor activity and unstructured verbal and electronic upstairs activity (the “2023 Verbal Quotes Exemption”) affects the conclusion that FAMs 1 through 3 have been satisfied. The 2023 Verbal Quotes Exemption, which was issued on May 19, 2023, is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. The relevant exemption for this time period is the Commission's November 12, 2020 order, which granted relief for the same activity through July 31, 2023 (the “2020 Verbal Quotes Order”).
CAT LLC does not believe that the Commission's November 2, 2023 order granting relief from certain CAT NMS Plan requirements (the “November 2023 Order”) affects the conclusion that FAMs 1 through 3 have been satisfied. The November 2023 Order is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. As described in the November 2023 Order, the relevant exemptive orders for this time period were issued on December 16, 2020, which also states that “the Commission has determined that the Participants have sufficiently complied with the conditions set forth in the prior Orders and with the technical requirements for Quarterly Progress Reports set forth in section 6.6(c) of the CAT NMS Plan, including for purposes of determining compliance with any applicable Financial Accountability Milestones.”
CAT LLC also completed the requirements of FAM Period 2, including the required linkages, by December 31, 2020. Although Participant exchanges may report the Executing Broker to CAT differently in certain situations, these reporting differences are irrelevant for linkage purposes as the fields used for CAT Executing Broker are not used for linkage.
The CAT Funding Model approved by the Commission permits the recovery of reasonable costs in each of the categories of CAT costs sought to be recovered via Historical CAT Assessment 1A.
CAT LLC believes that it is reasonable to seek recovery of costs incurred prior to when the CAT NMS Plan became effective in November 2016, such as legal and consulting fees incurred to create the CAT NMS Plan. Rule 613 specifically mandates that the CAT be created, implemented and maintained, and further provides that the CAT NMS Plan include a proposed allocation of estimated costs to fund the creation, implementation and maintenance of the CAT among the Participants (referred to as “plan sponsors”), and between the Participants and Industry Members (referred to as “members of the plan sponsors”).
Accordingly, the CAT NMS Plan specifically permits the recovery of costs, including legal and consulting costs, reasonably incurred prior to November 2016 in connection with the creation and implementation of the CAT.
Furthermore, the costs incurred to create and implement the CAT prior to the effective date of the CAT NMS Plan (“Pre-Formation Costs”) were reasonable both in scope and amount, in accordance with the requirements of Section 11.1(c) of the CAT NMS Plan. During the four-year period from 2012 to 2016, a total of $13,842,881 in Pre-Formation Costs were incurred. This is an average of approximately $3.5 million per year over this period. The Pre-Formation Costs fell into three categories: legal costs, consulting costs and public relations costs. This includes legal costs of $3,196,434; consulting costs of $10,589,273; and public relations costs of $57,174. The legal, consulting and public relations services were performed by WilmerHale, Deloitte and Peppercomm, respectively. The selection considerations and fees for these three firms are described in detail above and are described further below. The Pre-Formation Costs are direct costs of CAT, which have been funded entirely by the Participants through non-interest-bearing notes. The Pre-Formation Costs do not include the significant costs incurred by each of the individual Participants in responding to the adoption of Rule 613.
The Pre-Formation Costs are reasonable and appropriate as they reflect the extensive efforts that were necessary to create the CAT NMS Plan as mandated after the SEC's adoption of Rule 613. As described in more detail below, these efforts included, among other things, developing a plan for selecting the Plan Processor, soliciting and evaluating bids, engaging a diverse set of market participants and the SEC in the development of the Plan, interacting with the SEC in their oversight of the development of the Plan, and seeking appropriate exemptive relief to address areas of concern in Rule 613.
The Participants determined to utilize an RFP to ensure that potential alternative solutions for creating the Plan could be presented and considered, and that a detailed and meaningful cost-benefit analysis could be performed. The SEC supported the use of an RFP, and approved its use as it is described in extensive detail in the CAT NMS Plan.
In the context of the SEC's adoption of Rule 613, commenters urged the Commission to utilize an RFP process to assist in the planning and design of the NMS plan.
In this regard, several commenters suggested that the Commission undergo a RFP or request for information (“RFI”) process to create and implement a consolidated audit trail. Specifically, FIF urged the Commission to perform a RFP process “to determine the best technical solution for developing a consolidated audit trail.” FIF suggested that the Commission “should outline a set of goals and guiding principles they are striving to achieve as part of the adopted CAT filing and leave the determination of data elements and other technical requirements to [an] industry working group.” Similarly, Direct Edge suggested that Commission staff should form and engage in a
In response to these comments, the Commission modified Rule 613 to require the Participants to address certain important considerations regarding the features and details of the NMS plan and to extend the timeframe for submission of the CAT NMS Plan by the Participants from the 90 days as originally proposed to 270 days, in part, to accommodate a process that would address these considerations.
The SEC specifically recognized that the Participants planned to use an RFP when it approved the Selection Plan, and stated that the RFP was a reasonable approach.
On February 26, 2013, the Participants published an RFP soliciting bids from parties interested in serving as the plan processor for the CAT. Initially, 31 firms submitted intentions to bid. In the following months, the Participants engaged with potential bidders with respect to, among other things, the selection process, selection criteria, and potential bidders' questions and concerns. On March 21, 2014, the Participants received ten bids in response to the RFP.
On September 4, 2013, the Participants filed with the Commission a national market system plan to govern the process for Participant review of the bids submitted in response to the RFP, the procedures for evaluating the bids, and, ultimately, selection of the plan processor (the “Selection Plan”).
The Selection Plan divided the review and evaluation of bids, and the selection of the plan processor, into various stages. Specifically, pursuant to the Selection Plan, a selection committee reviewed all bids and determined which bids contained sufficient information to allow the Participants to meaningfully assess and evaluate the bids. The ten submitted bids were deemed “Qualified Bids,” and so passed to the next stage, in which each bidder presented its bids to the Participants on a confidential basis. On July 1, 2014, after conducting careful analysis and comparison of the bids, the Selection Committee voted and selected a shortlist of six eligible bidders. The Selection Committee determined which shortlisted bidders would be provided the opportunity to revise their bids. After the Selection Committee assessed and evaluated the revised bids, the Selection Committee selected the plan processor via two rounds of voting by the Participants, as described in the Selection Plan.
The Selection Plan established an Operating Committee responsible for formulating, drafting, and filing with the Commission the CAT NMS Plan and for ensuring that the Participants' joint obligations under Rule 613 were met in a timely and efficient manner. In formulating the CAT NMS Plan, the Participants also engaged multiple persons across a wide range of roles and expertise, engaged the consulting firm Deloitte as project manager, and engaged the law firm WilmerHale to serve as legal counsel in drafting the Plan. Within this structure, the Participants focused on, among other things, comparative analyses of the proposed technologies and operating models, development of funding models to support the building and operation of the CAT, and detailed review of governance considerations. Given the complexity and scope of developing the CAT NMS Plan, these efforts were extensive.
When it approved the CAT NMS Plan in 2016, the Commission reiterated its belief that the Selection Plan remains a “reasonable approach,” that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue”:
In approving the Selection Plan, the Commission stated that the Selection Plan is reasonably designed to achieve its objective of facilitating the development of the CAT NMS Plan and the selection of the Plan Processor. The Commission also found that the Selection Plan is reasonably designed to govern the process by which the SROs will formulate and submit the CAT NMS Plan, including the review, evaluation, and narrowing down of Bids in response to the RFP, and ultimately choosing the Plan Processor that will build, operate, and maintain the consolidated audit trail. The Commission believes that the process set out in the Selection Plan for selecting a Plan Processor remains a reasonable approach, which will facilitate the selection of Plan Processor through a fair, transparent and competitive process and that no modifications to the Selection Plan are required to meet the approval standard. . . . In response to the comment that offered support for a specific Bidder, the Commission agrees with the Participants that the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor and thus
During the process of developing the CAT NMS Plan, the Participants engaged in extensive and meaningful dialogue with market participants and the SEC. To this end, the Participants created a website to update the public on the progress of the CAT NMS Plan, published a request for comment on multiple issues related to the Plan, held multiple public events to inform the industry of the progress of the CAT and to address inquiries, and formed, and later expanded, a DAG to solicit more input from a representative industry group.
The DAG included representatives of Participants and Industry Members and conducted meetings to discuss, among other things, technical and operational aspects the Participants were considering for the Plan. The Participants issued press releases soliciting participants for the DAG, and a wide spectrum of firms was deliberately chosen to provide insight from various industry segments affected by CAT. The DAG meetings included discussions of topics such as option market maker quote reporting, requirements for capturing Customer IDs, timestamps and clock synchronization, reporting requirements for order handling scenarios, costs and funding, error handling and corrections, and potential elimination of systems made redundant by the CAT. From the inception of the DAG through September 2014, the DAG participated in 36 meetings, as well as a variety of DAG subcommittee meetings.
Following multiple discussions between the Participants and both the DAG and the bidders, as well as among the Participants themselves, the Participants recognized that some provisions of Rule 613 would not permit certain solutions to be included in the Plan that the Participants, in coordination with the DAG, determined advisable to effectuate the most efficient and cost-effective CAT. Specifically, “the SROs reached the conclusion that additional flexibility in certain of the minimum requirements specified in Rule 613 would allow them to propose a more efficient and cost-effective approach without adversely affecting the reliability or accuracy of CAT Data, or its security and confidentiality.”
After reviewing the exemptive request, the Commission determined that it was appropriate in the public interest and consistent with the protection of investors to grant the requested exemptive relief.
[T]he Commission is persuaded to provide flexibility in the discrete areas discussed in the Exemption Request so that the alternative approaches can be included in the CAT NMS Plan and subject to notice and comment. Doing so could allow for more efficient and cost-effective approaches than otherwise would be permitted. The Commission at this stage is not deciding whether the proposed approaches detailed below are more efficient or effective than those in Rule 613. However, the Commission believes the proposed approaches should be within the permissible range of alternatives available to the SROs.
The Commission further stated that the requested exemptive relief is consistent with the protection of investors. The Commission noted that:
Doing so will provide the public an opportunity to consider and comment on whether these proposed alternative approaches would indeed be more efficient and cost-effective than those otherwise required by Rule 613, and whether such approaches would adversely affect the reliability or accuracy of CAT Data or otherwise undermine the goals of Rule 613. Moreover, if—as the SROs represent—efficiency gains and cost savings would result from including the proposed approaches in the CAT NMS Plan without adverse effects, then the resultant benefits could potentially flow to investors (
The Participants incorporated the exemptive relief into the proposed CAT NMS Plan, which was noticed for comment, and the Commission ultimately approved the CAT NMS Plan with the more efficient and cost-effective alternative approaches described in the exemptive relief. Accordingly, the Participants believe that the costs incurred in developing the exemptive request were critical to the creation of a better CAT than was originally contemplated by Rule 613, and therefore should be recoverable as part of Historical CAT Assessment 1A.
Rule 613(a)(1) under Regulation NMS required the Participants to jointly file the CAT NMS Plan on or before April 28, 2013, less than a year after the adoption of Rule 613. In recognition of the complexity of the project to create the CAT NMS Plan as well as industry interest in limiting or eliminating certain requirements of Rule 613 (
The SROs stated in their Request Letter that they do not believe that the 270-day time period provided for in Rule 613(a)(1) provides sufficient time for the development of the RFP, formulation and submission of bids, and review and evaluation of such bids. The SROs also stated that they believe additional time beyond the 270 days provided for in Rule 613(a)(1) is necessary in order to provide sufficient time for effective consultation with and input from the industry and the public on the proposed solution chosen by the SROs for the creation of the consolidated audit trail at the conclusion of the RFP process and the NMS plan itself.
In recognition of the need for additional time to refine the technical description of and requirements for the CAT and to allow for additional evaluation of the proposed cost and funding considerations, the SEC granted two extensions of this deadline.
This additional time to complete the RFP process should allow the SROs to engage in a more thoughtful and comprehensive process for the development of an NMS plan. In this regard, the Commission notes that the additional time to solicit comment from the industry and the public at certain key points in the development of the NMS plan could identify issues that can be resolved earlier in the development of the consolidated audit trail and prior to filing the NMS plan with the Commission.
Given the Commission's recognition of the reasonableness and value of the extension of the deadline to file the CAT NMS Plan, the Participants believe that the costs incurred in developing the extension request were important to the process of developing the CAT NMS Plan, and therefore should be recoverable as part of Historical CAT Assessment 1A.
After extensive analyses and discussions with the DAG, bidders, market participants and the SEC staff, the Participants finalized the draft of the CAT NMS Plan and filed the CAT NMS Plan with the SEC on September 30, 2014. Following additional discussions, the Participants filed several amendments to the CAT NMS Plan during 2015 and 2016. With these additional changes, the SEC published the CAT NMS Plan for notice and comment in May 2016.
The Pre-Formation Costs include legal costs of $3,196,434. The legal services were performed by WilmerHale. The selection considerations and fees for WilmerHale were described in detail above. Prior to the creation of CAT LLC, WilmerHale was engaged to represent the consortium of SROs, not the individual Participants. For administrative purposes, FINRA agreed to receive such legal bills, although such costs were shared among the Participants. Therefore, the legal costs incurred with respect to WilmerHale do not include legal costs incurred by the individual Participants. These pre-formation legal costs are described in detail above and are further described below:
• Analyzed various legal matters associated with the Selection Plan and drafted an amendment to Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the DAG;
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on the CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Drafted exemptive requests;
• Provided interpretations related to the CAT NMS Plan;
• Provided support with regard to discussions among the exchanges, FINRA and other third parties, such as Deloitte;
• Provided tax advice with regard to CAT's status as a tax-exempt organization; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The Pre-Formation Costs include consulting costs of $10,589,273. The consulting services were performed by Deloitte. The selection considerations and fees for Deloitte were described in detail above. Prior to the creation of CAT LLC, for administrative purposes, Deloitte was engaged by FINRA to provide consulting services related to CAT, but the costs were shared by the consortium of SROs per agreement. Therefore, the consulting costs incurred with respect to Deloitte do not include consulting costs incurred by the individual Participants. The pre-formation consulting costs include the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participants' independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, reviewing technical requirements of other NMS plans, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided support for industry outreach sessions, including with regard to program design and agenda development, program support and logistics and coordination; and
• Provided support in fact finding, drafting content and meeting coordination for WilmerHale with regard to the CAT and the development of the CAT NMS Plan.
Such Pre-Formation Costs did not include costs related to the Chair of the CAT NMS Plan Operating Committee, as the CAT NMS Plan had not yet been adopted.
The Pre-Formation Costs include public relations costs of $57,174. The public relations services were performed by Peppercomm. The selection considerations and fees for Peppercomm are described in detail above. The costs related to Peppercomm were shared among the SROs. Therefore, the public relations costs do not include public relations costs incurred by the individual Participants. The pre-formation public relations costs include services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs related to cloud hosting services as a part of Historical CAT Assessments. CAT LLC believes that the costs related to cloud hosting services described in detail above are reasonable and appropriate given the strict data processing timelines and storage requirements imposed by the Commission-approved CAT NMS Plan and should be recoverable as a part of Historical CAT Assessment 1A.
CAT LLC believes that the costs for the cloud hosting services are reasonable, both in terms of the level of the fees paid by CAT LLC for cloud hosting services provided by AWS and the scope of the services performed by AWS for CAT LLC. CAT LLC believes that both the scope and amount of the costs for cloud hosting services are reasonable given the current requirements of the CAT NMS Plan adopted pursuant to Rule 613, including the strict data processing timeline, storage and other technical requirements under the Commission-approved CAT NMS Plan.
CAT LLC believes that the level of fees for the cloud hosting services is 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.
CAT LLC also believes that the scope of services provided by AWS for the CAT are appropriate given the current requirements of the Commission-approved CAT NMS Plan. As described above, the cloud hosting services costs reflect a variety of factors including, among other things:
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In addition, various requirements of the CAT NMS Plan adopted pursuant to Rule 613 contribute to the significant cloud hosting services costs, and that various Plan requirements could be amended or removed without affecting the regulatory purpose of the CAT. Indeed, CAT LLC has repeatedly sought exemptive relief and filed amendments to the CAT NMS Plan, and has even filed suit against the Commission, to seek to revise or eliminate certain costly requirements related to the CAT. However, despite these efforts, absent the Commission granting exemptive relief or approving cost savings amendments to the CAT NMS Plan, CAT LLC, the Participants and Industry Members are all required to comply with such requirements.
CAT is reasonably designed to efficiently and effectively utilize cloud computing and storage services, given the requirements of the Commission-approved CAT NMS Plan, including requirements related to security, operational reliance and quality assurance, and maintainability.
The Plan Processor uses state-of-the-art software that meets the strict security standards of the CAT NMS Plan. CAT utilizes a big data processing framework that is extensively used by large data processing companies, such as Apple, Meta, Netflix, IBM and Google. As such, it has substantial commercial support and support in the open-source community. It is also well suited for use with regard to iterative types of algorithms and query functions and analytics that the CAT requires, and it provides the heightened security necessary for the CAT.
The development and implementation of the design of CAT is not and has not been static. CAT LLC and the Plan Processor are always evaluating new innovations and service offerings from AWS and other providers to seek to maximize efficiency and cost avoidance while still satisfying the requirements of the CAT NMS Plan. These efforts have led to substantial savings to date. The cloud hosting costs for 2023 were less than the cloud hosting costs for 2022 by $8 million despite processing seven trillion more events in 2023 due to the efficiency and cost avoidance efforts for cloud hosting services. For example, when AWS introduced new storage options, FCAT adopted the cost-efficient new storage option after establishing that the new offering would satisfy the security and other standards of the CAT NMS Plan. This change led to millions of dollars of savings in storage costs. Similarly, when AWS introduced a new compute processor, FCAT adopted this new compute processor, which lead to millions of dollars in savings in compute costs. However, in other cases, new cloud technology developments could not be implemented in CAT because they would not satisfy the security or other requirements of the CAT NMS Plan.
When evaluating the design of the CAT, it must be kept in mind that the CAT is not a typical commercial technology project. The ability to make use of technology approaches that may lead to cost avoidance is also subject to the restrictive requirements of the CAT NMS Plan, such as processing timeframes, requirements for retention of data versions, query requirements, and security standards. Because such requirements are set forth in the CAT NMS Plan, any modification of such requirements are subject to the time-consuming process of amending the CAT NMS Plan or seeking an exemption from the relevant requirement. For example, CAT LLC recently has filed an amendment to address several of these expensive Plan requirements.
The CAT System also was designed to minimize the extent to which Industry Members would need to alter their systems to report to CAT. During the design process, Industry Member groups argued that it would make more sense financially for the CAT to accommodate differences in industry systems, than for all Industry Members to change their systems. Moreover, such design choices would facilitate consistency, uniformity and accuracy in reporting. Requiring the CAT to make such accommodations may increase CAT costs while accommodating CAT Reporters.
Based on the requirements in the CAT NMS Plan and/or in response to industry requests for functionality to be embedded with the Plan Processor to streamline or limit Industry Member system changes, the CAT has been designed to limit the effect on Industry Members. The following provides examples of such accommodations:
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To be clear, if OATS-like error correction tools are not made available on Day 1, hundreds of firms will be required to create and test their own tools or obtain vendor alternatives prior to the CAT Go-Live Date. Proprietary tools will require additional system builds, access to and ingestion of CAT data to perform system validation, and testing which will further stress the limited number of subject matter experts (“SMEs”) dedicated to the implementation of CAT reporting. Should this occur, inevitably firms (especially small firms who lack the necessary IT staff to write code and develop proprietary systems), may be put in the position of passing onto investors the cost required to build hundreds of redundant systems.
CAT provides various tools to help Industry Members identify and rectify errors.
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FIF CAT WG is not proposing a specific format; rather, we are proposing flexibility of input formats which includes support of existing formats (
Mandating a uniform format for reporting data to the CAT simplifies the task for the Central Repository of consolidating/storing data, but it puts the burden on each CAT Reporter to accurately translate their current (
The costs for cloud hosting services are appropriate and have not been adversely affected by the original design and approaches of the Initial Plan Processor. FCAT's design costs are the result of the requirements of the Commission-approved CAT NMS Plan.
When FCAT took over as the Plan Processor from Thesys, it utilized certain aspects of the technical specifications created by Thesys in its design. However, FCAT has not maintained aspects of the original design that would not be appropriate for the CAT. FCAT revised and enhanced the original technical specifications of the CAT System to increase its efficiency and efficacy, and to ensure its compliance with the CAT NMS Plan. For example, the Initial Plan Processor's approach utilized many more fields than FCAT's approach, which relies on additional linkages. With the additional linkages, the CAT System takes on more of the CAT-related burdens than the Industry Members. Such an approach serves to facilitate consistency, uniformity and accuracy in reporting.
Moreover, FCAT did not utilize the system built by the Initial Plan Processor; it rebuilt the CAT System based on revised technical specifications. For example, the Initial Plan Processor used an on-premises processing approach which was not geared toward the huge amounts of data stored in the CAT, while FCAT adopted a cloud-based solution in response to such data demands.
Furthermore, given the very short timeframe to develop the CAT System and the prior optimization of certain query tools (
CAT LLC continues to support the selection of AWS as the cloud hosting services provider for CAT given the compliance, operational, and security requirements of the CAT. Independent analyses confirm these conclusions,
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In addition, the nature of the CAT, including the amount of data it must process and the size of its data footprint, does not allow for a multi-cloud solution as this would be cost prohibitive and greatly increase the security boundary and associated risk profile of the CAT. For example, a multi-cloud hosting option would increase costs, complexity, and risk for operations with regard to, for example, DevOps, production support, and networking. Similarly, with regard to security, a multi-cloud solution would increase risk, including with regard to the need for data transfers between cloud providers and the expansion of the security boundary. With regard to labor, a multi-cloud solution would lose economies of scale due to the need to support unique cloud requirements. Accordingly, the use of a single-cloud solution continues to provide advantages with regard to cost, complexity, and risk. Indeed, “[t]he best practice is to focus on a single primary strategic provider.”
Furthermore, if another cloud service provider were determined to be a better match for the CAT at some future date, switching cloud service providers would be a very significant, expensive and time-consuming effort. Such an effort would likely be a 10-to-15-year commitment at a substantial expense. Such a move would require the replication or redesign of the underlying cloud environments (
CAT LLC believes that the recovery of costs related to the development of the funding model is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
Funding the CAT is a critical aspect of Rule 613 and the CAT NMS Plan. Article XI of the CAT NMS Plan describes in detail the requirements for funding the CAT, and the Participants are required to comply with and enforce compliance with the funding requirements of the CAT NMS Plan, just as with other aspects of the Plan. Accordingly, the development and implementation of a funding model for the CAT is as much a part of the requirements of the CAT NMS Plan as the development and operation of the CAT System. CAT LLC sees no reason to distinguish the efforts to develop a funding model from, for example, efforts to develop the CAT System, in seeking to recover reasonable CAT costs.
Moreover, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . legal costs.”
In addition, the legal costs incurred for the assistance in developing the CAT Funding Model are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at negotiated rates for such services that reflect both the extent of the services and market rates. Moreover, the scope of the legal costs associated with the development of the funding model reflect the complexity of the task in satisfying the detailed requirements of the CAT NMS Plan, the standards of the Exchange Act, and the many perspectives of the different market constituents potentially affected by or interested in the funding model, including Industry Members, Participants and investors. The many and varied comments by market participants on CAT funding over the years demonstrate the complexity of the task.
CAT LLC believes that the recovery of legal costs related to the litigation with the SEC regarding the CAT NMS Plan is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
The conditional exemptive relief in this Order allows for the implementation of alternative regulatory solutions that continue to advance the regulatory goals that Rule 613 and the CAT NMS Plan were intended to promote, while reducing the implementation and operational costs, burdens, and/or difficulties that would otherwise be incurred by the Participants and Industry Members that must fund the CAT.
CAT LLC believes it is reasonable and appropriate to incur costs to limit the need to incur even greater costs due to certain interpretations of the Plan.
In addition, the legal costs incurred during the litigation are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at market rates for such services. As such, the legal costs related to this litigation incurred during the period covered by Historical CAT Assessment 1A were reasonable.
Finally, Industry Members will directly benefit from the result of the litigation because it has addressed CAT NMS Plan requirements that would have imposed significantly greater costs on the CAT. Accordingly, it is reasonable and appropriate that the costs of such litigation be included in Historical CAT Costs 1.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017, which was the date by which Participants were required to begin reporting to the CAT, due to the delay in the commencement of reporting to the CAT. As discussed above, the Participants determined to exclude all CAT costs incurred from November 15, 2017 through November 15, 2018, which includes $37,852,083 in Thesys costs incurred from November 15, 2017 through November 15, 2018 (as well as other CAT costs during this period). The remaining Thesys costs incurred after November 15, 2018 are the $19,628,791 in capitalized developed technology costs for the period from November 16, 2018 through February 2019 incurred in the development of the CAT by the Initial Plan Processor, as well as a transition fee for the transition from the Initial Plan Processor to the successor Plan Processor. The Participants would remain responsible for 100% of these $19,628,791 in costs.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017. CAT LLC notes that the development and implementation of the CAT System, while unprecedented in scope and design, is like any other large and innovative technology project in that, inevitably, there were adjustments and refinements in the technical approach as the project developed, even with substantial planning efforts and oversight prior to the build. This is even more likely when the project faces a very tight implementation schedule, such as the one imposed by the Commission in Rule 613 and the CAT NMS Plan. However, an adjusted approach does not mean that the funds were not valid expenditures and should not be recovered.
The reasonableness of Thesys costs should be evaluated by the Commission as of the time they were incurred, not in hindsight. As detailed above, the Commission concluded in 2016 that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue.”
As noted in the CAT Funding Model Approval Order, the Commission recognized that “[t]he CAT NMS Plan contemplates that the costs of the CAT are to be allocated between the Participants and Industry Members.”
CAT LLC believes that the recovery of CAIS-related costs is appropriate, and that the amount and scope of such costs, as described above, are reasonable, and that the reasonableness of historical costs should be evaluated by the Commission as of the time they were incurred, not in hindsight.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable CAIS operating costs as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . CAIS operating fees.”
In addition, CAT LLC determined that the CAIS operating fees described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The “CAIS Operating Costs” for Historical CAT Costs 1 total $9,480,587, with Pre-FAM costs of $2,072,908, FAM 1 costs of $254,998, FAM 2 costs of $1,590,298, and FAM 3 costs of $5,562,383. As described above, the CAIS operating fees were incurred with regard to two categories of CAIS-related efforts: (1) the acceleration of the reporting of LTIDs; and (2) the development of the CAIS Technical Specifications and the building of CAIS. These two categories of costs are discussed in more detail below.
During the period covered by Historical CAT Assessment 1A, the CAIS operating costs included costs related to the acceleration of the
• After FCAT developed the LTID Technical Specifications, the LTID Technical Specifications were published on January 31, 2020, with additional updates provided to the LTID Technical Specifications through April 2021.
• The LTID account information testing environment opened on August 24, 2020.
• The LTID account information reporting production environment opened on December 14, 2020.
• CAT Reporters were required to request their production readiness certification for account information related to LTIDs by the deadline of April 9, 2021.
• The LTID account information reporting for Phases 2a, 2b and 2c for Large Industry Members went live on April 26, 2021.
• The LTID account information reporting for Phases 2d for Large Industry Members went live on December 13, 2021.
• The LTID account information reporting for Phases 2a, 2b, 2c and 2d for Small Industry Members went live on April 26, 2021.
Throughout this project, FCAT and CAT LLC worked closely with the industry on LTID and CAIS reporting. Between December 2019 and December 2021, at least 57 checkpoint calls, webinars, and technical working group meetings with industry representatives were hosted to address issues and to educate CAT Reporters regarding LTID and CAIS reporting.
The LTID reporting project was successfully completed in a timely fashion, and the fees related to the project were reasonable. Accordingly, CAT LLC appropriately seeks to recover such costs via Historical CAT Assessment 1A.
During the period covered by Historical CAT Assessment 1A, FCAT began the development of the full CAIS Technical Specifications and the building of CAIS. The CAIS Technical Specifications were developed during this period as follows:
• Iterative drafts of the CAIS Technical Specifications were published on June 30, 2020, December 1, 2020, and January 1, 2021.
• The full, final CAIS Technical Specifications were published on January 29, 2021.
• Updated versions of the CAIS Technical Specifications were published throughout 2021.
As discussed above, FCAT and CAT LLC frequently engaged with the industry regarding the development of CAIS, hosting regular checkpoint calls, webinars, and technical working group meetings with industry representatives to address any issues, including addressing the interplay between Industry Members' existing customer systems and CAIS, and to educate CAT Reporters regarding LTID and CAIS reporting. Such engagement was critical to the CAIS development process as the CAIS project was unprecedented in terms of its content, scope and complexity.
During this period, FCAT also commenced the building of the CAIS system in accordance with the CAIS Technical Specifications during the period covered by Historical CAT Assessment 1A. The CAIS system was ready for industry testing shortly after the end of this period in January 2022.
The CAIS Technical Specifications and the CAIS system, as developed during this period, continue to be used. Industry Members have been required to report, and have continuously reported, required data to CAIS on a daily basis since November 7, 2022, consistent with interim reporting obligations. The CAIS system accepts and validates the CAIS data submitted by Industry Members and provides Industry Members with initial feedback on data errors. In light of the unprecedented nature of the CAIS system, certain changes to the system, such as changes related to error corrections and the CAIS regulatory portal, were necessary to finalize CAIS reporting. FCAT worked to address these remaining issues,
CAT LLC believes that the recovery of public relations costs is appropriate and that the amount and scope of such costs, as described above, are reasonable.
The Commission has long recognized that external public relations costs are reasonably associated with creating, implementing and maintaining the CAT. In the CAT NMS Plan Approval Order, the Commission estimated that the Participants had collectively spent approximately $2,400,000 in preparation of the CAT NMS Plan on external public relations, legal, and consulting costs, and estimated that the Participants would continue to incur external public relations costs associated with maintaining the CAT upon approval of the CAT NMS Plan.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for public relations services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . public relations costs.”
In addition, CAT LLC determined that the public relations costs described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The services performed by the public relations firms through 2021 were limited in scope to assist CAT LLC,
CAT LLC believes that the recovery of legal costs related to the limitation of liability provision, including costs related to the proceedings before the SEC and costs related to the proposed amendment to the Consolidated Audit Trail Reporter Agreement and the Consolidated Audit Trail Reporting Agent Agreement (the “Reporting Agreements”) is appropriate and that the amount and scope of such costs as described above are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
Moreover, it is critical that CAT LLC, which has no employees of its own, have the ability to fund a legal defense in litigation and other legal proceedings against it. In response to CAT LLC requiring Industry Members to agree to the limitation of liability provision to submit data to the CAT, SIFMA filed an application for review of actions taken by CAT LLC and the Participants pursuant to Sections 19(d) and 19(f) of the Exchange Act. Contemporaneously with the filing of this proceeding, SIFMA moved for a stay of the requirement that Industry Members sign a Reporter Agreement, or in the alternative, asked the Commission to further delay the launch of CAT reporting on June 22, 2020. CAT LLC must have the resources to defend itself from litigious actions by others, like these.
Although a limitation of liability provision ultimately was not adopted as proposed, it was a reasonable provision to propose for the CAT Reporter Agreements, given that such provisions are in accordance with industry norms. Limitations of liability are ubiquitous within the securities industry and have long governed the economic relationships between self-regulatory organizations and the entities that they regulate. For example, U.S. securities exchanges have adopted rules to limit their liability for losses that Industry Members incur through their use of exchange facilities.
Furthermore, as described above, the specialized services were performed by experienced counsel at market rates for such services. Accordingly, the legal costs for the efforts related to the limitation of liability provision were reasonable.
CAT LLC believes that the recovery of consulting costs related to the Chair of the CAT Operating Committee is appropriate and that the amount and scope of such costs are reasonable.
As a preliminary matter, the selection of the Chair of the Operating Committee complies with the requirements of Section 4.2 of the CAT NMS Plan. The initial Chair that served during the period covered by Historical CAT Assessment 1A was designated by a Participant as the Participant's alternate voting member. Accordingly, the Chair is a representative of the Participants, as required by the CAT NMS Plan.
In addition, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for consulting as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . consulting . . . ” costs.
The Participants determined that the position of the Chair was a critical role for the implementation of the CAT, and an independent Chair would appropriately consider and address the views of each of the Participants. The Participants also determined that it was important to have a Chair with a strong background regarding issues related to the regulatory obligations of self-regulatory organizations, including their obligations under national market system plans. The compensation paid to the Chair is appropriate for a person with such background and skills. The average annual amount paid to the Chair from 2017 through the end of FAM 3 was $292,733.30. Separate from the Chair, CAT LLC relies upon a Leadership Team of representatives of the SROs to oversee the day-to-day implementation of the CAT NMS Plan. CAT LLC does not compensate any member of the Leadership Team.
CAT LLC understands that there are three types of reconciliation processes related to the invoices:
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As discussed further below, CAT LLC only considers the first type of process to be a “reconciliation” and the only type of process that is required under the CAT NMS Plan. CAT LLC provides the means to reconcile the CAT invoice amount to the underlying trades provided by CAT.
The CAT NMS Plan does not require CAT LLC to facilitate the second type of process: matching underlying trades for a CAT invoice with a firm's internal books and records. CAT LLC has access only to the underlying trades provided by CAT; it does not have access to a firm's internal books and records. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
The CAT NMS Plan also does not require CAT LLC to provide the ability to identify the order originator for the underlying trades for the CAT invoices. Accordingly, the billing guidance and processes do not provide CAT Reporters with the ability to identify the order originator for the underlying trades provided by CAT with CAT invoices. CAT LLC has been working closely with CAT Reporters to explain its billing approach and to address any outstanding billing questions. But, it should not be lost that CAT LLC provides information sufficient to allow CAT Reporters to reconcile CAT invoice amounts with the underlying trades provided by CAT LLC.
The CAT NMS Plan does not require CAT LLC to facilitate the matching of underlying trades for a CAT invoice with a firm's internal books and records, which may consist of trading data from various sources external to CAT. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
In this regard, it is important to recognize that CAT LLC has developed a billing approach that greatly improves upon existing billing practices for similar regulatory fees (
To facilitate the introduction of CAT fees, CAT LLC has worked with FCAT to develop an approach to CAT billing that is consistent with existing billing constructs used with regard to Section 31-related sales values fees, subject to certain enhancements. Under this billing approach, FCAT is providing additional linkage elements, not necessarily provided in the Section 31-sales value fee context, to facilitate CAT Reporters' ability to match the underlying trades provided by CAT with their internal books and records and to reduce the complexity of that process. Specifically, FCAT is providing various key elements of the trade itself, such as the tradeID and branch sequence,
With the Additional Trade Details, CAT LLC and FCAT believe that the overwhelming majority of underlying trades provided by CAT bills can be matched with a CAT Reporter's internal books and records. CAT LLC recognizes that there may be certain cases in which such matching is more difficult given various firm-specific considerations, but believes that such instances are significantly more limited than with regard to the SRO fees charged in relation to Section 31.
Similar to other regulatory fees, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Accordingly, Historical CAT Assessment 1A does not address the process by which any CAT Reporters may pass through the fee to their customers. Likewise, the CAT billing approach provided by the Plan Processor is designed to address the needs of CAT Reporters with regard to the reconciliation of CAT invoices with the underlying trades provided by CAT LLC with the invoices; they are not designed to address issues related to any pass-through fees. Accordingly, facilitating CAT Reporters' ability to pass through fees to their clients is outside the scope of this fee filing. Nevertheless, as described below, CAT LLC and the Plan Processor have expended significant efforts to provide technical assistance to Industry Members regarding the implementation of Historical CAT Assessment 1A, including providing Additional Trade Details that provide significant details about each underlying trade.
In its approval of the CAT Funding Model, the Commission approved charging CAT fees to the CAT Executing Broker, rather than the originating broker. This fee filing must comply with the requirements of the CAT Funding Model, and, therefore, charges the Historical CAT Assessment 1A to CAT Executing Brokers.
Moreover, charging originating brokers would introduce significant complexity to the billing process from the CAT's perspective, and would increase the costs of implementing CAT fees. Charging the CAT Executing Broker is simple and straightforward, and leverages a one-to-one relationship between billable events (trades) and billable parties, similar to other
As noted, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT Fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Nevertheless, the Additional Trade Details provided with regard to the underlying trades on CAT invoices may assist with this process. Like with Section 31-related sales value fees, however, it is not always possible to trace every fee on a transaction back to the originating party. Industry Members have faced these issues under Section 31-related sales values fees for many years.
CAT LLC has worked with FCAT to provide significant technical assistance to Industry Members to allow the Industry Members to understand how Historical CAT Assessments will be implemented and billed, including webinars, CAT alerts, mock invoices, and responses to questions posed to the FCAT Help Desk.
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By providing such detailed and sustained assistance to Industry Members regarding CAT fees and billing, CAT LLC has successfully addressed questions raised by Industry Members regarding the CAT fees and billing processes.
In keeping with past practice, CAT LLC provided notice of the proposed
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the Historical CAT Assessment 1A fees to be collected are directly associated with the 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 Exchange has already incurred such development and implementation costs and the proposed Historical CAT Assessment 1A fees, therefore, would allow the Exchange to collect certain of such costs in a fair and reasonable manner from Industry Members, as contemplated by the CAT NMS Plan.
The proposed Historical CAT Assessment 1A fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining Historical CAT Assessments as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Historical Fee Rate, the identification of the parties responsible for payment and the transactions subject to the fee rate for the Historical CAT Assessment, is reasonable and satisfies the Exchange Act.
The formula for calculating a Historical Fee Rate requires the amount of Historical CAT Costs to be recovered. Specifically, Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Historical CAT Costs 1 for each of these categories of costs above.
Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the Historical CAT Costs are reasonable and appropriate.” As discussed below, the Exchange believes that the amounts set forth in this filing for each of these cost categories is “reasonable and appropriate.” Each of the costs included in Historical CAT Costs 1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover costs related to cloud hosting services as a part of Historical CAT Assessments.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and an amendment to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing reasonableness of the CAT's costs and the level of fees assessed to support those costs.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to CAIS operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to change request fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to capitalized developed technology costs as a part of Historical CAT Assessments.
These costs involve the activity of both the Initial Plan Processor and FCAT, as the successor Plan Processor.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to legal fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover consulting costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover insurance costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover professional and administration costs as a part of Historical CAT Assessments.
CAT LLC determined to hire a financial advisory firm, Anchin, to assist with financial matters for the CAT. CAT LLC interviewed Anchin as well as other potential financial advisory firms to assist with the CAT project, considering a variety of factors in its analysis, including the firm's relevant expertise and fees.
CAT LLC also determined to engage an independent accounting firm, Grant Thornton, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC interviewed this firm as well as another potential accounting firm to audit CAT LLC's financial statements, considering a variety of factors in its analysis, including the relevant expertise and fees of each of the firms. CAT LLC determined that Grant Thornton was well-qualified for the role given the balance of these considerations.
The professional and administrative costs also include costs related to the receipt of certain market data from Exegy. After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy. Exegy provided the data elements required by the CAT NMS Plan, and the fees were reasonable and in line with market rates for the market data received.
The professional and administrative costs also include costs related to a third
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover public relations costs as a part of Historical CAT Assessments.
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 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 will count executed equivalent shares for CAT billing purposes.
CAT LLC has determined to establish a Historical Recovery Period of 24 months for Historical CAT Assessment 1A and that such length is reasonable. CAT LLC determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable fee rate for Historical CAT Assessment 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans notes to the Participants in a timely fashion. CAT LLC determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
As noted in the Plan amendment for the CAT Funding Model, as a practical matter, the fee filing for a Historical CAT Assessment would provide the exact fee per executed equivalent share to be paid for each Historical CAT Assessment, and describe the relevant number of decimal places for the fee rate.
The Exchange believes that imposing Historical CAT Assessment 1A with a fee rate of $0.000002 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the remaining Historical CAT Costs 1 and such costs would be spread out over an appropriate recovery period, as discussed above. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, Historical CAT Assessment 1A is significantly lower than fees assessed pursuant to Section 31 (
Historical CAT Assessment 1A 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 Historical CAT Assessments as well as the Industry Members to be charged the Historical CAT Assessments.
Historical CAT Assessment 1A provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. For example, as described above, the calculation of Historical CAT Assessment 1A complies with the formula set forth in Section 11.3(b) of the CAT NMS Plan. In addition, Historical CAT Assessment 1A would be charged to CEBBs and CEBSs in accordance with Section 11.3(b) of the CAT NMS Plan. Furthermore, the Participants would continue to remain responsible for their designated share of Past CAT Costs through the cancellation of loans made by the Participants to CAT LLC.
In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A—Historical CAT Costs 1 (including Excluded Costs) and the exclusion of costs previously invoiced via Historical CAT Assessment 1, the count for the executed equivalent share volume for the prior 12 months, the length of the Historical Recovery Period, and the projected executed equivalent share volume for the Historical Recovery Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for Historical CAT Assessment 1A 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.
Historical CAT Assessment 1A is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of Historical CAT Assessments 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. Historical CAT Assessment 1A complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A and the resulting fee rate for Historical CAT Assessment 1A is reasonable. Therefore, Historical CAT Assessment 1A does not impose an unfairly discriminatory fee on Industry Members.
Finally, 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 specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce Historical CAT Assessment 1A on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A is reasonable and the resulting fee rate for Historical CAT Assessment 1A calculated in accordance with the CAT Funding Model is reasonable. Therefore, Historical CAT Assessment 1A would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to establish fees for Industry Members
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS, which required the self-regulatory organizations (“SROs”) to submit a national market system (“NMS”) plan to create, implement and maintain a consolidated audit trail that would capture customer and order event information for orders in NMS securities across all markets, from the time of order inception through routing, cancellation, modification or execution.
The CAT Funding Model provides a framework for the recovery of the costs to create, develop and maintain the CAT, including providing a method for allocating costs to fund the CAT among Participants and Industry Members. The CAT Funding Model establishes two categories of fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry Members to recover a portion of historical CAT costs previously paid by the Participants (“Historical CAT Assessment” fees); and (2) CAT fees assessed by CAT LLC and payable by Participants and Industry Members to fund prospective CAT costs (“Prospective CAT Costs” fees).
Under the CAT Funding Model, “[t]he Operating Committee will establish one or more fees (each a `Historical CAT Assessment') to be payable by Industry Members with regard to CAT costs previously paid by the Participants (`Past CAT Costs').”
Each Historical CAT Assessment to be paid by CEBBs and CEBSs is designed to contribute toward the recovery of two-thirds of the Historical CAT Costs. Because the Participants previously have paid Past CAT Costs via loans to the Company, the Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs will be paid by the cancellation of loans made by the Participants to the Company on a pro rata basis based on the outstanding loan amounts due under the loans, instead of through the payment of a CAT fee.
CAT LLC proposes to charge CEBBs and CEBSs (as described in more detail below) Historical CAT Assessment 1A to recover certain historical CAT costs incurred prior to January 1, 2022, 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.' ”
The Exchange, along with the other Participants in the CAT, previously filed a fee filing to implement Historical CAT Assessment 1.
Historical CAT Assessment 1A will be charged to each CEBB and CEBS for each applicable transaction in Eligible Securities.
(a) with respect to a transaction in an Eligible Security that is executed on an exchange, the Industry Member identified as the Industry Member responsible for the order on the buy-side of the transaction and the Industry Member responsible for the sell-side of the transaction in the equity order trade event and option trade event in the CAT Data submitted to the CAT by the relevant exchange pursuant to the Participant Technical Specifications; and (b) with respect to a transaction in an Eligible Security that is executed otherwise than on an exchange and required to be reported to an equity trade reporting facility of a registered national securities association, the Industry Member identified as the executing broker and the Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event in the CAT Data submitted to the CAT by FINRA pursuant to the Participant Technical Specifications; provided, however, in those circumstances where there is a non-Industry Member identified as the contra-side executing broker in the TRF/ORF/ADF transaction data event or no contra-side executing broker is identified in the TRF/ORF/ADF transaction data event, then the Industry Member identified as the executing broker in the TRF/ORF/ADF transaction data event would be treated as CAT Executing Broker for the Buyer and for the Seller.
The following fields of the Participant Technical Specifications indicate the CAT Executing Brokers for the transactions executed on an exchange.
In addition,
The Operating Committee determined the fee rate to be used in calculating Historical CAT Assessment 1A based on the Historical CAT Costs for Historical CAT Assessment 1A and the projected total executed share volume of all transactions in Eligible Securities for the Historical Recovery Period for Historical CAT Assessment 1A (“Historical Recovery Period 1A”), as discussed in detail below. Based on this calculation, the Operating Committee has determined that the fee rate for Historical CAT Assessment 1A would be $0.000002, as discussed in detail below.
Under the CAT NMS Plan, for purposes of calculating each Historical CAT Assessment, executed equivalent shares in a transaction in Eligible Securities will be reasonably counted as follows: (1) each executed share for a transaction in NMS Stocks will be counted as one executed equivalent share; (2) each executed contract for a transaction in Listed Options will be counted based on the multiplier applicable to the specific Listed Options (
The CAT NMS Plan states that “[t]he Operating Committee will reasonably determine the Historical CAT Costs sought to be recovered by each Historical CAT Assessment, where the Historical CAT Costs will be Past CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT Costs by the Operating Committee. Each Historical CAT Assessment will seek to recover from CAT Executing Brokers two-thirds of Historical CAT Costs incurred during the period covered by the Historical CAT Assessment.”
The following describes in detail Historical CAT Costs 1 with regard to
Historical CAT Costs 1 would include costs incurred by CAT prior to June 22, 2020 (“Pre-FAM Period”) and already funded by the Participants, excluding Excluded Costs (described further below). Historical CAT Costs 1 would include costs for the Pre-FAM Period of $124,290,730. The Participants would remain responsible for one-third of this cost (which they have previously paid) ($41,430,243.33), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($41,430,243.33) and CEBSs paying one-third ($41,430,243.33). These costs do not include Excluded Costs, as discussed further below. The following table breaks down Historical CAT Costs 1 for the Pre-FAM Period into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The Pre-FAM Period includes a broad range of CAT-related activity from 2012 through June 22, 2020, including the evaluation of the requirements of SEC Rule 613, the development of the CAT NMS Plan, the evaluation and selection of the initial and successor Plan Processors, the commencement of the creation and implementation of the CAT to comply with Rule 613 and the CAT NMS Plan, including technical specifications for transaction reporting and regulatory access, and related technology and the commencement of reporting to the CAT. The following describes the costs for each of the categories for the Pre-FAM Period.
The $10,268,840 in technology costs for cloud hosting services represent costs incurred for services provided by the cloud services provider for the CAT, Amazon Web Services, Inc. (“AWS”), during the Pre-FAM Period.
As part of its proposal for acting as the successor Plan Processor for the CAT, FCAT selected AWS as a subcontractor to provide cloud hosting services. In 2019, after reviewing the capabilities of other cloud services providers, FCAT determined that AWS was the only cloud services provider at that time sufficiently mature and capable of providing the full suite of necessary cloud services for the CAT, including, for example, the security, resiliency and complexity necessary for the CAT computing requirements. The use of cloud hosting services is standard for this type of high-volume data activity and reasonable and necessary for implementation of the CAT, particularly given the substantial data volumes associated with the CAT.
Under the Plan Processor Agreement with FCAT, 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 cost 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. The fees for cloud hosting services during the Pre-FAM Period were paid to FCAT by CAT NMS,
AWS was engaged by FCAT to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. Services provided by AWS include storage services, databases, compute services and other services (such as networking, management tools and DevOps tools). AWS also was engaged to provide various environments for CAT, such as development, performance testing, test and production environments.
The cost for AWS services for the CAT is a function of the volume of CAT Data. The greater the amount of CAT Data, the greater the cost of AWS services to the CAT. During the Pre-FAM Period from the engagement of AWS in February 2019 through June 2020, AWS provided 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,”
The $21,085,485 in technology costs related to operating fees represent costs incurred with regard to activities of FCAT as the Plan Processor. 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 (
FCAT was selected to assume the role of the successor Plan Processor. Prior to this selection, the Participants engaged in discussions with two prior Bidders
The Selection Subcommittee considered factors including, but not limited to, the following, in recommending FINRA to the Operating Committee as the successor Plan Processor:
a. FINRA's specialized technical expertise and capabilities in the area of broker-dealer technology;
b. The need to appoint a successor Plan Processor with specialized expertise to develop, implement, and maintain the CAT System in accordance with the CAT NMS Plan and SEC Rule 613;
c. FINRA's detailed proposal in response to CATLLC's recent inquiries; and
d. FINRA's data query and analytics systems demonstration to the Participants.
Based on these and other factors, the Selection Subcommittee determined that FINRA was the most appropriate
On February 26, 2019, the Operating Committee (with FINRA recusing itself) voted to select FINRA as the successor Plan Processor pursuant to Section 6.1(t) of the CAT NMS Plan.
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. The operating fees during the Pre-FAM Period were paid to FCAT by CAT LLC.
From March 29, 2019 (the commencement of the Plan Processor Agreement with FCAT) through June 22, 2020 (the end of the Pre-FAM Period), the Plan Processor's activities with respect to the CAT included the following:
• Commenced user acceptance testing with market data provided by Exegy Incorporated (“Exegy”), a market data provider;
• Published Technical Specifications and related reporting scenarios documents for Phase 2a, 2b and 2c reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated testing for Phase 2a and 2b reporting for Industry Members;
• Began developing Technical Specifications and related reporting scenarios documents for Phase 2d reporting for Industry Members, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published Central Repository Access Technical Specifications, and provided regulator access to test data from Industry Members;
• Facilitated Participant exchanges that support options market makers sending Quote Sent Time to the CAT;
• Facilitated the introduction of OPRA and Options NBBO Other Data to CAT;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing requirements under Regulation SCI;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants, the SEC and its staff;
• Operated the FINRA CAT Helpdesk, which is the primary source for answers to questions about CAT, including questions regarding: clock synchronization, firm reporting responsibilities, interpretive questions, technical specifications for reporting to CAT and more;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content;
• Provided 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.
The $2,072,908 in technology costs related to CAIS operating fees represent the fees paid for FCAT's subcontractor charged with the development and operation of CAT's Customer and Account Information System (“CAIS”). 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.
During the Pre-FAM Period, the CAIS-related services were provided by the Plan Processor through the Plan Processor's subcontractor, Kingland Systems Incorporation (“Kingland”). Kingland had experience operating in the securities regulatory technology space, and as a part of its proposal for acting as the Plan Processor for the CAT, FCAT selected Kingland as a subcontractor to provide certain CAIS-related services.
Under the Plan Processor Agreement with FCAT, CAT LLC was required to pay to the Plan Processor the fees incurred by FCAT for CAIS-related services provided by FCAT through Kingland on a monthly basis. FCAT negotiated the fees for Kingland'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. The fees for CAIS-related services during the Pre-FAM Period were paid by CAT LLC to FCAT. FCAT, in turn, paid Kingland.
During the Pre-FAM Period, Kingland began development of the CAIS Technical Specifications and the building of CAIS. In addition, Kingland also worked on the build related to the CCID Alternative, an alternative approach to customer information that was not included in the CAT NMS Plan as originally adopted.
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 change 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 costs were paid by CAT LLC to FCAT.
This category of costs includes capitalizable application development costs incurred in the development of the CAT. The capitalized developed technology costs for the Pre-FAM Period of $51,847,150 relate to technology provided by the Initial Plan Processor and the successor Plan Processor.
On January 17, 2017, the Selection Committee of the CAT NMS Plan selected the Initial Plan Processor, Thesys Technologies, LLC, for the CAT NMS Plan pursuant to Article V of the CAT NMS Plan.
From January 17, 2017 through January 30, 2019, the time in which Thesys CAT was engaged for the CAT, but excluding the period from November 15, 2017 through January 30, 2019, the Initial Plan Processor engaged in various activities with respect to the CAT, including preparing iterative drafts of Participant Technical Specifications, Industry Member Technical Specifications and the Central Repository Access Technical Specifications. In addition, Thesys CAT also developed CAT technology, addressed compliance items, including drafting CAT policies and procedures, addressing Regulation SCI requirements, establishing a CAT Compliance Officer and a Chief Information Security Officer, addressed security-related matters for the CAT, and worked towards the initiation of Participant reporting per the Participant Technical Specifications.
The legal costs of $19,674,463 represent the fees paid for legal services provided by two law firms, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), during the Pre-FAM Period. The legal costs exclude those costs incurred from November 15, 2017 through November 15, 2018.
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. WilmerHale's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading law firms for similar work.
The legal costs for WilmerHale during the Pre-FAM Period included costs incurred from 2013 until June 22, 2020 to address corporate and regulatory legal matters related to the CAT. The legal fees for this law firm during the period from February 2013 until the formation of the CAT NMS, LLC on November 15, 2016 were paid directly by the exchanges and FINRA to WilmerHale. After the formation of CAT NMS LLC, the legal fees were paid by CAT LLC to WilmerHale.
After WilmerHale was engaged in 2013 through the end of the Pre-FAM Period on June 22, 2020 (excluding the legal costs from November 15, 2017 through November 15, 2018), WilmerHale provided legal assistance to the CAT on a variety of matters, including with regard to the following:
• Analyzed various legal matters associated with the Selection Plan, and drafted an amendment to the Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the Development Advisory Group (“DAG”);
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan and related filings;
• Negotiated and drafted the plan processor agreements with the Initial Plan Processor and the successor Plan Processor;
• Provided assistance with compliance with Regulation SCI;
• Assisted with clock synchronization study;
• Provided assistance with respect to the establishment of CAT security;
• Drafted exemptive requests from CAT NMS Plan requirements, including with regard to options market maker quotes, Customer IDs, CAT Reporter IDs, linking allocations to executions, CAT reporting timeline, FDIDs, customer and account information, timestamp granularity, small industry members, data facility reporting and linkage, allocation reports, SRO-assigned market participant identifiers and cancelled trade indicators, thereby seeking to implement changes that would be cost effective and benefit Industry Members and Participants;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided advice regarding CAT policies and procedures;
• Analyzed the SEC's amendment of the CAT NMS Plan regarding financial accountability;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues; and
• Assisted with third-party vendor agreements.
The consulting costs of $17,013,414 represent the fees paid to the consulting firm Deloitte & Touche LLP (“Deloitte”) as project manager during the Pre-FAM Period, from October 2012 until June 22, 2020. 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.
To help facilitate project management given the unprecedented complexity and scope of the CAT project, the Participants determined it was necessary to engage a consulting firm to assist with the CAT project in 2012, following the adoption of Rule 613. A variety of factors were considered in the analysis of prospective consulting firms, including (1) the firm's qualifications, resources, and expertise; (2) the firm's relevant experience and understanding of the regulatory issues raised by the CAT and in coordinating matters of similar scope; (3) the composition of the consulting team; and (4) professional fees. Following a series of interviews, the exchanges and FINRA as a consortium determined that Deloitte was well qualified given the balance of these considerations and engaged Deloitte on October 1, 2012.
Deloitte's fee rates are negotiated on an annual basis and are in line with market rates for this type of specialized consulting work. CAT LLC assesses Deloitte's performance and reviews prospective budgets and staffing plans submitted by Deloitte on an annual basis. Deloitte's compensation arrangements are reasonable and appropriate, and in line with the rates charged by other leading consulting firms for similar work.
The consulting costs for CAT during the period from 2012 until the formation of the CAT NMS, LLC were paid directly by the Participants to Deloitte. After the formation of CAT NMS, LLC, the consulting fees were paid by CAT LLC to Deloitte. CAT LLC reviewed the consulting fees each month and approved the invoices.
After Deloitte was hired in 2012 through the end of the Pre-FAM Period on June 22, 2020 (excluding the consulting costs from November 15, 2017 through November 15, 2018), Deloitte provided a variety of consulting services, including the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participant's independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Assisted with cost and funding-related activities for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA
• Provided 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;
• Assisted with industry outreach and communications regarding the CAT, including assistance with industry outreach events, the development of the CAT website, frequently asked questions, and coordinating with the CAT LLC's public relations firm;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress;
• Coordinated efforts regarding the selection of the successor Plan Processor;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor, including support for the Operating Committee and successor Plan Processor for the new role; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $880,419 represent the cost incurred for insurance for CAT during the Pre-FAM Period. Commencing in 2020, CAT LLC performed an evaluation of various potential alternatives for CAT insurance policies, which included engaging in discussions with different insurance companies and conducting cost comparisons of various alternative approaches to insurance. Based on an analysis of a variety of factors, including coverage and premiums, CAT LLC determined to purchase cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance from USI Insurance Services LLC (“USI”). Such policies are standard for corporate entities, and cyber security liability insurance is important for the CAT System. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
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.
After Anchin was hired in April 2018 through the end of the Pre-FAM Period on June 22, 2020 (excluding the period from April 2018 through November 15, 2018), Anchin provided a variety of services, including the following:
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, inclduding budget to actual fluctuation analyses;
• Addressed accounting and financial reporting matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase
Upon the termination of the contract between CAT LLC and Exegy, FCAT entered into a contract with Exegy to purchase the required market data from Exegy in July 2019. All costs under the contract were treated as a direct pass through cost to CAT LLC. Therefore, the fees for the market data were paid by CAT LLC to FCAT, who, in turn, paid Exegy for the market data.
The public relations costs of $224,669 represent the fees paid to public relations firms during the Pre-FAM Period for professional communications services to CAT, including media relations consulting, strategy and execution. By engaging a public relations firm, CAT LLC was better positioned to understand and address CAT matters to the benefit of all market participants. Specifically, the public relations firms provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
The services performed by each of the public relations firms were comparable. The fees for such services were reasonable and in line with market rates. Only one public relations firm was engaged at a time; the three firms were engaged sequentially as the primary public relations contact moved among the three firms during this time period.
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 1 of the Financial Accountability Milestones (“FAM Period 1”),
By the
CAT LLC continued to utilize AWS in FAM Period 1 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 1 Period. Accordingly, the $2,642,122 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 1. The fee arrangement for AWS described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. Moreover, CAT LLC continued to believe that AWS's maturity in the cloud services space as well as the significant cost and time necessary to move the CAT to a different cloud services provider supported the continued engagement of AWS.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 1 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, reference data and other types of Other Data. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 1.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 1. Accordingly, the $1,099,680 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 1. The fee arrangement for FCAT described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, FCAT's activities with respect to the CAT included the following:
• Published iterative drafts of draft Technical Specifications for Phase 2d, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Published iterative drafts of CAIS Technical Specifications, after substantial engagement with SEC staff, Industry Members and Participants on the Technical Specifications;
• Facilitated Industry Member reporting of Quote Sent Time on Options Market Maker quotes;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 1. Accordingly, the $254,998 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 1. The fee arrangement for Kingland described above with regard to the Pre-FAM Period continued in place during FAM Period 1 pursuant to the Plan Processor Agreement. During FAM Period 1, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to CCID Alternative, as well as the acceleration of the reporting of LTIDs.
CAT LLC did not incur costs related to change requests during FAM Period 1.
Capitalized developed technology costs for FAM Period 1 of $1,684,870 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include: (1) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including separate production and industry test entitlements, and reprocessing of exchange event timestamps; (2) implementation fees; and (3) license fees.
The legal costs of $481,687 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 1.
• Assisted with the development of the CAT funding model and drafted related amendments and fee filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, verbal activity, options market maker quote sent time, TRF linkages, and allocations;
• Provided interpretations related to CAT NMS Plan requirements, including the Financial Accountability Milestone amendment;
• Assisted with compliance with Regulation SCI;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the drafting of the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Assisted with communications and presentations for the industry regarding CAIS;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding CAT technical specifications;
• Assisted with third-party vendor agreements; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $137,209 represent the fees paid to Deloitte as project manager during FAM Period 1. CAT LLC continued to employ Deloitte during FAM Period 1 based on, among other things, their expertise and cumulative experience with the CAT. The fee rates for Deloitte during FAM Period 1 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 1 were paid by CAT LLC to the consulting firm. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 1, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT;
• Assisted with the transition from the Initial Plan Processor to the successor Plan Processor; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
Although insurance was in effect during FAM Period 1, CAT LLC did not incur costs related to insurance during FAM Period 1.
• Maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups; and
• Prepared monthly and quarterly financial statements.
The public relations costs of $7,700 represent the fees paid to Peak Strategies during FAM Period 1. CAT LLC continued to employ Peak Strategies during FAM Period 1 based on, among other things, their expertise and history with the project. The fee rates for this firm were reasonable and in line with market rates for these types of services. The fees for these services during FAM Period 1 were paid by CAT LLC to Peak Strategies. During FAM Period 1, Peak Strategies continued to provide professional communications services to CAT LLC, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT LLC and already funded by Participants during Period 2 of the Financial Accountability Milestones (“FAM Period 2”),
By the completion of FAM Period 2, CAT LLC was required to implement the following with regard to the CAT:
(a) Industry Member reporting (excluding reporting by Small Industry Members that are not OATS reporters) for equities transactions, excluding Customer Account Information, CustomerID, and Customer Identifying Information, is developed, tested, and implemented at a 5% Error Rate or less and with sufficient intra-firm linkage, inter-firm linkage, national securities exchange linkage, and trade reporting facilities linkage to permit the Participants and the Commission to analyze the full lifecycle of an order across the national market system,
CAT LLC completed the requirements of FAM Period 2 by December 31, 2020. The following describes the costs for each of the categories for FAM Period 2.
CAT LLC continued to utilize AWS in FAM Period 2 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 2 Period. Accordingly, the $20,709,212 in technology costs for cloud hosting services represent costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 2. The fee arrangement for AWS described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During the FAM 2 Period, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a and Phase 2b Industry Member Data (including certain linkages) as well as SIP Data, and Other Data, including reference data. In addition, Industry Members began reporting LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 2.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 2. Accordingly, the $9,108,700 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 2. The fee arrangement for FCAT described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, FCAT's activities with respect to the CAT included publishing the Technical Specifications for Phase 2d and overseeing the reporting of firm to firm and intrafirm linkages by Industry Members. In addition, FCAT also continued to engage in the following activities during FAM Period 2:
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the development and implementation of the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT Alerts, meetings, presentations and webinars;
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 2. Accordingly, the $1,590,298 in technology costs for CAIS operating fees represent costs incurred for services provided by Kingland during FAM Period 2. The fee arrangement for Kingland described above with regard to the Pre-FAM Period and FAM Period 1 continued in place during FAM Period 2 pursuant to the Plan Processor Agreement. During FAM Period 2, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build
During FAM Period 2, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 2, CAT incurred costs of $51,823 related to a change request regarding the addition of functionality for exchange Participants to report rejected messages to the CAT.
Capitalized developed technology costs for FAM Period 2 of $6,761,094 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to separate production and industry test entitlements, market maker reference data, and back-processing of exchange exception logic; (3) implementation fees; and (4) license fees.
The legal costs of $2,766,644 represent the fees paid for legal services provided by two law firms, WilmerHale and Pillsbury during FAM Period 2.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements regarding, for example, allocations, exchange activity, OTQT, initial data validation, error corrections and recordkeeping;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittees, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6 of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Assisted with third-party vendor agreements (
• Assisted with change requests; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The consulting costs of $532,146 represent the fees paid to Deloitte as project manager during FAM Period 2. CAT LLC continued to employ Deloitte during FAM Period 2 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 2 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 2 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 2, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $976,098 represent the fees paid for insurance during FAM Period 2. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $438,523 represent the fees paid to Anchin and Grant Thornton for financial services provided during FAM Period 2.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from the Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audit by an independent auditor; and
• Reviewed historical costs from inception.
The public relations costs of $41,940 represent the fees paid to Peak Strategies during FAM Period 2. CAT LLC continued to employ Peak Strategies during FAM Period 2 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 2 were paid by CAT LLC to Peak Strategies. During FAM Period 2, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would include costs incurred by CAT and already funded by the Participants during Period 3 of the Financial Accountability Milestones (“FAM Period 3”),
By the completion of FAM Period 3, CAT LLC was required to implement the following requirements with regard to the CAT:
CAT LLC completed the requirements of FAM Period 3 by December 31, 2021. The following describes the costs for each of the categories for FAM Period 3.
CAT LLC continued to utilize AWS in FAM Period 3 to provide a broad array of cloud hosting services for the CAT, including data ingestion, data management, and analytic tools. AWS continued to provide 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, during the FAM 3 Period. Accordingly, the $94,574,759 in technology costs for cloud hosting services represents costs incurred for services provided by AWS, as the cloud services provider, during FAM Period 3. The fee arrangement for AWS described above for the earlier periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement.
The cost for AWS cloud services for the CAT continued to be a function of the volume of CAT Data. During FAM Period 3, the volume of CAT Data continued to far exceed the original predictions for the CAT as set forth in the CAT NMS Plan. During this period, data submitted to the CAT included options and equities Participant Data, Phase 2a, Phase 2b, Phase 2c and Phase 2d Industry Member Data (including certain linkages), SIP Data, Other Data, including reference data, and LTID account information. The following chart provides data regarding the average daily volume, cumulative total events, total compute hours and storage footprint of the CAT during FAM Period 3.
Pursuant to the Plan Processor Agreement discussed above, FCAT continued in its role as the Plan Processor for the CAT during FAM Period 3. Accordingly, the $23,106,091 in technology costs for operating fees represent costs incurred for the services provided by FCAT under the Plan Processor Agreement during FAM Period 3. The fee arrangement for FCAT described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, FCAT's activities with respect to the CAT included the following:
• Facilitated Phase 2c and Phase 2d testing for Industry Members;
• Oversaw creation of linkages of the lifecycle of order events based on the received data through Phase 2d;
• Addressed compliance items, including drafting CAT policies and procedures, and addressing Regulation SCI requirements;
• Provided support to the Operating Committee, the Compliance Subcommittee and CAT working groups;
• Assisted with interpretive efforts and exemptive requests regarding the CAT NMS Plan;
• Oversaw the security of the CAT;
• Monitored the operation of the CAT, including with regard to Participant and Industry Member reporting;
• Provided support to subcontractors under the Plan Processor Agreement;
• Provided support in discussions with the Participants and the SEC and its staff;
• Operated the FINRA CAT Helpdesk;
• Facilitated communications with the industry, including via FAQs, CAT
• Administered the CAT website and all of its content; and
• Provided 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.
Pursuant to the Plan Processor Agreement with FCAT discussed above, Kingland continued in its role as a subcontractor for the development and implementation of CAIS during FAM Period 3. Accordingly, the $5,562,383 in technology costs for CAIS operating fees represents costs incurred for services provided by Kingland during FAM Period 3. The fee arrangement for Kingland described above with regard to the prior Periods continued in place during FAM Period 3 pursuant to the Plan Processor Agreement. During FAM Period 3, Kingland continued the development of the CAIS Technical Specifications and building of CAIS. In addition, Kingland continued to work on the CAIS Technical Specifications and build related to the CCID Alternative, as well as the acceleration of the reporting of LTIDs. The full CAIS Technical Specifications were published during FAM Period 3.
During FAM Period 3, CAT LLC engaged FCAT to pursue certain change requests in accordance with the Plan Processor Agreement. The change request costs were paid by CAT LLC to FCAT. Specifically, during FAM Period 3, CAT incurred costs of $396,169 related to change requests, including the following: (1) the addition of functionality for exchange Participants to report rejected messages to the CAT; (2) the migration of MIRS query engine to AWS to reduce operational costs and increase resiliency; and (3) updating the Participant Technical Specifications to allow for two-sided Participant option quote reporting.
Capitalized developed technology costs for FAM Period 3 of $10,763,372 include capitalizable application development costs incurred in the development of the CAT by FCAT. Such costs include (1) development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Plan Processor, including the transition from equity data received by FINRA pursuant to various regulatory services agreements between FINRA and Participant exchanges to the equity CAT Data, and the completion of the Industry Member Phase 2d options manual and complex orders go-live requirements; (2) costs related to certain modifications, upgrades, or other changes to the CAT that were not contemplated by the agreement between CAT LLC and the Plan Processor, including costs related to off-exchange volume concentration, Participant 24-hour trading and an external metastore; (3) implementation fees; and (4) license fees.
The legal costs of $6,333,248 represent the fees paid for legal services provided by three law firms, WilmerHale, Pillsbury and Covington & Burling LLP (“Covington”) during FAM Period 3.
• Assisted with the development of the CAT funding model and drafting related amendments and rule filings;
• Drafted exemptive requests from CAT NMS Plan requirements, including, for example, verbal activity regarding Phase 2c cutover, error reports, error corrections, Phase 2d Reporting, unique Order-ID on internal route events, reporting addresses, recordkeeping, and unique CCID for foreign customers;
• Provided interpretations related to CAT NMS Plan requirements, including with regard to the Financial Accountability Milestone amendment, FAQs, CAIS requirements, ADF, and technical specifications;
• Provided support for the Operating Committee, Compliance Subcommittee, working groups and Leadership Team, including with regard to meetings with the SEC staff;
• Assisted with the Implementation Plan and Quarterly Progress Reports required pursuant to Section 6.6(c) of the CAT NMS Plan;
• Drafted SRO rule filings related to the CAT Compliance Rule;
• Provided support for the Compliance Subcommittee, including with regard to responses to OCIE examinations and the annual assessment;
• Provided guidance regarding the SEC's proposed security amendments to the CAT NMS Plan;
• Provided guidance regarding SRO rule filings for the retirement of systems;
• Provided legal support for Operating Committee meetings, including drafting resolutions and other materials and voting advice;
• Provided assistance with change requests;
• Provided guidance and regulatory support for litigation regarding the response to the SEC's exemptive orders;
• Assisted with communications with the industry, including CAT Alerts and presentations;
• Provided guidance regarding the confidentiality of CAT Data, including third-party information requests;
• Assisted with cost management analysis and proposals; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
After Covington was hired in 2021 through the end of 2021, the firm provided legal assistance regarding the litigation with the SEC regarding the 2020 Orders. These services included researching, drafting, and filing motions to stay the 2020 orders and related materials in proceedings before the SEC, as well as researching, drafting, and filing petitions for judicial review of the 2020 Orders in proceedings before the U.S. Court of Appeals for the D.C. Circuit. Covington oversaw ongoing litigation proceedings on these matters, and also supported WilmerHale with respect to settlement negotiations with the SEC staff regarding the 2020 Orders.
In addition to these services, CAT LLC engaged Covington in November 2021 to provide assistance with respect to the SEC's disapproval of CAT NMS Plan amendments concerning a proposed limitation on liability in the event of a data breach or similar event. Covington provided advice concerning CAT's response to the SEC's disapproval order. This work accounted for a minority of Covington's fees in 2021.
The consulting costs of $1,408,209 represent the fees paid to Deloitte as project manager during FAM Period 3. CAT LLC continued to employ Deloitte during FAM Period 3 based on, among other things, their expertise and long history with the project. The fee rates for Deloitte during FAM Period 3 were negotiated and in line with market rates for this type of specialized consulting work. The consulting fees during FAM Period 3 were paid to Deloitte by CAT LLC. CAT LLC reviewed the consulting fees each month and approved the invoices. During FAM Period 3, Deloitte's CAT-related activities included the following:
• Implemented program operations for the CAT project;
• Provided 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;
• Assisted with cost and funding matters for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided support for third-party vendors for the CAT, including FCAT, Anchin and the law firms engaged by CAT LLC.
The insurance costs of $1,582,714 represent the fees paid for insurance during FAM Period 3. CAT LLC continued to maintain cyber security liability insurance, directors' and officers' liability insurance, and errors and omissions liability insurance offered by USI. After engaging in a process for renewing the coverage, CAT LLC determined to purchase these insurance policies from USI. The annual premiums for these policies were competitive for the coverage provided. The annual premiums were paid by CAT LLC to USI.
The professional and administration costs of $595,923 represent the fees paid to Anchin and Grant Thornton for financial services during FAM Period 3.
• Updated and maintained internal controls;
• Provided cash management and treasury functions;
• Faciliated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $92,400 represent the fees paid to Peak Strategies during FAM Period 3. CAT LLC continued to employ Peak Strategies during FAM Period 3 based on, among other things, their expertise and history with the project. The fee rates for this firm were in line with market rates for these types of services. The fees for these services during FAM Period 3 were paid by CAT LLC to Peak Strategies. During FAM Period 3, Peak Strategies continued to provide professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, the public relations firm provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Historical CAT Costs 1 would not include three categories of CAT costs (“Excluded Costs”): (1) $14,749,362 of costs related to the termination of the relationship with the Initial Plan Processor; (2) $48,874,937, which are all CAT costs incurred from November 15, 2017 through November 15, 2018; and (3) $19,628,791, which are costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when the relationship with the Initial Plan Processor was concluded. The Participants would remain responsible for 100% of these costs, which total $83,253,090. CAT LLC determined to exclude these Excluded Costs from Historical CAT Costs 1 because these costs relate to the delay in the start of reporting to the CAT and the conclusion of the relationship with the Initial Plan Processor.
First, Historical CAT Costs 1 would not include $14,749,362 of costs related to the conclusion of the relationship with the Initial Plan Processor. Such costs include costs related to the American Arbitration Association, the legal assistance of Pillsbury with regard to the arbitration with the Initial Plan Processor, and the settlement costs related to the arbitration with the Initial Plan Processor. The Participants would remain responsible for 100% of these $14,749,362 in costs.
Second, Historical CAT Costs 1 would not include all CAT costs incurred from November 15, 2017 through November 15, 2018. CAT LLC determined to exclude all costs during this one-year period of $48,874,937 from fees charged to Industry Members due to the delay in the start of reporting to the CAT. The Participants would remain responsible for 100% of these $48,874,937 in costs. The following table breaks down these costs into the categories set forth in Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan.
The following provides additional detail regarding the Excluded Costs.
CAT LLC did not incur technology costs related to the categories of cloud hosting services, operating fees, CAIS operating fees or change requests during the period from November 15, 2017 through November 15, 2018.
Capitalized developed technology costs for the period from November 15, 2017 through November 15, 2018 include capitalizable application development costs of $37,852,083 incurred in the development of the CAT by the Initial Plan Processor. Such costs include development costs incurred during the application development stage to meet various agreed-upon milestones regarding the CAT, as defined in the agreement between CAT LLC and the Initial Plan Processor. Such costs include costs related to Industry Member technical specifications for orders and transactions, the system security plan, testing and production for Participant CAT reporting, third-party security assessment and response, query portal, onboarding of the Chief Information Security Officer, and ingestion of FINRA TRF data and FINRA data related to halts and corporate actions.
The legal costs of $6,143,278 represent the fees paid to WilmerHale for legal services from November 15, 2017 through November 15, 2018. During this period, WilmerHale provided legal assistance to the CAT, including with regard to the following:
• Provided legal support for the governance of the CAT, including governance support for the Operating Committee, Advisory Committee, Compliance Subcommittee, and CAT working groups;
• Assisted with the development of the CAT funding model and drafted related amendments of the CAT NMS Plan;
• Provided assistance related to CAT security;
• Drafted exemptive requests, including requests related to PII;
• Assisted with the Implementation Plan required pursuant to Section 6.6(c)(i) of the CAT NMS Plan;
• Provided interpretations of and related to the CAT NMS Plan;
• Provided advice with regard to regulator access to the CAT;
• Assisted with the Plan Processor transition;
• Provided assistance regarding communications with the industry regarding the CAT;
• Provided advice regarding Customer Account Information and PII;
• Provided support for litigation related to SEC exemptive orders; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretative and implementation issues.
The consulting costs of $4,452,106 represent the fees paid to Deloitte for their role as project manager for the CAT from November 15, 2017 through November 15, 2018. During this period, Deloitte engaged in the following activities with respect to the CAT:
• Implemented program operations for the CAT project;
• Provided governance support to the Operating Committee, including support for Subcommittees and working groups of the Operating Committee (
• Assisted with cost and funding issues for the CAT, including the development of the CAT funding model and assistance with loans and the CAT bank account for CAT funding;
• Provided support for updating the SEC on the progress of the development of the CAT; and
• Provided active planning and coordination with and support for the Initial Plan Processor with regard to the development of the CAT, and reported to the Participants on the progress.
CAT LLC did not incur costs related to insurance during the period from November 15, 2017 through November 15, 2018.
The professional and administration costs of $340,145 represent the fees paid to Anchin, Exegy and RSM from November 15, 2017 through November 15, 2018.
• Developed, updated and maintained internal controls;
• Provided cash management and treasury functions;
• Facilitated bill payments;
• Provided monthly bookkeeping;
• Reviewed vendor invoices and documentation in support of cash disbursements;
• Provided accounting research and consultations on various accounting, financial reporting and tax matters;
• Addressed not-for-profit tax and accounting considerations;
• Prepared tax returns;
• Addressed various accounting, financial reporting and operating inquiries from Participants;
• Developed and maintained quarterly and annual operating and financial budgets, including budget to actual fluctuation analyses;
• Addressed accounting and financial matters relating to the transition from CAT NMS, LLC to Consolidated Audit Trail, LLC, including supporting the dissolution of CAT NMS, LLC;
• Supported compliance with the CAT NMS Plan;
• Worked with and provided support to the Operating Committee and various CAT working groups;
• Prepared monthly, quarterly and annual financial statements;
• Supported the annual financial statement audits by an independent auditor;
• Reviewed historical costs from inception; and
• Provided accounting and financial information in support of SEC filings.
The public relations costs of $87,325 represent the fees paid to Sloane from November 15, 2017 through November 15, 2018. From the commencement of its engagment in March 2018 through November 15, 2018, Sloane provided professional communications services to CAT, including media relations consulting, strategy and execution. Specifically, Sloane provided services related to communications with the public regarding the CAT, including monitoring developments related to the CAT (
Third, Historical CAT Costs 1 would not include the $19,628,791 in costs paid to the Initial Plan Processor from November 16, 2018 through February 2019 when CAT LLC's relationship with the Initial Plan Processor concluded. CAT LLC determined that Historical CAT Costs 1 would not include any fees paid to the Initial Plan Processor after November 15, 2017,
CEBBs and CEBSs collectively have been invoiced for $173,075,024 of the $212,039,879.34 of Historical CAT Costs 1 via Historical CAT Assessment 1, where $86,537,512 was invoiced collectively to CEBBs and $86,537,512 was invoiced collectively to CEBSs. Accordingly, Historical CAT Assessment 1A would seek to recover the remaining $38,964,855.34 of
Under the CAT NMS Plan, the Operating Committee is required to reasonably establish the length of the Historical Recovery Period used in calculating each Historical Fee Rate based upon the amount of the Historical CAT Costs to be recovered by the Historical CAT Assessment, and to describe the reasons for its length.
The Operating Committee determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable Historical Fee Rate 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans to the Participants in a timely fashion. The Operating Committee determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
The length of the Historical Recovery Period 1A and the reasons for its length are provided in this filing in accordance with the requirement in the CAT NMS Plan to provide such information in a fee filing for a Historical CAT Assessment.
The calculation of the fee rate for Historical CAT Assessment 1A also requires the determination of the projected total executed equivalent share volume of transactions in Eligible Securities for Historical Recovery Period 1A. 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 Historical Recovery Period based on the executed equivalent share volume of all transactions in Eligible Securities for the prior twelve months.”
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 executed equivalent shares. The Operating Committee has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
The projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A 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 Historical CAT Assessment.
The fee rate for Historical CAT Assessment 1A would be calculated by dividing the total amount of costs to be recovered by Historical CAT Assessment 1A by the reasonably projected total executed equivalent share volume of all transactions in Eligible Securities for Historical Recovery Period 1A, and dividing by 2. Specifically, the fee rate for Historical CAT Assessment 1A would be calculated by dividing $38,964,855.34 by 11,961,875,098,720.98, and then dividing by 2, which equals $0.00000162871017371542 per executed equivalent shares. Rounding this to six decimal places results in a fee rate of $0.000002 per executed equivalent share.
Participants would not be required to pay any fees associated with Historical CAT Assessment 1A as the Participants previously have paid all Past CAT Costs. The CAT NMS Plan explains that:
Because Participants previously have paid Past CAT Costs via loans to the Company, Participants would not be required to pay any Historical CAT Assessment. In lieu of a Historical CAT Assessment, the Participants' one-third share of Historical CAT Costs and such other additional Past CAT Costs as reasonably determined by the Operating Committee will be paid by the cancellation of loans made to the Company on a pro rata basis based on
The CAT NMS Plan further states that “Historical CAT Assessments are designed to recover two-thirds of the Historical CAT Costs.”
CEBBs and CEBSs would be required to pay fees for Historical CAT Assessment 1A on a monthly basis for the period in which Historical CAT Assessment 1A is in effect.
The CAT NMS Plan states that, “[n]otwithstanding the length of the Historical Recovery Period used in calculating the Historical Fee Rate, each Historical CAT Assessment calculated using the Historical Fee Rate will remain in effect until all Historical CAT Costs for the Historical CAT Assessment are collected.”
To implement Historical CAT Assessment 1A, a new section would be added to the Exchange's fee schedule for “Consolidated Audit Trail Funding Fees”, and it would include the proposed paragraphs described below.
The CAT NMS Plan states that:
Each month in which a Historical CAT Assessment is in effect, each CEBB and each CEBS shall pay a 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 Historical CAT Assessment for each transaction will be calculated by multiplying the number of executed equivalent shares in the transaction by one-third and by the Historical Fee Rate reasonably determined pursuant to paragraph (b)(i) of this Section 11.3.
Accordingly, based on the factors discussed above, the Exchange proposes to add paragraph (a)(2) to the Consolidated Audit Trail Funding Fees section of its fee schedule. Proposed paragraph (a)(2) would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for Historical CAT Assessment 1A in June 2026, which shall set forth the Historical CAT Assessment 1A fees calculated based on transactions in May 2026, and shall receive an invoice for Historical CAT Assessment 1A for each month thereafter in which Historical CAT Assessment 1A is in effect.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A 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 $0.000002 per executed equivalent share.
(C) Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time. Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).
Proposed paragraph (a)(2)(B) of the fee schedule would set forth the fee rate of $0.000002 per executed equivalent share for Historical CAT Assessment 1A, which is calculated as discussed above.
The proposed language in paragraph (a)(2)(B) of the fee schedule would describe when CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A. Specifically, CAT Executing Brokers would receive their first monthly invoice for Historical CAT Assessment 1A in June 2026 and the fees set forth in that invoice would be calculated based on transactions executed in the prior month, that is, transactions executed in May 2026. 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)(2)(A) of the fee schedule also would describe the monthly cadence of the invoices for Historical CAT Assessment 1A. Specifically, after the first invoices are provided to CAT Executing Brokers in June 2026, invoices will be sent to CAT Executing Brokers each month thereafter while Historical CAT Assessment 1A is in effect.
Proposed paragraph (a)(2)(B) of the fee schedule would describe the invoices for Historical CAT Assessment 1A. Proposed paragraph (a)(2)(B) of the fee schedule would state that “Consolidated Audit Trail, LLC shall provide each CAT Executing Broker with an invoice for Historical CAT Assessment 1A on a monthly basis.” Proposed paragraph (a)(2)(B) of the fee schedule also would describe the fees to be set forth in the invoices for Historical CAT Assessment 1A. 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
Furthermore, proposed paragraph (a)(2)(C) of the fee schedule would describe how long Historical CAT Assessment 1A would remain in effect. It would state that “Historical CAT Assessment 1A will remain in effect until $38,964,855.34 is collected from CAT Executing Brokers collectively, which is estimated to be approximately two years, but could be for a longer or shorter period of time.” This proposed paragraph would further state that “Consolidated Audit Trail, LLC will provide notice when Historical CAT Assessment 1A will no longer be in effect.”
Historical CAT Assessment 1A will be assessed for all transactions executed in each month through the end of the month in which $38,964,855.34 is assessed, and then CAT LLC will provide notice that Historical CAT Assessment 1A is no longer in effect. Since Historical CAT Assessment 1A is a monthly fee based on transaction volume from the prior month, Historical CAT Assessment 1A may collect more than $38,964,855.34. To the extent that occurs, any excess money collected during the final month in which Historical CAT Assessment 1A is in effect will be used to offset future fees and/or to fund the reserve for the CAT.
Finally, proposed paragraph (a)(2)(D) of the fee schedule sets forth the requirement for the CAT Executing Brokers to pay the invoices for Historical CAT Assessment 1A. It would state that “[e]ach CAT Executing Broker shall be required to pay each invoice for Historical CAT Assessment 1A in accordance with paragraph (b).”
Paragraph (b)(1) of the “Consolidated Audit Trail Funding Fees” section of its fee schedule describes the manner of payment of Industry Member CAT fees. Paragraph (b)(1) 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.
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all applicable fees authorized under this Article XI within thirty (30) days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due (as determined in accordance with the preceding sentence), such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (a) the Prime Rate plus 300 basis points; or (b) the maximum rate permitted by applicable law.
Accordingly, the Exchange previously has added this requirement to the Exchange's fee schedule. Specifically, paragraph (b)(2) of the fee schedule states:
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 Historical CAT Assessment 1A.
The CAT NMS Plan states that:
Details regarding the calculation of a CAT Executing Broker's Historical CAT Assessment will be provided upon request to such CAT Executing Broker. At a minimum, such details would include each CAT Executing Broker's executed equivalent share volume and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by transactions executed on each exchange and transactions executed otherwise than on an exchange, and (3) by buy-side transactions and sell-side transactions.
Such information would provide CEBBs and CEBSs with the ability to understand the details regarding the calculation of their Historical CAT Assessment.
In addition, CAT LLC will make certain aggregate statistics regarding Historical CAT Assessments publicly available. Specifically, the CAT NMS Plan states that, “[f]or each Historical CAT Assessment, 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 on an exchange, and (3) by buy-side transactions and sell-side transactions.”
Furthermore, CAT LLC will make publicly available on the CAT website the total amount invoiced each month that Historical CAT Assessment 1A is in effect as well as the total amount invoiced for Historical CAT Assessment 1A 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 Historical CAT Assessment 1A. By reviewing statistics regarding how much has been invoiced and how much remains to be invoiced for Historical CAT Assessment 1A, Industry Members would have sufficient information to reasonably track how much longer Historical CAT Assessment 1A is likely to be in place.
To date, CAT LLC, via FCAT, has billed Industry Members for Historical CAT Assessment 1 and certain Prospective CAT Fees. Industry Members will be billed for Historical CAT Assessment 1A via the same processes established for Historical CAT Assessment 1 and the Prospective CAT Fees. Accordingly, Industry Members have substantial experience with the CAT billing processes.
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 Historical CAT Assessment until any applicable Financial Accountability Milestone described in Section 11.6 has been satisfied.”
In accordance with Section 11.6(b) of the CAT NMS Plan, Historical CAT Assessment 1A seeks to recover costs that are related to “all fees, costs, and expenses (including legal and consulting fees, costs, and expenses) incurred by or for the Company in connection with the development, implementation and operation of the CAT from the effective date of [Section 11.6 of the CAT NMS Plan] until such time as Full Implementation of CAT NMS Plan Requirements has been achieved”
The reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of both: (a) equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information; and (b) options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information.
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports.
Under the FAM Period 1 requirement of Initial Industry Member Core Equity and Options Reporting, Industry Members—excluding Small Industry Members that are not OATS reporters—were required to report two categories of data to the CAT: equites transaction data and options transaction data (both excluding Customer Account Information, Customer-ID, and Customer Identifying Information) by July 31, 2020. Pursuant to exemptive relief provided by the Commission, the Commission authorized the Participants' Compliance Rules to allow core equity reporting for Industry Members (Phase 2a) to begin on June 22, 2020 and core options reporting for Industry Members (Phase 2b) to begin on July 20, 2020.
In adopting the FAMs, the Commission stated that the equities transaction reporting required for FAM Period 1 “is consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Equities 2a file submission and data integrity validations.' ”
• All events and scenarios covered by OATS, which includes information related to the receipt or origination of orders, order transmittal, and order modifications, cancellations and executions;
• Reportable Events for: (1) proprietary orders, including market maker orders, for Eligible Securities that are equities; (2) electronic quotes in listed equity Eligible Securities (
• Firm Designated IDs (“FDIDs”), which Industry Members must report to the CAT as required by Sections 6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT NMS Plan;
• Industry Members would be required to report all street side representative orders, including both agency and proprietary orders and mark such orders as representative orders, except in certain limited exceptions as described in the Industry Member Technical Specifications;
• The link between the street side representative order and the order being represented when: (1) the representative order was originated specifically to represent a single order received either from a customer or another broker-dealer; and (2) there is (a) an existing direct electronic link in the Industry Member's system between the order being represented and the representative order and (b) any resulting executions are immediately and automatically applied to the represented order in the Industry Member's system;
• Manual and Electronic Capture Time for Manual Order Events;
• Special handling instructions for the original receipt or origination of an order during Phase 2a; and
• When routing an order, whether the order was routed as an intermarket sweep order (“ISO”).
In Phase 2a, Industry Members were not required to report modifications of a previously routed order in certain limited instances, nor were they required to report a cancellation of an order received from a Customer after the order has been executed.
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Equities 2a file submission and data integrity validation (Large Industry Members and Small OATS Reporters)” was completed on June 22, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “equities transaction data, excluding Customer Account Information, Customer-ID, and Customer Identifying Information” was completed on June 22, 2020.
In adopting the FAMs, the Commission stated that the options transaction reporting required for FAM Period 1 is “consistent with the functionality that the Participants describe on the CAT NMS Plan website as `Production Go-Live for Options 2b file submission and data integrity validations.' ”
The Quarterly Progress Report for the third quarter of 2020 states that “Interim Step: Production Go-Live for Options 2b file submission and data integrity validations” was completed on July 20, 2020. Accordingly, the FAM Period 1 requirement of reporting by Industry Members (excluding Small Industry Members that are not OATS reporters) of “options transaction data, excluding Customer Account Information, Customer-ID and Customer Identifying Information” was completed on July 20, 2020.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from June 22, 2020 through July 31, 2020. The total costs for this period, as discussed above, are $6,377,343. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($2,125,781) and CEBSs paying one-third ($2,125,781) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 2. FAM Period 2 began on August 1, 2020, and concluded on December 31, 2020, the date of the Full Implementation of Core Equity Reporting. Section 1.1 of the CAT NMS Plan defines “Full Implementation of Core Equity Reporting” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2020,
Specifically, the Full Implementation of Core Equity Reporting requires the satisfaction of two prongs. The first prong requires Participants to have fully implemented the first phase of equities transaction reporting for Industry Members (excluding Small Industry Members that are not OATS reporters) at an Error Rate of less than 5%. In addition, equities transaction data produced by the CAT at this stage must also be sufficiently interlinked so as to permit full analysis of an order's lifecycle across the national market, excluding full linkage of representative orders. As CAT LLC reported on its Quarterly Progress Reports, Phase 2a was fully implemented as of October 26, 2020, including intra-firm, inter-firm, national securities exchange, and trade
• “Production Go-Live for Equities 2a Intrafirm Linkage validations” was completed on 7/27/2020;
• “Production Go-Live for Firm to Firm Linkage validations for Equities 2a (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020; and
• “Production Go-Live for Equities 2a Exchange and TRF Linkage validations (Large Industry Members and Small OATS Reporters)” was completed on October 26, 2020.
Furthermore, as CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2020, the average overall error rate for Phase 2a Industry Member Data was less than 5% as of December 31, 2020. The average overall error rate was calculated by dividing the compliance errors by processed records.
The second prong of this FAM requires that the equities transaction data collected by the CAT at this stage be made available to regulators through two basic query tools required by the CAT NMS Plan—a targeted query tool that will enable regulators to retrieve data via an online query screen with a variety of predefined selection criteria, and a user-defined direct query tool that will provide regulators with the ability to query data using all available attributes and data sources.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from August 1, 2020 through December 31, 2020. The total costs for this period, as discussed above, are $42,976,478. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remaining two-thirds, with CEBBs paying one-third ($14,325,492.70) and CEBSs paying one-third ($14,325,492.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
Historical CAT Assessment 1A seeks to recover costs that are related to Post-Amendment Expenses incurred during FAM Period 3. FAM Period 3 began on January 1, 2021, and concluded on December 31, 2021, the date of the Full Availability and Regulatory Utilization of Transactional Database Functionality. Section 1.1 of the CAT NMS Plan defines “Full Availability and Regulatory Utilization of Transactional Database Functionality” as:
Under Section 1.1 of the CAT NMS Plan, this Financial Accountability Milestone is considered complete as of the date identified in the Participants' Quarterly Progress Reports. As indicated by the Participants' Quarterly Progress Report for the fourth quarter of 2021,
Specifically, the “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires the satisfaction of five prongs. The first prong requires that reporting to the Order Audit Trail System (“OATS”) is no longer required for new orders. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021,
In addition to Phase 2a and Phase 2b Industry Member Data, the second and third prongs of “Full Availability and Regulatory Utilization of Transactional Database Functionality” require Industry Member reporting of Phase 2c Industry Member Data and Phase 2d Industry Member Data. The Phase 2c Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. That Order states that “Phase 2c Industry Member Data” is Industry Member Data related to Eligible Securities that are equities
Phase 2c Industry Member Data also includes electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are equities and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: (1) an equity bid or offer is displayed publicly or has been communicated (a) for listed securities to the ADF operated by FINRA; or (b) for unlisted equity securities to an “interdealer quotation system,” as defined in FINRA Rule 6420(c); or (2) an equity bid or offer which is accessible electronically by customers or other market participants and is immediately actionable for execution or routing;
The Phase 2d Industry Member Data is described in detail in the SEC's Phased Reporting Exemptive Relief Order. “Phase 2d Industry Member Data” is Industry Member Data that is related to Eligible Securities that are options other than Phase 2b Industry Member Data, Industry Member Data that is related to Eligible Securities that are equities other than Phase 2a Industry Member Data or Phase 2c Industry Member Data, and Industry Member Data other than Phase 2e Industry Member Data. Phase 2d Industry Member Data includes with respect to the Eligible Securities that are options: (1) simple manual orders; (2) electronic and manual paired orders; (3) all complex orders with linkages to all CAT-reportable legs; (4) LTIDs (if applicable) for accounts with Reportable Events for Phase 2d; (5) date account opened or Account Effective Date (as applicable) for accounts with an LTID and flag indicating the Firm Designated ID type as account or relationship for such accounts; (6) Allocation Reports as required to be recorded and reported to the Central Repository pursuant to Section 6.4(d)(ii)(A)(1) of the CAT NMS Plan; (7) the modification or cancellation of an internal route of an order; and (8) linkage between a combined order and the original customer orders. Phase 2d Industry Member Data also would include electronic quotes that are provided by or received in a CAT Reporter's order/quote handling or execution systems in Eligible Securities that are options and are provided by an Industry Member to other market participants off a national securities exchange under the following conditions: a listed option bid or offer which is accessible electronically by customers or other market participants and is immediately actionable (
Phase 2d Industry Member Data also includes with respect to Eligible Securities that are options or equities (1) receipt time of cancellation and modification instructions through Order Cancel Request and Order Modification Request events; (2) modifications of previously routed orders in certain instances; and (3) OTC Equity Securities quotes sent by an Industry Member to an IDQS operated by an Industry Member CAT Reporter that does not match and execute orders. In addition, subject to any exemptive or other relief, Phase 2d Industry Member Data will include verbal or manual quotes on an exchange floor or in the over-the-counter market, where verbal quotes and manual quotes are defined as bids or offers in Eligible Securities provided verbally or that are provided or received other than via a CAT Reporter's order handling and execution system (
The Quarterly Progress Report for the fourth quarter of 2021 states that “Phase 2a was fully implemented as of October 26, 2020;” “Phase 2b was fully implemented as of January 4, 2021;” “Phase 2c was implemented as of April 26, 2021;” and “Phase 2d was fully implemented as of December 13, 2021.”
• “Production Go-Live for Equities 2c reporting requirements (Large Industry
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b and 2c (Large Industry Members)” was completed on April 26, 2021;
• “FCAT Plan Processor creates linkages of the lifecycle of order events based on the received data through Phase 2d Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Large Industry Members)” was completed on December 13, 2021;
• “Production Go-Live for Options 2b reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Equities 2c reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “Production Go-Live for Options 2d reporting requirements (Small OATS Reporters and Small Non-OATS Reporters)” was completed on December 13, 2021;
• “LTID Account Information Reporting Go-Live for Phases 2d (Large Industry Members)” was completed on December 13, 2021; and
• “LTID Account Information Reporting Go-Live for Phases 2a, 2b, 2c and 2d (Small Industry Members)” was completed on December 13, 2021.
The third prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” also imposes an Error Rate requirement of 5% or less. The Quarterly Progress Report for the fourth quarter of 2021 states the average overall error rate was less than 5% as of December 31, 2021. The average overall error rate was calculated by dividing the compliance errors by processed records.
The fourth prong of “Full Availability and Regulatory Utilization of Transactional Database Functionality” requires that the data collected by the CAT at this stage be made available to regulators through an online targeted query tool and a user-defined direct query tool. As CAT LLC reported on its Quarterly Progress Report for the fourth quarter of 2021, the query tool functionality incorporating the data from Phases 2a, 2b, 2c and 2d was available to the Participants and to the Commission as of December 31, 2021.
The fifth prong requires the requirements of Section 6.10(a) of the CAT NMS Plan to have been met. Section 6.10(a) of the CAT NMS Plan requires the Participants to use the tools described in Appendix D to “develop and implement a surveillance system, or enhance existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository.” The Exchange implemented a surveillance system, or enhanced existing surveillance systems, reasonably designed to make use of the consolidated information contained in the Central Repository as of December 31, 2021 in accordance with Section 6.10(a) of the CAT NMS Plan.
The Commission has determined that the Participants have sufficiently complied with the conditions set forth in the 2020 Orders and with the technical requirements for Quarterly Progress Reports set forth in Section 6.6(c) of the CAT NMS Plan for purposes of determining compliance with this FAM.
As discussed above, the remaining Historical CAT Costs 1 to be recovered via Historical CAT Assessment 1A would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2021 through December 31, 2021. The total costs for this period, as discussed above, are $144,415,268. Participants would remain responsible for one-third of this cost (which they have previously paid), and Industry Members would be responsible for the remain two-thirds, with CEBBs paying one-third ($48,138,422.70) and CEBSs paying one-third ($48,138,422.70) through Historical CAT Assessment 1 and Historical CAT Assessment 1A.
As discussed above, CAT LLC has satisfied the Financial Accountability Milestones (“FAMs”) for Periods 1 through 3.
CAT LLC does not believe that the exemptive relief relating to the reporting of electronic responses for quotes (“RFQs”) that are not immediately actionable (“NIA Electronic RFQ Responses”) affect the conclusion that FAMs 1 through 3 have been satisfied. The only reason CAT LLC pursued this relief is because certain Industry Members introduced concerns that NIA Electronic RFQ Responses could be considered “orders” reportable pursuant to Rule 613(j)(8) and some Industry Members were not prepared to report such orders to CAT. Thus, the relief was requested on behalf of Industry Members. CAT LLC itself has not taken any position on whether NIA Electronic RFQ Responses are “orders,” as the definition of “order” is an SEC rule and the trading processes for NIA Electronic RFQ Responses are the Industry Members', not those of the Participants or CAT LLC. Accordingly, CAT LLC stated in its letter that “Industry Members must determine whether trading interest falls within the definition of an `order' for CAT purposes. To the extent an NIA Electronic RFQ Response is not considered an `order” as defined in Rule 613(j)(8) and the CAT NMS Plan, it would not be reportable to CAT.”
Only “orders” as defined in SEC Rule 613(j)(8) are reportable to CAT. There is no agreement across the industry or among regulators as to whether NIA Electronic RFQ Responses are “orders” reportable to CAT. Certain Industry Members have raised the question as to whether NIA Electronic RFQ Responses are orders, but others have argued that they are not orders under Rule 613(j)(8).
As further discussed in the prior FIF letters, even if the Commission had the legal authority to require the reporting of NIA RFQ responses to CAT without an amendment to Rule 613, the Commission has not provided guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT. In subsequent discussions with industry members, Commission representatives have agreed that, prior to NIA RFQ responses being reportable to CAT, it would be necessary for the Commission to provide further guidance to industry members as to the conditions under which NIA RFQ responses would be reportable to CAT.
On May 20, 2024, the Commission granted CAT LLC's request for exemptive relief from certain CAT reporting requirements pertaining to NIA Electronic RFQ Responses to the extent such responses are considered “orders” reportable pursuant to Rule 613(j)(8).
When the Commission proposed the FAMs, the Participants expressed concern that, “by conditioning the ability of CAT LLC and the Participants to collect Post-Amendment Industry Member Fees on factors dependent on the efforts of Industry Members, the Commission's proposals inadvertently establish a perverse incentive for Industry Members to devote less than maximum efforts to comply with their obligations related to the CAT as they will pay less fees in such instances.”
CAT LLC does not believe that the Commission's May 19, 2023 order granting temporary exemptive relief relating to certain verbal floor activity and unstructured verbal and electronic upstairs activity (the “2023 Verbal Quotes Exemption”) affects the conclusion that FAMs 1 through 3 have been satisfied. The 2023 Verbal Quotes Exemption, which was issued on May 19, 2023, is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. The relevant exemption for this time period is the Commission's November 12, 2020 order, which granted relief for the same activity through July 31, 2023 (the “2020 Verbal Quotes Order”).
CAT LLC does not believe that the Commission's November 2, 2023 order granting relief from certain CAT NMS Plan requirements (the “November 2023 Order”) affects the conclusion that FAMs 1 through 3 have been satisfied. The November 2023 Order is not relevant for purposes of FAM Periods 1 through 3, which only cover the period through December 31, 2021. As described in the November 2023 Order, the relevant exemptive orders for this time period were issued on December 16, 2020, which also states that “the Commission has determined that the Participants have sufficiently complied with the conditions set forth in the prior Orders and with the technical requirements for Quarterly Progress Reports set forth in section 6.6(c) of the CAT NMS Plan, including for purposes of determining compliance with any applicable Financial Accountability Milestones.”
CAT LLC also completed the requirements of FAM Period 2, including the required linkages, by December 31, 2020. Although Participant exchanges may report the Executing Broker to CAT differently in certain situations, these reporting differences are irrelevant for linkage purposes as the fields used for CAT Executing Broker are not used for linkage.
The CAT Funding Model approved by the Commission permits the recovery of reasonable costs in each of the categories of CAT costs sought to be recovered via Historical CAT Assessment 1A.
CAT LLC believes that it is reasonable to seek recovery of costs incurred prior to when the CAT NMS Plan became effective in November 2016, such as legal and consulting fees incurred to create the CAT NMS Plan. Rule 613 specifically mandates that the CAT be created, implemented and maintained, and further provides that the CAT NMS Plan include a proposed allocation of estimated costs to fund the creation, implementation and maintenance of the CAT among the Participants (referred to as “plan sponsors”), and between the Participants and Industry Members (referred to as “members of the plan sponsors”).
Accordingly, the CAT NMS Plan specifically permits the recovery of costs, including legal and consulting costs, reasonably incurred prior to November 2016 in connection with the creation and implementation of the CAT.
Furthermore, the costs incurred to create and implement the CAT prior to the effective date of the CAT NMS Plan (“Pre-Formation Costs”) were reasonable both in scope and amount, in accordance with the requirements of Section 11.1(c) of the CAT NMS Plan. During the four-year period from 2012 to 2016, a total of $13,842,881 in Pre-Formation Costs were incurred. This is an average of approximately $3.5 million per year over this period. The Pre-Formation Costs fell into three categories: legal costs, consulting costs and public relations costs. This includes legal costs of $3,196,434; consulting costs of $10,589,273; and public relations costs of $57,174. The legal, consulting and public relations services were performed by WilmerHale, Deloitte and Peppercomm, respectively. The selection considerations and fees for these three firms are described in detail above and are described further below. The Pre-Formation Costs are direct costs of CAT, which have been funded entirely by the Participants through non-interest-bearing notes. The Pre-Formation Costs do not include the significant costs incurred by each of the individual Participants in responding to the adoption of Rule 613.
The Pre-Formation Costs are reasonable and appropriate as they reflect the extensive efforts that were necessary to create the CAT NMS Plan as mandated after the SEC's adoption of Rule 613. As described in more detail below, these efforts included, among other things, developing a plan for selecting the Plan Processor, soliciting and evaluating bids, engaging a diverse set of market participants and the SEC in the development of the Plan, interacting with the SEC in their oversight of the development of the Plan, and seeking appropriate exemptive relief to address areas of concern in Rule 613.
The Participants determined to utilize an RFP to ensure that potential alternative solutions for creating the Plan could be presented and considered, and that a detailed and meaningful cost-benefit analysis could be performed. The SEC supported the use of an RFP, and approved its use as it is described in extensive detail in the CAT NMS Plan.
In the context of the SEC's adoption of Rule 613, commenters urged the Commission to utilize an RFP process to assist in the planning and design of the NMS plan.
In this regard, several commenters suggested that the Commission undergo a RFP or request for information (“RFI”) process to create and implement a consolidated audit trail. Specifically, FIF urged the Commission to perform a RFP process “to determine the best technical solution for developing a consolidated audit trail.” FIF suggested that the Commission “should outline a set of goals and guiding principles they are striving to achieve as part of the adopted CAT filing and leave the determination of data elements and
In response to these comments, the Commission modified Rule 613 to require the Participants to address certain important considerations regarding the features and details of the NMS plan and to extend the timeframe for submission of the CAT NMS Plan by the Participants from the 90 days as originally proposed to 270 days, in part, to accommodate a process that would address these considerations.
The SEC specifically recognized that the Participants planned to use an RFP when it approved the Selection Plan, and stated that the RFP was a reasonable approach.
On February 26, 2013, the Participants published an RFP soliciting bids from parties interested in serving as the plan processor for the CAT. Initially, 31 firms submitted intentions to bid. In the following months, the Participants engaged with potential bidders with respect to, among other things, the selection process, selection criteria, and potential bidders' questions and concerns. On March 21, 2014, the Participants received ten bids in response to the RFP.
On September 4, 2013, the Participants filed with the Commission a national market system plan to govern the process for Participant review of the bids submitted in response to the RFP, the procedures for evaluating the bids, and, ultimately, selection of the plan processor (the “Selection Plan”).
The Selection Plan divided the review and evaluation of bids, and the selection of the plan processor, into various stages. Specifically, pursuant to the Selection Plan, a selection committee reviewed all bids and determined which bids contained sufficient information to allow the Participants to meaningfully assess and evaluate the bids. The ten submitted bids were deemed “Qualified Bids,” and so passed to the next stage, in which each bidder presented its bids to the Participants on a confidential basis. On July 1, 2014, after conducting careful analysis and comparison of the bids, the Selection Committee voted and selected a shortlist of six eligible bidders. The Selection Committee determined which shortlisted bidders would be provided the opportunity to revise their bids. After the Selection Committee assessed and evaluated the revised bids, the Selection Committee selected the plan processor via two rounds of voting by the Participants, as described in the Selection Plan.
The Selection Plan established an Operating Committee responsible for formulating, drafting, and filing with the Commission the CAT NMS Plan and for ensuring that the Participants' joint obligations under Rule 613 were met in a timely and efficient manner. In formulating the CAT NMS Plan, the Participants also engaged multiple persons across a wide range of roles and expertise, engaged the consulting firm Deloitte as project manager, and engaged the law firm WilmerHale to serve as legal counsel in drafting the Plan. Within this structure, the Participants focused on, among other things, comparative analyses of the proposed technologies and operating models, development of funding models to support the building and operation of the CAT, and detailed review of governance considerations. Given the complexity and scope of developing the CAT NMS Plan, these efforts were extensive.
When it approved the CAT NMS Plan in 2016, the Commission reiterated its belief that the Selection Plan remains a “reasonable approach,” that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue”:
In approving the Selection Plan, the Commission stated that the Selection Plan is reasonably designed to achieve its objective of facilitating the development of the CAT NMS Plan and the selection of the Plan Processor. The Commission also found that the Selection Plan is reasonably designed to govern the process by which the SROs will formulate and submit the CAT NMS Plan, including the review, evaluation, and narrowing down of Bids in response to the RFP, and ultimately choosing the Plan Processor that will build, operate, and maintain the consolidated audit trail. The Commission believes that the process set out in the Selection Plan for selecting a Plan Processor remains a reasonable approach, which will facilitate the selection of Plan Processor through a fair, transparent and competitive process and that no modifications to the Selection Plan are required to meet the approval standard. . . . In response to the comment that offered support for a specific Bidder, the Commission agrees with the Participants that the
During the process of developing the CAT NMS Plan, the Participants engaged in extensive and meaningful dialogue with market participants and the SEC. To this end, the Participants created a website to update the public on the progress of the CAT NMS Plan, published a request for comment on multiple issues related to the Plan, held multiple public events to inform the industry of the progress of the CAT and to address inquiries, and formed, and later expanded, a DAG to solicit more input from a representative industry group.
The DAG included representatives of Participants and Industry Members and conducted meetings to discuss, among other things, technical and operational aspects the Participants were considering for the Plan. The Participants issued press releases soliciting participants for the DAG, and a wide spectrum of firms was deliberately chosen to provide insight from various industry segments affected by CAT. The DAG meetings included discussions of topics such as option market maker quote reporting, requirements for capturing Customer IDs, timestamps and clock synchronization, reporting requirements for order handling scenarios, costs and funding, error handling and corrections, and potential elimination of systems made redundant by the CAT. From the inception of the DAG through September 2014, the DAG participated in 36 meetings, as well as a variety of DAG subcommittee meetings.
Following multiple discussions between the Participants and both the DAG and the bidders, as well as among the Participants themselves, the Participants recognized that some provisions of Rule 613 would not permit certain solutions to be included in the Plan that the Participants, in coordination with the DAG, determined advisable to effectuate the most efficient and cost-effective CAT. Specifically, “the SROs reached the conclusion that additional flexibility in certain of the minimum requirements specified in Rule 613 would allow them to propose a more efficient and cost-effective approach without adversely affecting the reliability or accuracy of CAT Data, or its security and confidentiality.”
After reviewing the exemptive request, the Commission determined that it was appropriate in the public interest and consistent with the protection of investors to grant the requested exemptive relief.
[T]he Commission is persuaded to provide flexibility in the discrete areas discussed in the Exemption Request so that the alternative approaches can be included in the CAT NMS Plan and subject to notice and comment. Doing so could allow for more efficient and cost-effective approaches than otherwise would be permitted. The Commission at this stage is not deciding whether the proposed approaches detailed below are more efficient or effective than those in Rule 613. However, the Commission believes the proposed approaches should be within the permissible range of alternatives available to the SROs.
The Commission further stated that the requested exemptive relief is consistent with the protection of investors. The Commission noted that:
Doing so will provide the public an opportunity to consider and comment on whether these proposed alternative approaches would indeed be more efficient and cost-effective than those otherwise required by Rule 613, and whether such approaches would adversely affect the reliability or accuracy of CAT Data or otherwise undermine the goals of Rule 613. Moreover, if—as the SROs represent—efficiency gains and cost savings would result from including the proposed approaches in the CAT NMS Plan without adverse effects, then the resultant benefits could potentially flow to investors (
The Participants incorporated the exemptive relief into the proposed CAT NMS Plan, which was noticed for comment, and the Commission ultimately approved the CAT NMS Plan with the more efficient and cost-effective alternative approaches described in the exemptive relief. Accordingly, the Participants believe that the costs incurred in developing the exemptive request were critical to the creation of a better CAT than was originally contemplated by Rule 613, and therefore should be recoverable as part of Historical CAT Assessment 1A.
Rule 613(a)(1) under Regulation NMS required the Participants to jointly file the CAT NMS Plan on or before April 28, 2013, less than a year after the adoption of Rule 613. In recognition of the complexity of the project to create the CAT NMS Plan as well as industry interest in limiting or eliminating certain requirements of Rule 613 (
The SROs stated in their Request Letter that they do not believe that the 270-day time period provided for in Rule 613(a)(1) provides sufficient time for the development of the RFP, formulation and submission of bids, and review and evaluation of such bids. The SROs also stated that they believe additional time beyond the 270 days provided for in Rule 613(a)(1) is necessary in order to provide sufficient time for effective consultation with and input from the industry and the public on the proposed solution chosen by the SROs for the creation of the consolidated audit trail at the conclusion of the RFP process and the NMS plan itself.
In recognition of the need for additional time to refine the technical description of and requirements for the CAT and to allow for additional evaluation of the proposed cost and funding considerations, the SEC granted
This additional time to complete the RFP process should allow the SROs to engage in a more thoughtful and comprehensive process for the development of an NMS plan. In this regard, the Commission notes that the additional time to solicit comment from the industry and the public at certain key points in the development of the NMS plan could identify issues that can be resolved earlier in the development of the consolidated audit trail and prior to filing the NMS plan with the Commission.
Given the Commission's recognition of the reasonableness and value of the extension of the deadline to file the CAT NMS Plan, the Participants believe that the costs incurred in developing the extension request were important to the process of developing the CAT NMS Plan, and therefore should be recoverable as part of Historical CAT Assessment 1A.
After extensive analyses and discussions with the DAG, bidders, market participants and the SEC staff, the Participants finalized the draft of the CAT NMS Plan and filed the CAT NMS Plan with the SEC on September 30, 2014. Following additional discussions, the Participants filed several amendments to the CAT NMS Plan during 2015 and 2016. With these additional changes, the SEC published the CAT NMS Plan for notice and comment in May 2016.
The Pre-Formation Costs include legal costs of $3,196,434. The legal services were performed by WilmerHale. The selection considerations and fees for WilmerHale were described in detail above. Prior to the creation of CAT LLC, WilmerHale was engaged to represent the consortium of SROs, not the individual Participants. For administrative purposes, FINRA agreed to receive such legal bills, although such costs were shared among the Participants. Therefore, the legal costs incurred with respect to WilmerHale do not include legal costs incurred by the individual Participants. These pre-formation legal costs are described in detail above and are further described below:
• Analyzed various legal matters associated with the Selection Plan and drafted an amendment to Selection Plan;
• Assisted with the RFP and bidding process for the CAT Plan Processor;
• Analyzed legal matters related to the DAG;
• Drafted the CAT NMS Plan, analyzed various items related to the CAT NMS Plan, and responded to comment letters on the CAT NMS Plan;
• Provided legal support for the formation of the legal entity, the governance of the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Drafted exemptive requests;
• Provided interpretations related to the CAT NMS Plan;
• Provided support with regard to discussions among the exchanges, FINRA and other third parties, such as Deloitte;
• Provided tax advice with regard to CAT's status as a tax-exempt organization; and
• Provided support with regard to discussions with the SEC and its staff, including with respect to addressing interpretive and implementation issues.
The Pre-Formation Costs include consulting costs of $10,589,273. The consulting services were performed by Deloitte. The selection considerations and fees for Deloitte were described in detail above. Prior to the creation of CAT LLC, for administrative purposes, Deloitte was engaged by FINRA to provide consulting services related to CAT, but the costs were shared by the consortium of SROs per agreement. Therefore, the consulting costs incurred with respect to Deloitte do not include consulting costs incurred by the individual Participants. The pre-formation consulting costs include the following:
• Established and implemented program operations for the CAT project, including the program management office and workstream design;
• Assisted with the Plan Processor selection process, including but not limited to, the development of the RFP and the bidder evaluation process, and facilitation and consolidation of the Participants' independent reviews;
• Assisted with the development and drafting of the CAT NMS Plan, including conducting cost-benefit studies, reviewing technical requirements of other NMS plans, analyzing OATS and CAT requirements, and drafting appendices to the Plan;
• Provided governance support to the CAT, including governance support prior to the adoption of the CAT NMS Plan, which involved support for the full committee of exchanges and FINRA as well as subcommittees of this group (
• Provided support for updating the SEC on the progress of the development of the CAT;
• Provided support for industry outreach sessions, including with regard to program design and agenda development, program support and logistics and coordination; and
• Provided support in fact finding, drafting content and meeting coordination for WilmerHale with regard to the CAT and the development of the CAT NMS Plan.
Such Pre-Formation Costs did not include costs related to the Chair of the CAT NMS Plan Operating Committee, as the CAT NMS Plan had not yet been adopted.
The Pre-Formation Costs include public relations costs of $57,174. The public relations services were performed by Peppercomm. The selection considerations and fees for Peppercomm are described in detail above. The costs related to Peppercomm were shared among the SROs. Therefore, the public relations costs do not include public relations costs incurred by the individual Participants. The pre-formation public relations costs include
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs related to cloud hosting services as a part of Historical CAT Assessments. CAT LLC believes that the costs related to cloud hosting services described in detail above are reasonable and appropriate given the strict data processing timelines and storage requirements imposed by the Commission-approved CAT NMS Plan and should be recoverable as a part of Historical CAT Assessment 1A.
CAT LLC believes that the costs for the cloud hosting services are reasonable, both in terms of the level of the fees paid by CAT LLC for cloud hosting services provided by AWS and the scope of the services performed by AWS for CAT LLC. CAT LLC believes that both the scope and amount of the costs for cloud hosting services are reasonable given the current requirements of the CAT NMS Plan adopted pursuant to Rule 613, including the strict data processing timeline, storage and other technical requirements under the Commission-approved CAT NMS Plan.
CAT LLC believes that the level of fees for the cloud hosting services is 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.
CAT LLC also believes that the scope of services provided by AWS for the CAT are appropriate given the current requirements of the Commission-approved CAT NMS Plan. As described above, the cloud hosting services costs reflect a variety of factors including, among other things:
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In addition, various requirements of the CAT NMS Plan adopted pursuant to Rule 613 contribute to the significant cloud hosting services costs, and that various Plan requirements could be amended or removed without affecting the regulatory purpose of the CAT. Indeed, CAT LLC has repeatedly sought exemptive relief and filed amendments to the CAT NMS Plan, and has even filed suit against the Commission, to seek to revise or eliminate certain costly requirements related to the CAT. However, despite these efforts, absent the Commission granting exemptive relief or approving cost savings amendments to the CAT NMS Plan, CAT LLC, the Participants and Industry Members are all required to comply with such requirements.
CAT is reasonably designed to efficiently and effectively utilize cloud computing and storage services, given the requirements of the Commission-approved CAT NMS Plan, including requirements related to security, operational reliance and quality assurance, and maintainability.
The Plan Processor uses state-of-the-art software that meets the strict security standards of the CAT NMS Plan. CAT utilizes a big data processing framework that is extensively used by large data processing companies, such as Apple, Meta, Netflix, IBM and Google. As such, it has substantial commercial support and support in the open-source community. It is also well suited for use with regard to iterative types of algorithms and query functions and analytics that the CAT requires, and it provides the heightened security necessary for the CAT.
The development and implementation of the design of CAT is not and has not been static. CAT LLC and the Plan Processor are always evaluating new innovations and service offerings from AWS and other providers to seek to maximize efficiency and cost avoidance while still satisfying the requirements of the CAT NMS Plan. These efforts have led to substantial savings to date. The cloud hosting costs for 2023 were less than the cloud hosting costs for 2022 by $8 million despite processing seven trillion more events in 2023 due to the efficiency and cost avoidance efforts for cloud hosting services. For example, when AWS introduced new storage options, FCAT adopted the cost-efficient new storage option after establishing that the new offering would satisfy the security and other standards of the CAT NMS Plan. This change led to millions of dollars of savings in storage costs. Similarly, when AWS introduced a new compute processor, FCAT adopted this new compute processor, which lead to millions of dollars in savings in compute costs. However, in other cases, new cloud technology developments could not be implemented in CAT because they would not satisfy the security or other requirements of the CAT NMS Plan.
When evaluating the design of the CAT, it must be kept in mind that the CAT is not a typical commercial technology project. The ability to make use of technology approaches that may lead to cost avoidance is also subject to the restrictive requirements of the CAT NMS Plan, such as processing timeframes, requirements for retention of data versions, query requirements, and security standards. Because such requirements are set forth in the CAT NMS Plan, any modification of such requirements are subject to the time-consuming process of amending the CAT NMS Plan or seeking an exemption from the relevant requirement. For example, CAT LLC recently has filed an amendment to address several of these expensive Plan requirements.
The CAT System also was designed to minimize the extent to which Industry Members would need to alter their systems to report to CAT. During the design process, Industry Member groups argued that it would make more sense financially for the CAT to accommodate differences in industry systems, than for all Industry Members to change their systems. Moreover, such design choices would facilitate consistency, uniformity and accuracy in reporting. Requiring the CAT to make such accommodations may increase CAT costs while accommodating CAT Reporters.
Based on the requirements in the CAT NMS Plan and/or in response to industry requests for functionality to be embedded with the Plan Processor to streamline or limit Industry Member system changes, the CAT has been designed to limit the effect on Industry Members. The following provides examples of such accommodations:
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To be clear, if OATS-like error correction tools are not made available on Day 1, hundreds of firms will be required to create and test their own tools or obtain vendor alternatives prior to the CAT Go-Live Date. Proprietary tools will require additional system builds, access to and ingestion of CAT data to perform system validation, and testing which will further stress the limited number of subject matter experts (“SMEs”) dedicated to the implementation of CAT reporting. Should this occur, inevitably firms (especially small firms who lack the necessary IT staff to write code and develop proprietary systems), may be put in the position of passing onto investors the cost required to build hundreds of redundant systems.
CAT provides various tools to help Industry Members identify and rectify errors.
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FIF CAT WG is not proposing a specific format; rather, we are proposing flexibility of input formats which includes support of existing formats (
Mandating a uniform format for reporting data to the CAT simplifies the task for the Central Repository of consolidating/storing data, but it puts the burden on each CAT Reporter to accurately translate their current (
CAT provides such a flexible input format.
The costs for cloud hosting services are appropriate and have not been adversely affected by the original design and approaches of the Initial Plan Processor. FCAT's design costs are the result of the requirements of the Commission-approved CAT NMS Plan.
When FCAT took over as the Plan Processor from Thesys, it utilized certain aspects of the technical specifications created by Thesys in its design. However, FCAT has not maintained aspects of the original design that would not be appropriate for the CAT. FCAT revised and enhanced the original technical specifications of the CAT System to increase its efficiency and efficacy, and to ensure its compliance with the CAT NMS Plan. For example, the Initial Plan Processor's approach utilized many more fields than FCAT's approach, which relies on additional linkages. With the additional linkages, the CAT System takes on more of the CAT-related burdens than the Industry Members. Such an approach serves to facilitate consistency, uniformity and accuracy in reporting.
Moreover, FCAT did not utilize the system built by the Initial Plan Processor; it rebuilt the CAT System based on revised technical specifications. For example, the Initial Plan Processor used an on-premises processing approach which was not geared toward the huge amounts of data stored in the CAT, while FCAT adopted a cloud-based solution in response to such data demands.
Furthermore, given the very short timeframe to develop the CAT System and the prior optimization of certain query tools (
CAT LLC continues to support the selection of AWS as the cloud hosting services provider for CAT given the compliance, operational, and security requirements of the CAT. Independent analyses confirm these conclusions, noting that “AWS is an excellent choice for either strategic or tactical use and recommends considering AWS for almost all cloud IaaS or IaaS+PaaS scenarios.”
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In addition, the nature of the CAT, including the amount of data it must process and the size of its data footprint, does not allow for a multi-cloud solution as this would be cost prohibitive and greatly increase the security boundary and associated risk profile of the CAT. For example, a multi-cloud hosting option would increase costs, complexity, and risk for operations with regard to, for example, DevOps, production support, and networking. Similarly, with regard to security, a multi-cloud solution would increase risk, including with regard to the need for data transfers between cloud providers and the expansion of the security boundary. With regard to labor, a multi-cloud solution would lose economies of scale due to the need to support unique cloud requirements. Accordingly, the use of a single-cloud solution continues to provide advantages with regard to cost, complexity, and risk. Indeed, “[t]he best practice is to focus on a single primary strategic provider.”
Furthermore, if another cloud service provider were determined to be a better match for the CAT at some future date, switching cloud service providers would be a very significant, expensive and time-consuming effort. Such an effort would likely be a 10-to-15-year commitment at a substantial expense. Such a move would require the replication or redesign of the underlying cloud environments (
CAT LLC believes that the recovery of costs related to the development of the funding model is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
Funding the CAT is a critical aspect of Rule 613 and the CAT NMS Plan. Article XI of the CAT NMS Plan describes in detail the requirements for funding the CAT, and the Participants are required to comply with and enforce compliance with the funding requirements of the CAT NMS Plan, just as with other aspects of the Plan. Accordingly, the development and implementation of a funding model for the CAT is as much a part of the requirements of the CAT NMS Plan as the development and operation of the CAT System. CAT LLC sees no reason to distinguish the efforts to develop a funding model from, for example, efforts to develop the CAT System, in seeking to recover reasonable CAT costs.
Moreover, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . legal costs.”
In addition, the legal costs incurred for the assistance in developing the CAT Funding Model are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at negotiated rates for such services that reflect both the extent of the services and market rates. Moreover, the scope of the legal costs associated with the development of the funding model reflect the complexity of the task in satisfying the detailed requirements of the CAT NMS Plan, the standards of the Exchange Act, and the many perspectives of the different market constituents potentially affected by or interested in the funding model, including Industry Members, Participants and investors. The many and varied comments by market participants on CAT funding over the years demonstrate the complexity of the task.
CAT LLC believes that the recovery of legal costs related to the litigation with the SEC regarding the CAT NMS Plan is appropriate, and that the amount and scope of such costs, as described above, are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
The conditional exemptive relief in this Order allows for the implementation of alternative regulatory solutions that continue to advance the regulatory goals that Rule 613 and the CAT NMS Plan were intended to promote, while reducing the implementation and operational costs, burdens, and/or difficulties that would otherwise be incurred by the Participants and Industry Members that must fund the CAT.
CAT LLC believes it is reasonable and appropriate to incur costs to limit the need to incur even greater costs due to certain interpretations of the Plan.
In addition, the legal costs incurred during the litigation are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. As described above, the specialized services were performed by experienced counsel at market rates for such services. As such, the legal costs related to this litigation incurred during the period covered by Historical CAT Assessment 1A were reasonable.
Finally, Industry Members will directly benefit from the result of the litigation because it has addressed CAT NMS Plan requirements that would have imposed significantly greater costs on the CAT. Accordingly, it is reasonable and appropriate that the costs of such litigation be included in Historical CAT Costs 1.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017, which was the date by which Participants were required to begin reporting to the CAT, due to the delay in the commencement of reporting to the CAT. As discussed above, the Participants determined to exclude all CAT costs incurred from November 15, 2017 through November 15, 2018, which includes $37,852,083 in Thesys costs incurred from November 15, 2017 through November 15, 2018 (as well as other CAT costs during this period). The remaining Thesys costs incurred after November 15, 2018 are the $19,628,791 in capitalized developed technology costs for the period from November 16, 2018 through February 2019 incurred in the development of the CAT by the Initial Plan Processor, as well as a transition fee for the transition from the Initial Plan Processor to the successor Plan Processor. The Participants would remain responsible for 100% of these $19,628,791 in costs.
CAT LLC believes that it is appropriate to recover costs related to the services performed by the Initial Plan Processor prior to November 15, 2017. CAT LLC notes that the development and implementation of the CAT System, while unprecedented in scope and design, is like any other large and innovative technology project in that, inevitably, there were adjustments and refinements in the technical approach as the project developed, even with substantial planning efforts and oversight prior to the build. This is even more likely when the project faces a very tight implementation schedule, such as the one imposed by the Commission in Rule 613 and the CAT NMS Plan. However, an adjusted approach does not mean that the funds were not valid expenditures and should not be recovered.
The reasonableness of Thesys costs should be evaluated by the Commission as of the time they were incurred, not in hindsight. As detailed above, the Commission concluded in 2016 that “the competitive bidding process to select the Plan Processor is a reasonable and effective way to choose a Plan Processor,” and that “the process set forth in the Selection Plan should be permitted to continue.”
As noted in the CAT Funding Model Approval Order, the Commission recognized that “[t]he CAT NMS Plan contemplates that the costs of the CAT are to be allocated between the Participants and Industry Members.”
CAT LLC believes that the recovery of CAIS-related costs is appropriate, and that the amount and scope of such costs, as described above, are reasonable, and that the reasonableness of historical costs should be evaluated by the Commission as of the time they were incurred, not in hindsight.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable CAIS operating costs as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . CAIS operating fees.”
In addition, CAT LLC determined that the CAIS operating fees described above are reasonable in both amount and scope and should be recoverable as a part of Historical CAT Assessment 1A. The “CAIS Operating Costs” for Historical CAT Costs 1 total $9,480,587, with Pre-FAM costs of $2,072,908, FAM 1 costs of $254,998, FAM 2 costs of $1,590,298, and FAM 3 costs of $5,562,383. As described above, the CAIS operating fees were incurred with regard to two categories of CAIS-related efforts: (1) the acceleration of the reporting of LTIDs; and (2) the development of the CAIS Technical Specifications and the building of CAIS. These two categories of costs are discussed in more detail below.
During the period covered by Historical CAT Assessment 1A, the CAIS operating costs included costs related to the acceleration of the reporting of LTIDs earlier than originally contemplated during this period at the request of the SEC and in accordance with exemptive relief granted by the SEC.
• After FCAT developed the LTID Technical Specifications, the LTID Technical Specifications were published on January 31, 2020, with additional updates provided to the LTID Technical Specifications through April 2021.
• The LTID account information testing environment opened on August 24, 2020.
• The LTID account information reporting production environment opened on December 14, 2020.
• CAT Reporters were required to request their production readiness certification for account information related to LTIDs by the deadline of April 9, 2021.
• The LTID account information reporting for Phases 2a, 2b and 2c for Large Industry Members went live on April 26, 2021.
• The LTID account information reporting for Phases 2d for Large Industry Members went live on December 13, 2021.
• The LTID account information reporting for Phases 2a, 2b, 2c and 2d for Small Industry Members went live on April 26, 2021.
Throughout this project, FCAT and CAT LLC worked closely with the industry on LTID and CAIS reporting. Between December 2019 and December 2021, at least 57 checkpoint calls, webinars, and technical working group meetings with industry representatives were hosted to address issues and to educate CAT Reporters regarding LTID and CAIS reporting.
The LTID reporting project was successfully completed in a timely fashion, and the fees related to the project were reasonable. Accordingly, CAT LLC appropriately seeks to recover such costs via Historical CAT Assessment 1A.
During the period covered by Historical CAT Assessment 1A, FCAT began the development of the full CAIS Technical Specifications and the building of CAIS. The CAIS Technical Specifications were developed during this period as follows:
• Iterative drafts of the CAIS Technical Specifications were published on June 30, 2020, December 1, 2020, and January 1, 2021.
• The full, final CAIS Technical Specifications were published on January 29, 2021.
• Updated versions of the CAIS Technical Specifications were published throughout 2021.
As discussed above, FCAT and CAT LLC frequently engaged with the industry regarding the development of CAIS, hosting regular checkpoint calls, webinars, and technical working group meetings with industry representatives to address any issues, including addressing the interplay between Industry Members' existing customer systems and CAIS, and to educate CAT Reporters regarding LTID and CAIS reporting. Such engagement was critical to the CAIS development process as the CAIS project was unprecedented in terms of its content, scope and complexity.
During this period, FCAT also commenced the building of the CAIS system in accordance with the CAIS Technical Specifications during the period covered by Historical CAT Assessment 1A. The CAIS system was ready for industry testing shortly after the end of this period in January 2022.
The CAIS Technical Specifications and the CAIS system, as developed during this period, continue to be used. Industry Members have been required to report, and have continuously reported, required data to CAIS on a daily basis since November 7, 2022, consistent with interim reporting obligations. The CAIS system accepts and validates the CAIS data submitted by Industry Members and provides Industry Members with initial feedback on data errors. In light of the unprecedented nature of the CAIS system, certain changes to the system, such as changes related to error corrections and the CAIS regulatory portal, were necessary to finalize CAIS reporting. FCAT worked to address these remaining issues,
CAT LLC believes that the recovery of public relations costs is appropriate and that the amount and scope of such costs, as described above, are reasonable.
The Commission has long recognized that external public relations costs are reasonably associated with creating, implementing and maintaining the CAT. In the CAT NMS Plan Approval Order, the Commission estimated that the Participants had collectively spent approximately $2,400,000 in preparation of the CAT NMS Plan on external public relations, legal, and consulting costs, and estimated that the Participants would continue to incur external public relations costs associated with maintaining the CAT upon approval of the CAT NMS Plan.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for public relations services as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . public relations costs.”
In addition, CAT LLC determined that the public relations costs described above are reasonable in both amount
CAT LLC believes that the recovery of legal costs related to the limitation of liability provision, including costs related to the proceedings before the SEC and costs related to the proposed amendment to the Consolidated Audit Trail Reporter Agreement and the Consolidated Audit Trail Reporting Agent Agreement (the “Reporting Agreements”) is appropriate and that the amount and scope of such costs as described above are reasonable.
As a preliminary matter, as discussed above, the Commission recognized that it is appropriate to recover reasonable costs for legal services as a part of Historical CAT Assessments.
Moreover, it is critical that CAT LLC, which has no employees of its own, have the ability to fund a legal defense in litigation and other legal proceedings against it. In response to CAT LLC requiring Industry Members to agree to the limitation of liability provision to submit data to the CAT, SIFMA filed an application for review of actions taken by CAT LLC and the Participants pursuant to Sections 19(d) and 19(f) of the Exchange Act. Contemporaneously with the filing of this proceeding, SIFMA moved for a stay of the requirement that Industry Members sign a Reporter Agreement, or in the alternative, asked the Commission to further delay the launch of CAT reporting on June 22, 2020. CAT LLC must have the resources to defend itself from litigious actions by others, like these.
Although a limitation of liability provision ultimately was not adopted as proposed, it was a reasonable provision to propose for the CAT Reporter Agreements, given that such provisions are in accordance with industry norms. Limitations of liability are ubiquitous within the securities industry and have long governed the economic relationships between self-regulatory organizations and the entities that they regulate. For example, U.S. securities exchanges have adopted rules to limit their liability for losses that Industry Members incur through their use of exchange facilities.
Furthermore, as described above, the specialized services were performed by experienced counsel at market rates for such services. Accordingly, the legal costs for the efforts related to the limitation of liability provision were reasonable.
CAT LLC believes that the recovery of consulting costs related to the Chair of the CAT Operating Committee is appropriate and that the amount and scope of such costs are reasonable.
As a preliminary matter, the selection of the Chair of the Operating Committee complies with the requirements of Section 4.2 of the CAT NMS Plan. The initial Chair that served during the period covered by Historical CAT Assessment 1A was designated by a Participant as the Participant's alternate voting member. Accordingly, the Chair is a representative of the Participants, as required by the CAT NMS Plan.
In addition, in approving the CAT Funding Model, the Commission recognized that it is appropriate to recover reasonable costs for consulting as a part of Historical CAT Assessments. As approved by the SEC, the CAT NMS Plan states that “the reasonably budgeted CAT costs shall include . . . consulting . . . ” costs.
The Participants determined that the position of the Chair was a critical role for the implementation of the CAT, and an independent Chair would appropriately consider and address the views of each of the Participants. The Participants also determined that it was important to have a Chair with a strong background regarding issues related to the regulatory obligations of self-regulatory organizations, including their obligations under national market system plans. The compensation paid to the Chair is appropriate for a person with such background and skills. The average annual amount paid to the Chair from 2017 through the end of FAM 3 was $292,733.30. Separate from the Chair, CAT LLC relies upon a Leadership Team of representatives of the SROs to oversee the day-to-day implementation of the CAT NMS Plan. CAT LLC does not compensate any member of the Leadership Team.
CAT LLC understands that there are three types of reconciliation processes related to the invoices:
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As discussed further below, CAT LLC only considers the first type of process to be a “reconciliation” and the only type of process that is required under the CAT NMS Plan. CAT LLC provides the means to reconcile the CAT invoice amount to the underlying trades provided by CAT.
The CAT NMS Plan does not require CAT LLC to facilitate the second type of process: matching underlying trades for a CAT invoice with a firm's internal books and records. CAT LLC has access only to the underlying trades provided by CAT; it does not have access to a firm's internal books and records. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
The CAT NMS Plan also does not require CAT LLC to provide the ability to identify the order originator for the underlying trades for the CAT invoices. Accordingly, the billing guidance and processes do not provide CAT Reporters with the ability to identify the order originator for the underlying trades provided by CAT with CAT invoices. CAT LLC has been working closely with CAT Reporters to explain its billing approach and to address any outstanding billing questions. But, it should not be lost that CAT LLC provides information sufficient to allow CAT Reporters to reconcile CAT invoice amounts with the underlying trades provided by CAT LLC.
The CAT NMS Plan does not require CAT LLC to facilitate the matching of underlying trades for a CAT invoice with a firm's internal books and records, which may consist of trading data from various sources external to CAT. Although beyond the requirements of the CAT NMS Plan and involving firm specific considerations, CAT LLC voluntarily has provided guidance and processes to assist CAT Reporters in their efforts to match the underlying trades with their own books and records.
In this regard, it is important to recognize that CAT LLC has developed a billing approach that greatly improves upon existing billing practices for similar regulatory fees (
To facilitate the introduction of CAT fees, CAT LLC has worked with FCAT to develop an approach to CAT billing that is consistent with existing billing constructs used with regard to Section 31-related sales values fees, subject to certain enhancements. Under this billing approach, FCAT is providing additional linkage elements, not necessarily provided in the Section 31-sales value fee context, to facilitate CAT Reporters' ability to match the underlying trades provided by CAT with their internal books and records and to reduce the complexity of that process. Specifically, FCAT is providing various key elements of the trade itself, such as the tradeID and branch sequence,
With the Additional Trade Details, CAT LLC and FCAT believe that the overwhelming majority of underlying trades provided by CAT bills can be matched with a CAT Reporter's internal books and records. CAT LLC recognizes that there may be certain cases in which such matching is more difficult given various firm-specific considerations, but believes that such instances are significantly more limited than with regard to the SRO fees charged in relation to Section 31.
Similar to other regulatory fees, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Accordingly, Historical CAT Assessment 1A does not address the process by which any CAT Reporters may pass through the fee to their customers. Likewise, the CAT billing approach provided by the Plan Processor is designed to address the needs of CAT Reporters with regard to the reconciliation of CAT invoices with the underlying trades provided by CAT LLC with the invoices; they are not designed to address issues related to any pass-through fees. Accordingly, facilitating CAT Reporters' ability to pass through fees to their clients is outside the scope of this fee filing. Nevertheless, as described below, CAT LLC and the Plan Processor have expended significant efforts to provide technical assistance to Industry Members regarding the implementation of Historical CAT Assessment 1A, including providing Additional Trade Details that provide significant details about each underlying trade.
In its approval of the CAT Funding Model, the Commission approved charging CAT fees to the CAT Executing Broker, rather than the originating broker. This fee filing must comply with the requirements of the CAT Funding Model, and, therefore, charges the Historical CAT Assessment 1A to CAT Executing Brokers.
Moreover, charging originating brokers would introduce significant
As noted, the CAT NMS Plan does not address the manner or extent to which CAT Executing Brokers may seek to pass any CAT Fees on to their customers, nor does it impose any obligation on CAT LLC or the Plan Processor to facilitate firms' ability to do so. Nevertheless, the Additional Trade Details provided with regard to the underlying trades on CAT invoices may assist with this process. Like with Section 31-related sales value fees, however, it is not always possible to trace every fee on a transaction back to the originating party. Industry Members have faced these issues under Section 31-related sales values fees for many years.
CAT LLC has worked with FCAT to provide significant technical assistance to Industry Members to allow the Industry Members to understand how Historical CAT Assessments will be implemented and billed, including webinars, CAT alerts, mock invoices, and responses to questions posed to the FCAT Help Desk.
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By providing such detailed and sustained assistance to Industry Members regarding CAT fees and billing, CAT LLC has successfully
In keeping with past practice, CAT LLC provided notice of the proposed Historical CAT Assessment 1A via CAT Fee Alert on April 1, 2026,
The Exchange believes the proposed rule change is consistent with the requirements of the Exchange Act. The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that this proposal is consistent with the Act because it implements provisions of the Plan and is designed to assist the Exchange in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The Exchange believes that the proposed fees paid by the CEBBs and CEBSs are reasonable, equitably allocated and not unfairly discriminatory. First, the Historical CAT Assessment 1A fees to be collected are directly associated with the 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 Exchange has already incurred such development and implementation costs and the proposed Historical CAT Assessment 1A fees, therefore, would allow the Exchange to collect certain of such costs in a fair and reasonable manner from Industry Members, as contemplated by the CAT NMS Plan.
The proposed Historical CAT Assessment 1A fees would be charged to Industry Members in support of the maintenance of a consolidated audit trail for regulatory purposes. The proposed fees, therefore, are consistent with the Commission's view that regulatory fees be used for regulatory purposes and not to support the Exchange's business operations. The proposed fees would not cover Exchange services unrelated to the CAT. In addition, any surplus would be used as a reserve to offset future fees. Given the direct relationship between CAT fees and CAT costs, the Exchange believes that the proposed fees are reasonable, equitable and not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model, finding it was reasonable and that it equitably allocates fees among Participants and Industry Members. The Exchange believes that the proposed fees adopted pursuant to the CAT Funding Model approved by the SEC are reasonable, equitably allocated and not unfairly discriminatory.
Section 11.1(b) of the CAT NMS Plan states that “[t]he Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves.” Per Section 11.1(b) of the CAT NMS Plan, the Exchange has filed this fee filing to implement the Industry Member CAT fees included in the CAT Funding Model. The Exchange believes that this proposal is consistent with the Exchange Act because it is consistent with, and implements, the CAT Funding Model in the CAT NMS Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the CAT NMS Plan. In approving the CAT NMS Plan, the SEC noted that the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
The SEC has determined that the CAT Funding Model is reasonable and satisfies the requirements of the Exchange Act. Specifically, the SEC has concluded that the method for determining Historical CAT Assessments as set forth in Section 11.3 of the CAT NMS Plan, including the formula for calculating the Historical
The formula for calculating a Historical Fee Rate requires the amount of Historical CAT Costs to be recovered. Specifically, Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan requires a fee filing to provide:
In accordance with this requirement, the Exchange has set forth the amount and type of Historical CAT Costs 1 for each of these categories of costs above.
Section 11.3(b)(iii)(B)(II) of the CAT NMS Plan also requires that the fee filing provide “sufficient detail to demonstrate that the Historical CAT Costs are reasonable and appropriate.” As discussed below, the Exchange believes that the amounts set forth in this filing for each of these cost categories is “reasonable and appropriate.” Each of the costs included in Historical CAT Costs 1 are reasonable and appropriate because the costs are consistent with standard industry practice, based on the need to comply with the requirements of the CAT NMS Plan, incurred subject to negotiations performed on an arm's length basis, and/or are consistent with the needs of any legal entity, particularly one with no employees.
In approving the CAT Funding Model, the Commission recognized that it is appropriate to recover costs related to cloud hosting services as a part of Historical CAT Assessments.
To comply with the requirements of the Plan, the breadth of the cloud activities related to the CAT is substantial. The cloud services not only include the production environment for the CAT, but they also include two industry testing environments, support environments for quality assurance and stress testing and disaster recovery capabilities. Moreover, the cloud storage costs are driven by the requirements of the Plan, which requires the storage of multiple versions of the data, from the original submitted version of the data through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting services. When the Commission adopted the CAT NMS Plan in 2016, it estimated that the CAT would need to receive 58 billion records per day
In addition to the effect of the data volume on the cloud hosting costs, the processing timelines set forth in the Plan contribute to the cloud hosting costs. Although CAT LLC has proactively sought to manage cloud hosting costs while complying with the Plan, including through requests to the Commission for exemptive relief and an amendment to the CAT NMS Plan, stringent CAT NMS Plan requirements do not allow for any material flexibility in cloud architecture design choices, processing timelines (
The costs for cloud hosting services also reflect the need for specialized cloud hosting services given the data volume and unique processing needs of the CAT. The data volume as well as the data processing needs of the CAT necessitate the use of cloud hosting services. The equipment, power and services required for an on-premises data model, the alternative to cloud hosting services, would be cost prohibitive. Moreover, as CAT was being developed, there were limited cloud hosting providers that could satisfy all the necessary CAT requirements, including the operational and security criteria. Over time more providers offering cloud hosting services that would satisfy these criteria have entered the market. CAT LLC will continue to evaluate alternative cloud hosting services, recognizing that the time and cost to move to an alternative cloud provider would be substantial.
The reasonableness of the cloud hosting services costs is further supported by key cost discipline mechanisms for the CAT—a cost-based funding structure, cost transparency, cost management efforts (including regular efforts to lower compute and storage costs where permitted by the Plan) and oversight. Together, these mechanisms help ensure the ongoing
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to CAIS operating fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to change request fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to capitalized developed technology costs as a part of Historical CAT Assessments.
These costs involve the activity of both the Initial Plan Processor and FCAT, as the successor Plan Processor.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover costs related to legal fees as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover consulting costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover insurance costs as a part of Historical CAT Assessments.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover professional and administration costs as a part of Historical CAT Assessments.
CAT LLC determined to hire a financial advisory firm, Anchin, to assist with financial matters for the CAT. CAT LLC interviewed Anchin as well as other potential financial advisory firms to assist with the CAT project, considering a variety of factors in its analysis, including the firm's relevant expertise and fees.
CAT LLC also determined to engage an independent accounting firm, Grant Thornton, to complete the audit of CAT LLC's financial statements, in accordance with the requirements of the CAT NMS Plan. CAT LLC interviewed this firm as well as another potential accounting firm to audit CAT LLC's financial statements, considering a variety of factors in its analysis, including the relevant expertise and fees of each of the firms. CAT LLC determined that Grant Thornton was well-qualified for the role given the balance of these considerations.
The professional and administrative costs also include costs related to the receipt of certain market data from Exegy. After performing an analysis of the available market data vendors to confirm that the data provided met the SIP Data requirements of the CAT NMS Plan and comparing the costs of the vendors providing the required SIP Data, CAT LLC determined to purchase market data from Exegy. Exegy provided the data elements required by the CAT NMS Plan, and the fees were reasonable and in line with market rates for the market data received.
The professional and administrative costs also include costs related to a third party security assessment of the CAT performed by RSM. The assessment was designed to verify and validate the effective design, implementation and operation of the controls specified by NIST Special Publication 800-53, Revision 4 and related standards and guidelines. Such a security assessment is in line with industry practice and important given the data included in the CAT. CAT LLC determined to engage RSM to perform the security assessment, after considering a variety of factors in its analysis, including the firm's relevant expertise and fees. The fees were reasonable and in line with market rates for such an assessment.
In approving the CAT Funding Model, the SEC recognized that it is appropriate to recover public relations costs as a part of Historical CAT Assessments.
The total executed equivalent share volume of transactions in Eligible Securities for the 12-month period from March 2025 through February 2026 was 5,980,937,549,360.49 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 will count executed equivalent shares for CAT billing purposes.
CAT LLC has determined to establish a Historical Recovery Period of 24 months for Historical CAT Assessment 1A and that such length is reasonable. CAT LLC determined that the length of Historical Recovery Period 1A appropriately weighs the need for a reasonable fee rate for Historical CAT Assessment 1A that spreads the Historical CAT Costs over an appropriate amount of time and the need to repay the loans notes to the Participants in a timely fashion. CAT LLC determined that 24 months for Historical Recovery Period 1A would establish a fee rate that is lower than other transaction-based fees, including fees assessed pursuant to Section 31.
CAT LLC has determined to calculate the projected total executed equivalent share volume for the 24 months of Historical Recovery Period 1A by doubling the executed equivalent share volume for the prior 12 months. The Operating Committee determined that such an approach was reasonable as the CAT's annual executed equivalent share volume has increased from prior years (
As noted in the Plan amendment for the CAT Funding Model, as a practical matter, the fee filing for a Historical CAT Assessment would provide the exact fee per executed equivalent share to be paid for each Historical CAT Assessment, and describe the relevant number of decimal places for the fee rate.
The Exchange believes that imposing Historical CAT Assessment 1A with a fee rate of $0.000002 per executed equivalent share is reasonable because it provides for a revenue stream for the Company that is aligned with the remaining Historical CAT Costs 1 and such costs would be spread out over an appropriate recovery period, as discussed above. Moreover, the Exchange believes that the level of the fee rate is reasonable, as it is comparable to other transaction-based fees. Indeed, Historical CAT Assessment 1A is significantly lower than fees assessed pursuant to Section 31 (
Historical CAT Assessment 1A 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 Historical CAT Assessments as well as the Industry Members to be
Historical CAT Assessment 1A provides for an equitable allocation of fees as it complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. For example, as described above, the calculation of Historical CAT Assessment 1A complies with the formula set forth in Section 11.3(b) of the CAT NMS Plan. In addition, Historical CAT Assessment 1A would be charged to CEBBs and CEBSs in accordance with Section 11.3(b) of the CAT NMS Plan. Furthermore, the Participants would continue to remain responsible for their designated share of Past CAT Costs through the cancellation of loans made by the Participants to CAT LLC.
In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A—Historical CAT Costs 1 (including Excluded Costs) and the exclusion of costs previously invoiced via Historical CAT Assessment 1, the count for the executed equivalent share volume for the prior 12 months, the length of the Historical Recovery Period, and the projected executed equivalent share volume for the Historical Recovery Period—are reasonable. Moreover, these inputs lead to a reasonable fee rate for Historical CAT Assessment 1A 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.
Historical CAT Assessment 1A is not an unfairly discriminatory fee. The SEC approved the CAT Funding Model, finding that each aspect of the CAT Funding Model satisfied the requirements of the Exchange Act. In reaching this conclusion, the SEC analyzed the potential effect of Historical CAT Assessments 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. Historical CAT Assessment 1A complies with the requirements regarding the calculation of Historical CAT Assessments as set forth in the CAT NMS Plan. In addition, as discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A and the resulting fee rate for Historical CAT Assessment 1A is reasonable. Therefore, Historical CAT Assessment 1A does not impose an unfairly discriminatory fee on Industry Members.
Finally, 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 specificity in the fee schedule. The Exchange also believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fee based on fixed rate per executed equivalent share. Such factors are crucial to estimating a reliable revenue stream for CAT LLC and for permitting Exchange members to reasonably predict their payment obligations for budgeting purposes.
Section 6(b)(8) of the Act
In addition, all Participants (including exchanges and FINRA) are proposing to introduce Historical CAT Assessment 1A on behalf of CAT LLC to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing, and, therefore, it does not raise competition issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed the potential competitive impact of the CAT Funding Model, including competitive issues related to market services, trading services and regulatory services, efficiency concerns, and capital formation.
As discussed above, each of the inputs into the calculation of Historical CAT Assessment 1A is reasonable and the resulting fee rate for Historical CAT Assessment 1A calculated in accordance with the CAT Funding Model is reasonable. Therefore, Historical CAT Assessment 1A would not impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Exchange Act.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.