Existing Collections Supporting Statement

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
the Consolidated Audit Trail NMS Plan (NMS Plan Required to be Filed under
Commission Rule 613)

A.

Justification

This submission is being made pursuant to the Paperwork Reduction Act of 1995,
44 U.S.C. Section 3501 et. seq. The collection of information is in connection with an
National Market System (NMS) Plan required to be filed with the Commission under
Rule 613.
1.

Necessity of Information Collection

The Commission believes that the regulatory data infrastructure on which FINRA
and the national securities exchanges (the “Participants”) and the Commission currently
must rely is generally outdated and inadequate to effectively oversee a complex,
dispersed and highly automated national market system. In performing their oversight
responsibilities, regulators today must attempt to cobble together disparate data from a
variety of existing information systems lacking in completeness, accuracy, accessibility,
and/or timeliness—a model that neither supports the efficient aggregation of data from
multiple trading venues, nor yields the type of complete and accurate market activity data
needed for robust market oversight.
Currently, FINRA and some of the exchanges maintain their own separate audit
trail systems for certain segments of this trading activity, which vary in scope, required
data elements and format. In performing their market oversight responsibilities,
Participant and Commission staffs today must rely heavily on data from these various
Participant audit trails. However, there are shortcomings in the completeness, accuracy,
accessibility, and timeliness of these existing audit trail systems. Some of these
shortcomings are a result of the disparate nature of the systems, which make it
impractical, for example, to follow orders through their entire lifecycle as they may be
routed, aggregated, re-routed, and disaggregated across multiple markets. The lack of
key information in the audit trails that would be useful for regulatory oversight, such as
the identity of the customers who originate orders, or even the fact that two sets of orders
may have been originated by the same customer, is another shortcoming.
Though Participant and Commission staffs also have access to sources of market
activity data other than Participant audit trails, these systems each suffer their own
drawbacks. For example, data obtained from the electronic blue sheet system and equity
cleared reports comprise only trade executions, and not orders or quotes. In addition, like
data from existing audit trails, data from these sources lacks key elements important to
regulators, such as the identity of the customer in the case of equity cleared reports.
Furthermore, recent experience with implementing incremental improvements to the
electronic blue sheet system has illustrated some of the overall limitations of the current

technologies and mechanisms used by the industry to collect, record, and make available
market activity data for regulatory purposes. 1
Recognizing these shortcomings, on July 11, 2012, the Commission adopted
Rule 613 of Regulation NMS under the Act. 2 Rule 613 required the Participants to
submit an NMS plan to create, implement, and maintain the consolidated audit trail
(“CAT”) 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 in a single, consolidated data source. 3 On
February 27, 2015, the Participants submitted the CAT NMS Plan. 4
The Commission notes that when it adopted Rule 613, it discussed the burden
hours associated with the development and submission of the CAT NMS Plan only. 5 In
doing so, the Commission noted that the development and submission of the CAT NMS
1

See Securities Exchange Act Release No. 64976 (July 27, 2011), 76 FR 46960
(August 3, 2011) (“Large Trader Release”).

2

See Securities Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722
(August 1, 2012) (“Adopting Release”); see also Securities Exchange Act Release
No. 62174 (May 26, 2010), 75 FR 32556 (June 8, 2010) (“Proposing Release”).

3

See 17 CFR 242.613(a)(1), (c)(1), (c)(7).

4

See Letter from Participants to Brent J. Fields, Secretary, Commission, dated
February 27, 2015. The Participants filed the CAT NMS Plan on September 30,
2014. See Letter from the Participants, to Brent J. Fields, Secretary, Commission,
dated September 30, 2014. The CAT NMS Plan filed on February 27, 2015, was
an amendment to and replacement of the Initial CAT NMS Plan (the “Amended
and Restated CAT NMS Plan”). On December 24, 2015, the Participants
submitted an Amendment to the Amended and Restated CAT NMS Plan. See
Letter from Participants to Brent J. Fields, Secretary, Commission, dated
December 23, 2015 (the “Amendment”). On February 9, 2016, the Participants
filed with the Commission an identical, but unmarked, version of the Amended
and Restated CAT NMS Plan, dated February 27, 2015, as modified by the
Amendment, as well as a copy of the request for proposal issued by the
Participants to solicit Bids from parties interested in serving as the Plan Processor
for the consolidated audit trail. Unless the context otherwise requires, the “CAT
NMS Plan” shall refer to the Amended and Restated CAT NMS Plan, as modified
by the Amendment.

5

See Adopting Release, supra note 2, at 45804. On September 25, 2015, the
Commission submitted to OMB a request for approval of an extension of the
collection of information related to the development and submission of the CAT
NMS Plan. See Submission for OMB Review; Comment Request for Extension
of Rule 613; SEC File No. 270-616, OMB Control No. 3235-0671 (September 25,
2015), 80 FR 59209 (October 1, 2015). This submission was approved by OMB
on December 21, 2015.

2

Plan that would govern the creation, implementation and maintenance of a consolidated
audit trail is a multi-step process and accordingly that the Commission was deferring its
discussion of the burden hours associated with the other paperwork requirements required
by Rule 613 and ongoing burdens since they would only be incurred if the Commission
approves the CAT NMS Plan. 6
The estimates discussed below are based on the requirements of Rule 613 and
take into account the Exemption Order. 7 Information and estimates contained in the CAT
NMS Plan that was submitted by the Participants also informed these estimates because
they provide a useful, quantified point of reference regarding potential burdens and costs.
The Commission acknowledges that the CAT NMS Plan filed by the Participants
contains provisions in addition to those required by the Commission in Rule 613 (e.g.,
requiring the inclusion of OTC Equity Securities; 8 the availability of historical data for
not less than six years in a manner that is directly available and searchable without
manual intervention from the Plan Processor; 9 a complete symbology database to be
maintained by the Plan Processor, including the historical symbology; as well as issue
symbol information and data using the listing exchange symbology format 10).
On April 27, 2016, the Commission published a notice soliciting comments from
the public. 11 On November 15, 2016, the Commission approved the CAT NMS Plan
(“CAT NMS Plan Order”). 12
6

See Adopting Release, supra note 2, at 45804.

7

The CAT NMS Plan published for comment reflects exemptive relief granted by
the Commission that provided the flexibility for the Participants to propose, in the
CAT NMS Plan, alternative approaches to certain requirements of Rule 613. See
Securities Exchange Act Release No. 77265 (March 1, 2016), 81 FR 11856
(March 7, 2016) (“Exemption Order”).

8

See CAT NMS Plan, supra note 4, at Section 1.1 (defining “Eligible Security” as
all NMS securities and all OTC Equity Securities); Appendix C, Section A.1(a).

9

See id. at Section 6.5(b)(i).

10

See id. at Appendix C, Section A.1(a); Appendix D, Section 2.

11

See Securities Exchange Act Release No. 77724 (April 27, 2016), 81 FR 30613
(May 17, 2016) (“CAT NMS Plan Notice”). The burdens associated with the
CAT NMS Plan Notice have been submitted under OMB number 3235-0671
which relates to Rule 613 - Consolidated Audit Trail-Filing a National Market
System Plan. Because those burdens are in addition to the existing burdens and
do not seek to change the burdens associated with the submission approved by
OMB on December 21, 2015, the supporting statement accompanying the
submission for Rule 613 - Consolidated Audit Trail-Filing a National Market
System Plan (3235-0671) which was approved by OMB on December 21, 2015,
was submitted to OMB along with the CAT NMS Plan Notice supporting
statement. The existing collection of information (Rule 613 - Consolidated Audit
Trail-Filing a National Market System Plan) pertained to the development and

3

2.

Purposes and Use of the Information Collection

The Commission believes that the CAT NMS Plan would improve the quality of
the data available to regulators in four areas that affect the ultimate effectiveness of core
regulatory efforts—completeness, accuracy, accessibility and timeliness. 13 The
improvements in these data qualities would substantially improve regulators’ ability to
perform analysis and reconstruction of market events, and market analysis and research
to inform policy decisions, as well as perform regulatory activities, in particular market
surveillance, examinations, investigations, and other enforcement functions.
A. Central Repository
Rule 613 states that the CAT NMS Plan shall provide for the creation and
maintenance of a Central Repository. 14 The Central Repository is required to receive,
consolidate and retain the data required to be submitted by the Participants and their
broker-dealer members. 15 Participant and Commission staffs would have access to the
data for regulatory purposes. 16
B. Data Collection and Reporting
The Commission believes that the data collected and reported to the Central
Repository pursuant to the requirements of the CAT NMS Plan (as required by Rule 613)
would be used by regulators to monitor and surveil the securities markets and detect and
investigate activity, whether on one market or across markets. The data collected and
reported to the Central Repository would also be used by regulators for the evaluation of
tips and complaints and for complex enforcement inquiries or investigations, as well as
inspections and examinations. Further, the Commission believes that regulators would
use the data collected and reported to the Central Repository to conduct timely and
submission of an NMS plan, and such NMS plan has been developed and
submitted, and published for comment in the CAT NMS Plan Notice and
subsequently approved by the Commission on November 15, 2016. See note 12,
infra. Therefore, the Commission deems such collection of information complete.
12

See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR
84696 (November 23, 2016).

13

See Adopting Release, supra note 2, at 45727 (discussing four “qualities” of trade
and order data that impact the effectiveness of core Participant and Commission
regulatory efforts: accuracy, completeness, accessibility, and timeliness).

14

See 17 CFR 242.613(e)(1).

15

Id. The Commission notes that the CAT NMS Plan refers to a member of a
national securities exchange or of a national securities association as an “Industry
Member.” See CAT NMS Plan, supra note 4, at Section 1.1.

16

See 17 CFR 242.613(e)(2).

4

accurate analysis of market activity for reconstruction of broad-based market events in
support of regulatory decisions.
C. Collection and Retention of National Best Bid and National
Best Offer Information, Last Sale Data and Transaction
Reports
The CAT NMS Plan must require the Central Repository to collect and retain
National Best Bid and National Best Offer (“NBBO”) information, transaction reports,
and Last Sale Reports in a format compatible with the order and event information
collected pursuant to Rule 613(c)(7). 17 Participant and Commission staffs could use this
data to easily search across order, NBBO, and transaction databases. The Commission
believes that having the NBBO information in a uniform electronic format compatible
with order and event information would assist Participants in enforcing compliance with
federal securities laws, rules, and regulations, as well as their own rules. 18 The
Commission also believes that a CAT NMS Plan requiring the Central Repository to
collect and retain the transaction reports and Last Sale Reports in a format compatible
with the order execution information would aid regulators in monitoring for certain
market manipulations. 19
D. Surveillance

17

See 17 CFR 242.613(e)(7).

18

The Commission and Participants use the NBBO to, among other things, evaluate
members for compliance with numerous regulatory requirements, such as the duty
of best execution or Rule 611 of Regulation NMS. See 17 CFR 242.611; see also,
e.g., ISE Rule 1901 and Phlx Rule 1084.

19

Rules 613(e)(7)(ii) and (iii) require that transaction reports reported pursuant to an
effective transaction reporting plan and Last Sale Reports reported pursuant to the
OPRA Plan be reported to the Central Repository. This requirement should allow
regulators to evaluate certain trading activity. For example, trading patterns of
reported and unreported trades may cause Participant or Commission staffs to
make further inquiries into the nature of the trading to ensure that the public was
receiving accurate and timely information regarding executions and that market
participants were continuing to comply with trade reporting obligations under
Participant rules. Similarly, patterns in the transactions that are reported and
unreported to the consolidated tape could be indicia of market abuse, including
failure to obtain best execution for customer orders or possible market
manipulation. The Commission and the Participants would be able to review
information on trades not reported to the tape to determine whether they should
have been reported, whether Section 31 fees should have been paid, and/or
whether the trades are part of a manipulative scheme.

5

The CAT NMS Plan (as required by Rule 613(f)) contains a requirement that the
Participants develop and implement a surveillance system, or enhance existing
surveillance systems, reasonably designed to make use of the consolidated information in
the consolidated audit trail. 20 This requirement is intended to position regulators to make
full use of the consolidated audit trail data in order to carry out their regulatory
obligations. In addition, because trading and potentially manipulative activities could
take place across multiple markets, and the consolidated audit trail data would trace the
entire lifecycle of an order from origination to execution or cancellation, new or
enhanced surveillance systems may also enable regulators to investigate potentially
illegal activity that spans multiple markets more efficiently.
E. Written Assessment of Operation of the Consolidated Audit
Trail
Rule 613(b)(6) requires the CAT NMS Plan to require the Participants to provide
the Commission a written assessment of the CAT’s operation at least every two years,
once the CAT NMS Plan is effective. 21 The CAT NMS Plan states that the Chief
Compliance Officer would oversee the assessment. 22 These assessments would aid
Participant and Commission staffs in understanding and evaluating any deficiencies in
the operation of the consolidated audit trail and to propose potential improvements to the
CAT NMS Plan. The Commission believes the written assessments would allow
Participants and Commission staffs to periodically assess whether such potential
improvements would enhance market oversight. Moreover, the Commission believes
these assessments would help inform the Commission regarding the likely feasibility,
costs, and impact of, and the Participants’ approach to, the consolidated audit trail
evolving over time. The Commission believes that the assessments will focus the Plan
Processor and Participants on critical technological and other developments, and should
help ensure that CAT technology is up-to-date, resilient and secure, and provides accurate
CAT Data.
F. Document on Expansion to Other Securities
Rule 613(i) requires the CAT NMS Plan to require the Participants to jointly
provide to the Commission, within six months after the CAT NMS Plan is effective, a
document outlining how the Participants could incorporate into the consolidated audit

20

See CAT NMS Plan, supra note 4, at Section 6.10(a). See also 17 CFR
242.613(f).

21

17 CFR 242.613(b)(6). As discussed in Section 12.A.e., infra, the Commission
has amended Section 6.6 of the Plan to change the frequency of the assessment
contemplated by Rule 613(b)(6) from biannual to annual.

22

See CAT NMS Plan, supra note 4, at Section 6.6(a)(ii). See also id. at Section
6.6(a)(i).

6

trail information regarding certain products that are not NMS securities. 23 A document
outlining a possible expansion of the consolidated audit trail could help inform the
Commission about the Participants’ strategy for potentially accomplishing such an
expansion over a reasonable period of time. Moreover, such document would aid the
Commission in assessing the feasibility and impact of possible future proposals by the
Participants to include such additional securities and transactions in the consolidated
audit trail.
Consideration Given to Information Technology
Several of the information collections associated with the CAT NMS Plan involve
the use of electronic information collection techniques. Rule 613 states that the CAT
NMS Plan shall provide for the creation and maintenance of the Central Repository, 24
which is required to receive, consolidate and retain the data required to be submitted
electronically by the Participants and their members. 25 The CAT NMS Plan requires
CAT Reporters to report data to the Central Repository either in a uniform electronic
format, or in a manner that would allow the Central Repository to convert the data to a
uniform electronic format. 26 The CAT NMS Plan also requires the Central Repository to
collect and retain on a current and continuing basis, in a format compatible with the
Participant and member data, all data including NBBO information, transaction reports,
and Last Sale Reports. 27 Additionally, the CAT NMS Plan (as required by Rule 613(f))
also requires that the Participants develop and implement a surveillance system, or
enhance existing surveillance systems, reasonably designed to make use of the
consolidated information in the consolidated audit trail. 28
The Commission believes it is important to require the electronic submission of
the information required by Rule 613 to ensure that the CAT can capture in a timely,
accurate and accessible manner all of the information necessary to efficiently and
effectively monitor cross-market trading activity in today’s highly automated and
dispersed markets. The Commission believes that, as part of operating their businesses,
the Participants are already accustomed to handling large volumes of data and may
already have in place electronic trading, routing and reporting systems. Most Participants
maintain audit trails that contain the trade and order data that they obtain from their
members and each equity and options exchange keeps an audit trail of orders and trades
that occur on its market. To improve upon the status quo, the consolidated audit trail
23

See 17 CFR 242.613(i). See also supra note 8.

24

See 17 CFR 242.613(e)(1).

25

Id.

26

See CAT NMS Plan, supra note 4, at Appendix C, Section A.1(b).

27

See id. at Section 6.5(a)(ii). See also 17 CFR 242.613(e)(7), (e)(8).

28

See CAT NMS Plan, supra note 4, at Section 6.10(a). See also 17 CFR
242.613(f).

7

would need to impose electronic information collection and reporting requirements. The
CAT NMS Plan states, “… each equities and options exchange is built on its own unique
platform, utilizes unique entry protocols and requirements and thus creates uniquely
formatted audit trails. The existence of multiple non-integrated audit trails has direct
consequences on the accuracy and efficiency of regulatory oversight.” 29 As trading
venues have become more automated, and trading systems have become computerized,
trading volumes have increased significantly and trading has become more dispersed
across more trading centers and therefore more difficult to monitor and trace. Audit trail
data for securities that are traded on multiple venues is fragmented across multiple data
sources, with each regulator generally having direct access only to data generated on the
trading venues it regulates. The Commission believes that the CAT NMS Plan would
bring audit trail data related to trading on all venues into the Central Repository where it
could be accessed by all regulators.
Commission staff does not believe that improvements in information technology
would have any impact on the burdens associated with the CAT NMS Plan (in fact,
improvements in information technology may reduce any burdens associated with the
Plan), nor that any obstacles exist to reducing such burdens.
Duplication
The CAT NMS Plan requires the collection and reporting of certain information
that national securities exchanges and national securities associations, as well as their
members, already collect and report pursuant to both Federal Rules and the rules of those
exchanges and associations. However, as required by Rule 613, the CAT NMS Plan
requires the Participants to collect additional and more detailed information, and to report
the information to the Central Repository in a uniform electronic format, or in a manner
that would allow the Central Repository to convert the data to a uniform electronic format
for consolidation and storage.
In an effort to ensure identification and avoidance of unnecessary duplicative
rules and requirements, Rule 613 requires the CAT NMS Plan to discuss a plan to
eliminate existing rules and systems (or components thereof) that will be rendered
duplicative by the consolidated audit trail, including identification of such rules and
systems (or components thereof). 30 To the extent that any existing rules or systems
related to monitoring quotes, orders, and executions provide information that is not
rendered duplicative by the consolidated audit trail, Rule 613 requires an analysis of: (A)
whether the collection of such information remains appropriate; 31 (B) if still appropriate,
whether such information should continue to be separately collected or should instead be

29

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(ii)(A).

30

See Rule 613(a)(1)(ix).

31

See Rule 613(a)(1)(ix)(A).

8

incorporated into the consolidated audit trail; 32 and (C) if no longer appropriate, how the
collection of such information could be efficiently terminated; the steps the plan sponsors
propose to take to seek Commission approval for the elimination of such rules and
systems (or components thereof); and a timetable for such elimination, including a
description of how the plan sponsors propose to phase in the consolidated audit trail and
phase out such existing rules and systems (or components thereof). 33
In accordance with Rule 613, the CAT NMS Plan provides information regarding
when the Participants intend to initiate and conclude identification of: duplicative rules
and systems, partially duplicative rules and systems, non-duplicative rules or systems
related to monitoring quotes, orders and executions, and the timing of Participant rule and
system changes due to any elimination or modification of Commission rules as a result of
the implementation of CAT. Further, the Plan discusses when the Participants will file
proposed rule changes to implement the rule modifications or deletions and elimination
of the relevant rules and systems. 34
Effect on Small Entities
The CAT NMS Plan would have an effect on small entities. The CAT NMS Plan
requires Participants to enforce compliance by their members with the provisions of
Rule 613 and the Plan through self-regulatory organization (“SRO”) rules that require
their members to comply with the requirements of Rule 613 and the CAT NMS Plan. 35
These rules would apply to all broker-dealers—including those that are small entities.
Commission rules generally define a broker-dealer as a small entity for purposes of the
Exchange Act and the Regulatory Flexibility Act if the broker-dealer had a total capital of
less than $500,000 on the date in the prior fiscal year as of which its audited financial
statements were prepared, and it is not affiliated with any person (other than a natural
person that is not a small entity).
Thus, small broker-dealers would be responsible for complying with the CAT
NMS Plan’s requirements for regularly reporting to the Central Repository the required
order and transaction data, and would need to either modify their existing order handling
and trading systems to comply with the CAT NMS Plan, or rely on outside vendors to
provide a functionality that would provide information to the Central Repository.
The Commission notes that some small firms currently may not have systems in
place to report audit trail data as they may be exempted from reporting data to FINRA’s
32

See Rule 613(a)(1)(ix)(B).

33

See Rule 613(a)(1)(ix)(C).

34

See CAT NMS Plan, supra note 4, at Appendix C, Section C.9.

35

The CAT NMS Plan states that the Participants will endeavor to promulgate
consistent rules requiring compliance by their members with the provisions of
Rule 613 and the Plan. See id. at Section 3.11. See also 17 CFR 242.613(g)(2).

9

Order Audit Trail System (“OATS”) because they do not engage in activities that would
incur OATS reporting obligations, or they may be excluded or exempted under FINRA’s
OATS reporting rules. Small firms currently excluded from OATS reporting due to their
size would have CAT reporting responsibilities under the Plan because the Plan makes no
provision to exempt or exclude them, as FINRA does with OATS reporting. 36
The Commission estimates that as of December 2015, there were approximately
1,234 Commission-registered broker-dealers that would be considered small entities for
purposes of the statute. Each of these brokers-dealers, assuming that they would be
subject to CAT reporting obligations, would be required to comply with the CAT NMS
Plan required under Rule 613. 37
To minimize the burden of complying with the collecting and reporting
requirements in the CAT NMS Plan, the CAT NMS Plan provides that small brokerdealers must begin reporting data to the Central Repository within three years of approval
of the CAT NMS Plan, while large broker-dealers must begin reporting such data within
two years of approval. 38 Thus, small broker-dealers would be given additional time to
ready themselves for compliance with the collection and reporting requirements in the
CAT NMS Plan.
Consequences of Not Conducting Collections
If the Commission were to not require the collections (or were to require the
collections on a less frequent basis), the Commission believes that this could impact its
36

See FINRA Rule 7470 (Exemption to the Order Recording and Data
Transmission Requirements). The Rule provides that, for good cause shown,
FINRA may exempt a member from its recording and reporting requirements if:
(1) the member and current control affiliates and associated persons of the
member have not been subject within the last five years to any final disciplinary
action, and within the last ten years to any disciplinary action involving fraud; (2)
the member has annual revenues of less than $2 million; (3) the member does not
conduct any market making activities in NMS stock or OTC securities; (4) the
member does not execute principal transactions with its customers; and (5) the
member does not conduct clearing or carrying activities for other firms. This
authority sunsets on July 10, 2019. Approximately 799 firms that are excluded or
exempt from OATS would incur CAT reporting obligations under the Plan. See
CAT NMS Plan Order, supra note 12, at Section V.F.1.c.(2)B.

37

The Commission understands that some registered broker-dealers either trade in
asset classes not currently included in the definition of Eligible Security or do not
trade at all (e.g., broker-dealers for the purposes of underwriting, advising, private
placements).

38

See CAT NMS Plan, supra note 4, at Section 6.4; see also 17 CFR
242.613(a)(3)(v) and (vi).

10

objective to create a comprehensive consolidated audit trail that allows regulators to
efficiently and accurately track all activity throughout the U.S. markets in National
Market System (NMS) securities. The Commission believes the collections would
improve the completeness, accuracy, accessibility and timeliness of data available to
regulators and therefore improve regulators’ ability to perform regulatory activities, in
particular market surveillance, examinations, investigations, and other enforcement
functions, as well as analysis and reconstruction of market events, and market analysis
and research to inform policy decisions. Regulators depend on data for many of these
activities and the improvements in the data qualities would thus improve the efficiency
and effectiveness of such regulatory activities.
Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
The information collection “Data Collection and Reporting” would require
respondents to record and report information to the Central Repository information more
frequently than quarterly; 39 specifically, certain information must be recorded
contemporaneously with a Reportable Event and reported to the Central Repository by
8:00 a.m. ET on the trading day following the day such information has been recorded by
a Participant or broker-dealer industry member, 40 and other information must be reported
by 8:00 a.m. ET on the trading day following the day a broker-dealer member receives
such information. 41
In addition, the “Data Collection and Reporting” information collection would
require respondents to submit confidential information to the Central Repository, such as
the terms of an order, 42 customer account information, 43 and information sufficient to
identify a customer. 44 Relatedly, the information collection requirement that the
Participants develop and implement new surveillance systems, or enhance existing
surveillance systems, reasonably designed to make use of consolidated audit trail
information 45 is intended to enable Participants to better monitor trading through use of
39

The CAT NMS Plan did not provide an estimated frequency of reporting for
Participants and broker-dealers.

40

See 17 CFR 242.613(c)(3); see also CAT NMS Plan, supra note 4, at Section
6.3(b), Section 6.4(b).

41

See 17 CFR 242.613(c)(4); see also CAT NMS Plan, supra note 4, at Section
6.4(b).

42

See 17 CFR 242.613(c)(7); see also CAT NMS Plan, supra note 4, at Section
6.3(d), Section 6.4(d).

43

See 17 CFR 242.613(c)(7)(viii)(B); see also CAT NMS Plan, supra note 4, at
Appendix C, Section A.1(A)(iii).

44

See 17 CFR 242.613(c)(7)(viii)(A); see also CAT NMS Plan, supra note 4, at
Section 6.4(ii)(A)(C).

45

See 17 CFR 242.613(f).

11

this confidential information. As described in Item 10 below, Rule 613 includes
requirements that the CAT NMS Plan must contain to protect the confidentiality of this
information 46 and these requirements are detailed in the CAT NMS Plan. 47
The Commission notes that the information collection “Written Assessment of the
Operation of the Consolidated Audit Trail” would likely contain confidential information
concerning any deficiencies of the Consolidated Audit Trail and a plan for improvements.
Rule 613(b)(6) provides that the CAT NMS Plan must require the Participants to submit
to the Commission the written assessment at least every two years once the Plan is
effective. 48 As discussed below, 49 the Commission has amended this requirement in the
CAT NMS Plan to change the frequency of the assessment contemplated by Rule
613(b)(6) from biannual to annual. To the extent that the Commission receives
confidential information pursuant to the CAT NMS Plan, such information will be kept
confidential, subject to the provisions of applicable law.
Consultations Outside the Agency
The Commission requested comment on the collection of information
requirements in the CAT NMS Plan Notice in April 2016. 50 The Commission received a
number of comments on the costs associated with the information collections required by
Rule 613. 51
A. Costs to Participants –Central Repository
One commenter provided an alternate estimate for Central Repository ongoing
costs of $28 million to $36 million.52 The commenter did not provide additional
information or analysis to support this estimate, but the Commission notes that the
commenter cited a study of the costs of the Volcker Rule in support of estimates for costs
46

See 17 CFR 242.613(a)(1)(iv), 613(b)(6), 613(e)(4)(i), 613(e)(4)(i)(A).

47

See CAT NMS Plan, supra note 4, at Section 6.1(b), Section 6.2(b), Section
6.5(f)(i), Section 6.5(iv), Section 6.9, Section 6.12, Appendix D, Section 4.

48

See 17 CFR 242.613(b)(6); see also CAT NMS Plan, supra note 4, at Section
6.6(a)(i).

49

See Section 12.A.e., infra.

50

See Securities Exchange Act Release No. 77724 (April 27, 2016), 81 FR 30613
(May 17, 2016). The public comments received on the CAT NMS Plan Notice
have been posted to the Commission’s public website and available at
https://www.sec.gov/comments/4-698/4-698.shtml.

51

The Commission notes that the Commission’s cost estimates are discussed in
detail in Section V.F. of the CAT NMS Plan Order. See CAT NMS Plan Order,
supra note 12, at Section V.F.

52

Data Boiler Letter at 15.

12

to broker-dealers. 53 If the commenter is basing its estimates on the costs expected from
the Volcker Rule, the Commission notes that the requirements of Rule 613 are
significantly different than the requirements of the Volcker Rule. The Commission is not
changing its Central Repository cost estimates in response to this commenter. The
Commission also notes that the estimates provided in the CAT NMS Plan Notice (and
updated in the Participants’ Response Letter III, discussed below) are the result of a
competitive bidding process specific to the CAT and the Commission deems them
credible. The Participants’ Response Letter III contains estimates that differ from those
discussed in the CAT NMS Plan Notice to reflect the fact that Participants have narrowed
the number of Bidders down to the final three and the range of potential cost estimates is
therefore narrower as well. 54 Based on this updated information, the Commission now
believes that the costs to build the Central Repository range from $37.5 million to $65
million and annual operating costs range from $36.5 million to $55 million.55
B. Costs to Participants – Data Collection and Reporting
One commenter believed that estimates of current data reporting costs to
Participants were “grossly underestimated,” 56 and stated that the implementation cost
estimate of $17.9 million for Participants was “not too far off,” but felt the Participants’
estimated costs for legal and consulting services and additional employees were not
reliable. The Commission has considered the comment and continues to believe that the
Participant cost estimates presented in the Plan are credible and is thus not changing its
cost estimates of Participants’ Data Recording and Reporting in response to the
commenter. All 19 Participants responded to the Participants Study57 that served as the
basis of the estimates, and most Participants have experience collecting audit trail data as
well as expertise in the requirements of the CAT and in their business practices. The
commenter did not provide an explanation for why the Participants were unable to
reasonably estimate their own current data reporting costs.
53

Data Boiler Letter at 15.

54

Response Letter III at 14–15. The Commission notes that the Participants
submitted three letters responding to commenters. See Letters from Participants
to Brent J. Fields, Secretary, Commission, dated September 2, 2016 (“Response
Letter I”), September 23, 2016 (“Response Letter II”) and October 7, 2016
(“Response Letter III”).

55

The Commission uses the upper end of cost ranges for its estimates of aggregate
costs to the industry. See CAT NMS Plan Order, supra note 12, at Section
V.F.2.a.

56

Data Boiler Letter at 35.

57

There were 19 Participants at the time the Participants conducted the study. The
study collected information from the Participants about current audit trail
reporting costs under the existing regulatory reporting framework and the
potential costs of reporting to the Central Repository (the “Participants Study”).
See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(i)(A)(1).

13

C. Costs to Participants – Surveillance
One commenter implied that savings on surveillance were unlikely, and stated
that the lack of an analytical framework did not facilitate the identification of suspicious
activities. 58 Another commenter noted that uncertainties in the manner in which
regulators will access data in the Central Repository create significant cost uncertainties,
especially if the Participants must use bulk extraction to create copies of CAT Data for
analysis within their own infrastructure. 59 On the other hand, the commenter asserted
that the CAT could permit more efficient market surveillance activity by the Participants,
which would allow for cost savings. 60 The Commission has considered these comments
and continues to believe that the Participant cost estimates presented in the Plan are
credible and is not changing its surveillance cost estimates in response to commenters.
As noted above, all 19 Participants 61 responded to the Participants Study, and most
Participants have experience collecting audit trail data as well as expertise in the
requirements of CAT as well as in their business practices. Regarding the comment
about the inclusion of an analytical framework in surveillance cost estimates in the Plan,
the Plan does incorporate analytical framework; 62 therefore, the Commission believes
that Participant cost estimates already account for such a framework.
D. Costs to Broker-Dealers – Data Collection and Reporting
The Commission received comments on the reliability of its Outsourcing Cost
Model for small broker-dealers and its re-estimation of costs. 63 One commenter believed
that the Commission’s estimates of service bureau charges for a small firm were
reasonable. 64 Another commenter noted that Outsourcers must expend internal resources
even when relying on their service providers to accomplish current data reporting. 65 A
third commenter stated that broker-dealers that clear for others may have higher

58

Data Boiler Letter at 35.

59

Securities Industry and Financial Markets Association (“SIFMA”) Letter at 33.

60

SIFMA Letter at 18.

61

See supra note 57.

62

See CAT NMS Plan Order, supra note 12, at Section V.E.2.c(1).

63

See CAT NMS Plan Notice, supra note 11, at Section IV.F.1.c.(2)B.ii., for a
discussion of the Commission’s Outsourcing Cost model.

64

Data Boiler Letter at 36.

65

Financial Information Forum (“FIF”) Letter at 34. This commenter references
electronic blue sheet (“EBS”) reporting, but indicates that broker-dealers
sometimes must also be involved in preparing EBS request responses.

14

implementation costs since they may have to support more broker-dealers as a result of
the CAT. 66
With respect to the comment that the Outsourcing Cost Model does not account
for internal expenses, the Commission notes that its cost estimates explicitly assume that
Outsourcers have employee expenses that cover these activities. 67 In response to the
commenters concerned that the Commission’s estimates do not account for an increase in
costs for broker-dealers that clear for other broker-dealers or provide support to
introducing broker-dealers, the Commission continues to believe in the reliability of the
analysis of broker-dealers implementation costs presented in the CAT NMS Plan Notice,
and notes that the Reporters Study estimates for large broker-dealers are likely to include
these expenses because respondents are likely to include broker-dealers that provide these
services. The Commission acknowledges, however, that there are some broker-dealers
that would be classified as Outsourcers or new reporters and the additional
implementation costs that these firms face due to clearing for other broker-dealers or
supporting introducing broker-dealers are not captured by the Outsourcing Cost Model.
The Commission cannot estimate the number of broker-dealers that would bear these
costs because the Commission lacks data on the number of broker-dealers that clear for
other broker-dealers that would be classified as new reporters or Outsourcers.
Furthermore, the Commission lacks data to estimate the magnitude of these costs because
the Plan does not provide this data and the Commission is unaware of any data available
to it that it could use to estimate these costs.
The Commission also received several comments on uncertainties in the cost
estimates for broker-dealers arising from not knowing the choice of Plan Processor, 68 not
having technical specifications, 69 differences in Bids preventing broker-dealers from
providing more definitive cost estimates, 70 and a lack of detail in the CAT NMS Plan. 71
In response to comment letters that identified these sources of uncertainties
related to the costs broker-dealers will incur, the Commission acknowledges that such
costs depend on the technical specifications, which are likely to remain unknown until the
Plan Processor is selected. The Commission also notes that final Bids will not be
submitted until after the Plan is approved, so the Commission is unable to quantify the
degree of variation in broker-dealer implementation costs across Bids.

66

Thomson Reuters Letter, at 3–4.

67

See CAT NMS Plan Notice, supra note 11, at 30723.

68

Thomson Reuters Letter at 4; Financial Services Institute (“FSI”) Letter at 6.

69

See, e.g., Financial Services Roundtable (“FSR”) Letter at 10; and Fidelity Letter
at 6.

70

FSI Letter at 6.

71

SIFMA Letter at 42 and FSI Letter at 6.

15

Additionally, the Commission received a number of comments relating to the
costs of the individual components comprising the broker-dealer data collection and
reporting requirement, such as customer information, the open/close indicator for
equities, listing exchange symbology, allocation report timestamp, and quote sent time.
In the CAT NMS Plan Notice, the Commission provided aggregate burden hour and
external cost estimates for the broker-dealer data collection and reporting requirement of
Rule 613. Although the costs of the following specific data elements were not discussed
in the CAT NMS Plan Notice Paperwork Reduction Act analysis, the Commission has
considered these comments because they relate to the overall data collection and
reporting information collection for broker-dealers.
a. Customer Information
In the CAT NMS Plan Notice, the Commission stated that it believed the
requirement in the CAT NMS Plan to report customer information for each transaction
represents a significant source of costs. 72 One commenter believed that the costs for
providing customer information to the Central Repository would comprise a significant
proportion of costs to the total industry and that the costs associated with the management
of sensitive information could increase costs. 73 Two commenters stated that including
Customer Identifying Information on new order reports would result in significant costs
for the industry. 74 In Response Letter I, the Participants suggested that the Commission
amend (and the Commission has accordingly amended) the CAT NMS Plan to clarify
that Customer Identifying Information and Customer Account Information would not be
reported with the original receipt or origination of an order. 75
One commenter requested clarification that only active accounts would be
reported as part of the customer definition process, which could reduce costs incurred for
reporting customer information. 76 In Response Letter I, the Participants suggested that
the Commission amend the Plan to add a definition of “Active Account,” defined as an
account that has had activity in Eligible Securities within the last six months.
Additionally, the Participants suggested that the Commission amend (and the
Commission has amended) Section 6.4(d)(iv) of the Plan by clarifying that each brokerdealer must submit an initial set of customer information for Active Accounts at the
commencement of reporting to the Central Repository, as well as any updates, additions,
or other changes in customer information, including any such customer information for
any new Active Accounts. 77
72

See CAT NMS Plan Notice, supra note 11, at Section IV.F.3.a.

73

Data Boiler Letter at 37.

74

Thomson Reuters Letter at 8–9; FIF Letter at 9–10, 86.

75

Response Letter I at 34.

76

FIF Letter at 10.

77

Response Letter I at 35.

16

The Commission considered these comments and the Participants’ responses and
continues to believe that the requirement in the CAT NMS Plan to report customer
information represents a significant proportion of total costs to the industry. The
Commission is not amending its broker-dealer data collection and reporting external cost
estimates in response to these comments. Commenters did not provide cost estimates that
would allow the Commission to estimate such costs, and the amendments to the Plan
clarify that the Plan does not require customer information to be reported on order
origination.
b. Open/Close Indicator for Equities
The Commission received comments on the costs to report an open/close
indicator on orders to buy or sell equities. Several commenters agreed with the
Commission’s analysis that an open/close indicator represents a significant proportion of
costs to the Plan. 78 Two commenters indicated that it would require significant process
changes across multiple systems, 79 and one provided a list of the different types of
systems impacted by the open/close indicator. 80 Some commenters mentioned that the
open/close indicator is currently not populated for equities. 81 Further, several
commenters implied that the costs of the open/close indicator were not included in the
cost estimates in the CAT NMS Plan Notice. 82 In Response Letter I, the Participants
indicated that the open/close indicator is not captured on equities or on certain options
transactions such as Options’ Market Maker transactions. 83
The Commission considered these comments and is modifying the Plan to
eliminate the requirement to report an open/close indicator for equities and on Options
Market Maker quotations. Although the Commission believes this will reduce the
compliance costs for broker-dealers, Participants, and the Central Repository, the
Commission cannot quantify the savings and is thus not amending its external cost
estimates in response to commenters. The Participants’ statement that open/close
indicators are not reported on some options orders is consistent with the Commission’s
experience and the analysis in the CAT NMS Plan Notice. While the economic analysis
in the Notice did not explicitly separate the costs associated with an open/close indicator
78

Thomson Reuters Letter at 9; SIFMA Letter at 35–36; FIF Letter at 83–86.

79

SIFMA Letter at 35; FIF Letter at 4, 84.

80

FIF Letter at 84.

81

Thomson Reuters Letter at 9, FIF Letter at 4, 83–85, SIFMA Letter at 35.

82

Specifically, one commenter stated that the inclusion of the open/close indicator
for equities was a surprise (FIF Letter at 84), and two commenters wanted
additional cost benefit analysis on the open/close indicator. FIF Letter at 84;
SIFMA Letter at 36.

83

Response Letter I at 21–22.

17

for equities and an open/close indicator for options, the Commission believes that the
costs of the open/close indicator for options are included in the cost estimates of the
Notice. However, because the Plan will no longer require the reporting of the open/close
indicator for Options Market Maker quotations, the Commission now believes there will
be an additional cost savings associated with not having to report this indicator as part of
CAT.
c. Listing Exchange Symbology
In the CAT NMS Plan Notice, the Commission explained its belief that the
requirement to use listing exchange symbology could represent a significant source of
costs, 84 because broker-dealers do not necessarily use listing exchange symbology when
placing orders on other exchanges or off-exchange. One commenter stated that it did not
expect the use of listing exchange symbology to be much more costly than the use of
existing symbology. 85 However, another commenter suggested that accepting only
listing exchange symbology is costly and invasive. 86 One other commenter stated that
listing exchange symbology would also be a significant source of costs to options. 87 The
Participants responded in Response Letter II that it was their understanding that all
broker-dealers subject to OATS or EBS reporting requirements currently use the listing
exchange symbology when submitting such reports. 88 Further, they stated in Response
Letter III that broker-dealers currently use symbology translation solutions when
submitting data to exchanges or when submitting to regulatory reporting systems such as
OATS or EBS. 89
The Commission considered the comments and now believes that the incremental
cost for CAT Reporters to translate from their existing symbology to listing exchange
symbology would be less than as discussed in the CAT NMS Plan Notice and would not
be a substantial contributor to aggregate costs. The Commission is not amending its
external cost estimates for broker-dealer data collection and reporting in response to these
comments.
d. Allocation Report Timestamp
Several commenters noted that there would be costs associated with reporting
timestamps on allocation reports. 90 One of these commenters mentioned that the
84

See CAT NMS Plan Notice, supra note 11, at 30730–731.

85

FIF Letter at 12, 95.

86

Data Boiler Letter at 37–38.

87

Bloomberg Letter at 5.

88

Response Letter II at 7.

89

Response Letter III at 13.

90

FSR Letter at 9; SIFMA Letter, at 35; FIF Letter, at 3, 4, 11, 86–89.

18

requirement to report allocation timestamps would mean that broker-dealers would incur
unnecessary costs to acquire additional resources. 91 One commenter estimated that the
currently proposed allocation timestamp requirement, with a one millisecond timestamp
granularity and a 50-millisecond clock offset, would cost the industry $88,775,000 in
initial implementation costs and $13,925,000 in ongoing annual costs. 92 The commenter
further estimated that a modified allocation timestamp requirement, with a one second
timestamp granularity and a one second clock offset, would cost the industry $44,050,000
in initial implementation costs and $5,035,833 in ongoing annual costs. 93 In Response
Letter I, the Participants recommended an amendment to the Plan that would specify a
one-second timestamp for allocation time on allocation reports, 94 and the Commission is
amending the Plan to reflect this recommendation.
The Commission considered these comments and is increasing its external cost
estimates for the broker-dealer data collection and reporting in response to a comment.
The Commission is now adding one commenter’s estimate of $44,050,000 in
implementation costs and $5,035,833 in ongoing costs to the estimates of costs to brokerdealers. 95 The Commission believes the cost estimates received to be credible because
they are based on a survey of industry participants who are informed of the allocation
timestamp requirement and the changes that broker-dealers would need to make to
comply with the requirement.
e. Quote Sent Time
In the CAT NMS Plan Notice, the Commission estimated that the requirement
that Options Market Makers submit quote sent times to the exchanges would cost
between $36.9 million and $76.8 million over five years. 96 The Commission concluded
that this requirement did not represent a significant source of costs. The Commission
received a comment stating that the estimated 5-year cost to Options Market Makers for
adding a timestamp to the quote times was between the range of $39.9 million and $76.8
million. The commenter further stated that this is “not a trivial cost for providing one
data element to the consolidated audit trail.” 97 The Commission continues to believe that
91

FSR Letter at 9.

92

FIF Letter at 87–89.

93

FIF Letter at 88, Table 6.

94

Response Letter I at 37–38.

95

See CAT NMS Plan Order, supra note 12, at Section V.F.3.a(4). The total cost
estimates of the CAT Plan reflect these implementation and ongoing costs.

96

See FIF, SIFMA, and Security Traders Association, Cost Survey Report on CAT
Reporting of Options Quotes by Market Makers (November 5, 2013), available at
http://www.catnmsplan.com/industryfeedback/p601771.pdf; see also CAT NMS
Plan, supra note 4, at Appendix C, Section B.7(b)(iv)(B).

97

FIF Letter at 65.

19

the estimates in the CAT NMS Plan Notice are credible estimates for the costs for
Options Market Makers to send the Quote Sent Time field to exchanges. In response to
the comment, the Commission notes that the implied annual costs would be much lower
than the five year costs and the Commission agrees that the costs of quote sent time are
significant. The Quote Sent Time cost estimate was not included in the cost estimates in
the Notice; therefore the Commission is now adding this cost to its estimates for Options
Market Maker data collection and reporting. 98 The Commission is using the maximum 5year cost estimate to Options Market Makers provided by the commenter ($76.8 million)
and has divided it into $17,400,000 in aggregate implementation external costs, and
$11,880,000 in aggregate ongoing external costs, 99 as provided in the burden hours and
external cost estimates discussion for Options Market Makers.
Payment or Gift
Not applicable. The Commission has not provided any payment or gift to the
respondents.
10.

Confidentiality

The Commission believes that the CAT NMS Plan would require the collection
and reporting of confidential information, including Personally Identifiable
Information 100 (“PII”), to identify customers. The CAT NMS Plan contains several
provisions that provide respondents with assurances that confidential information would
be protected.
Rule 613 requires the CAT NMS Plan to contain several provisions relating to the
security of the information. Specifically, Rule 613(a)(1)(iv) requires the Participants to
discuss the security and confidentiality of the information reported to the Central
Repository in the Plan. 101 Rule 613(b)(6) provides that the Plan must include a provision
requiring the Participants to provide to the Commission, at least every two years after
98

See CAT NMS Plan Order, supra note 12, at Section V.F.1.c(2)B.

99

The Commission assumes that the ratio of ongoing to implementation costs for
Quote Sent Time would be the same as the ratio of ongoing to implementation
costs for the other costs incurred by broker-dealers for data collection and
reporting to CAT. See CAT NMS Plan Order, supra note 12, at Section
V.F.3.a(6).

100

The term “Personally Identifiable Information,” as used by OMB, refers to
information which can be used to distinguish or trace an individual’s identity,
such as their name, social security number, biometric records, etc. alone, or when
combined with other personal or identifying information which is linked or
linkable to a specific individual, such as date and place of birth, mother’s maiden
name, etc. See OMB Memorandum M-07-16 (May 22, 2007).

101

17 CFR 242.613(a)(1)(iv).

20

effectiveness of the national market system plan, a written assessment of the operation of
the consolidated audit trail, which would include an evaluation of the performance of the
consolidated audit trail’s system security. 102 Rule 613(e)(4)(i) also requires that the Plan
include policies and procedures, including standards, to be used by the CAT Plan
Processor to ensure the security and confidentiality of all information reported to the
Central Repository. 103 The plan sponsors, and employees of the plan sponsors and
Central Repository, would be required to agree to use appropriate safeguards to ensure
the confidentiality of such data. 104 Further, Rule 613 requires that the CAT NMS Plan
require that audit trail data may not be used by the Participants other than for surveillance
or other regulatory purposes. 105
The CAT NMS Plan provides that the CAT Plan Processor is responsible for the
security and confidentiality of all CAT Data received and reported to the Central
Repository, including during all communications between CAT Reporters and the Plan
Processor, data extraction, data manipulation and transformation, loading to and from the
Central Repository, and data maintenance by the Central Repository. 106 The Plan
Processor must, among other things, require that individuals with access to the Central
Repository agree to use CAT Data only for appropriate surveillance and regulatory
activities and to employ safeguards to protect the confidentiality of CAT Data. 107
In addition, the Plan Processor must develop a comprehensive information
security program, as well as a training program that addresses the security and
confidentiality of all information accessible from the consolidated audit trail and the
operational risks associated with accessing the Central Repository. 108 The Plan Processor
must also designate one of its employees as the Chief Information Security Officer;
among other things, the Chief Information Security Officer is responsible for creating and
enforcing appropriate policies, procedures, and control structures regarding data
security. 109 The Technical Specifications, which the Plan Processor must publish, must
include a detailed description of the data security standards for the consolidated audit
trail. 110

102

17 CFR 242.613(b)(6).

103

17 CFR 242.613(e)(4)(i).

104

17 CFR 242.613(e)(4)(i)(A).

105

Id.

106

See CAT NMS Plan, supra note 4, at Section 6.5(f)(i), (iv).

107

Id. at Section 6.5(f)(i).

108

Id. at Sections 6.1(m), 6.12.

109

Id. at Section 6.2(b).

110

Id. at Section 6.9.

21

Appendix D of the CAT NMS Plan sets forth minimum data security
requirements for CAT that the Plan Processor must meet. 111 For example, Appendix D
enumerates various connectivity, data transfer, and encryption requirements, such as that
the CAT System must have encrypted internet connectivity, CAT Reporters must connect
to CAT infrastructure using secure methods such as private lines or virtual private
network connections over public lines, CAT Data must be encrypted at-rest and in-flight
using industry standard best practices. 112 Additional requirements regarding data storage,
data access, breach management, and PII data are also specified in Appendix D. 113
Further, the Participants must establish and enforce policies and procedures that ensure
the confidentiality of the CAT Data obtained from the Central Repository, limit the use of
CAT Data obtained from the Central Repository solely for surveillance and regulatory
purposes, 114 implement effective information barriers between each Participant’s
regulatory and non-regulatory staff with regard to CAT Data, and limit access to CAT
Data to designated persons. 115 However, a Participant may use the Raw Data 116 it reports
to the Central Repository for “commercial or other” purposes if not prohibited by
applicable law, rule or regulation. 117
To the extent that the Commission receives confidential information pursuant to
the CAT NMS Plan, such information will be kept confidential, subject to the provisions
of applicable law.
11.

Sensitive Questions

As noted in Item 10 above, the Commission believes that the CAT NMS Plan
would require the collection and reporting of certain PII 118 in order to uniquely identify
111

Id. at Appendix D, Section 4.

112

Id. at Appendix D, Section 4.1.2.

113

Id. at Appendix D, Section 4.1.3–4.1.6.

114

The Commission notes that regulatory purposes includes, among other things,
market surveillance, examinations, investigations, and other enforcement
functions, analysis and reconstruction of market events, and market analysis and
research to inform policy decisions.

115

See CAT NMS Plan, supra note 4, at Section 6.5(f)(ii), (g).

116

Raw data is defined as “Participant Data and Industry Member Data that has not
been through any validation or otherwise checked by the CAT System.” Id. at
Section 1.1.

117

Id. at Section 6.5(f)(i).

118

The CAT NMS Plan defines PII as including: social security number, tax
identifier number or similar information; and “Customer Identifying
Information” and “Customer Account Information.” “Customer Account
Information” is defined in the Plan to include, but not be limited to “account
number, account type, customer type, date account opened, and large trader

22

customers in the consolidated audit trail, but not of the categories of questions of a
sensitive nature required to be described in this Item. Specifically, the CAT NMS Plan
proposes to require broker-dealers to submit an initial set of “Customer Identifying
Information” to the Central Repository, including, as applicable to individuals, name,
address, date of birth, individual tax payer identification number (“ITIN”)/social security
number (“SSN”), and individual’s role in the account (e.g., primary holder, joint holder,
guardian, trustee, person with the power of attorney). 119 The Commission believes that
the ability to uniquely identify customers is critical to the efficacy and usefulness of the
consolidated audit trail, and that only the collection and use of PII will allow such
identification.
Currently, only a few data sources, which typically cover only a small portion of
order lifecycles, include information regarding customers. 120 Further, the customer
information in these data sources is often incomplete and unreliable and the data is
currently only obtainable by regulators making requests to broker-dealers directly. The

identifier (if applicable); except, however, that (a) in those circumstances in
which an Industry Member has established a trading relationship with an
institution but has not established an account with that institution, the Industry
Member will (i) provide the Account Effective Date in lieu of the “date account
opened”; (ii) provide the relationship identifier in lieu of the “account number”;
and (iii) identify the “account type” as a “relationship”; (b) in those circumstances
in which the relevant account was established prior to the implementation date of
the CAT NMS Plan applicable to the relevant CAT Reporter (as set forth in Rule
613(a)(3)(v) and (vi)), and no “date account opened” is available for the account,
the Industry Member will provide the Account Effective Date” in several
circumstances enumerated in the CAT NMS Plan. The Commission notes that
the information contained in “(a)” pertains to institutional customers (legal
entities) and that “(b)” pertains to institutional, proprietary or retail customers
(legal entities and individuals). See CAT NMS Plan, supra note 4, at Section 1.1
(defining “Customer Identifying Information” and Customer Account
Information”). The Commission also notes that the CAT NMS Plan defines an
“Industry Member” to mean a member of a national securities exchange or a
member of a national securities association. Id.
119

“Customer Identifying Information” also applies to legal entities. Under the CAT
NMS Plan, this information includes for legal entities: name, address, and
Employer Identification Number (“EIN”)/Legal Entity Identifier (“LEI”) or other
comparable common entity identifier, if applicable, provided, however, that an
Industry Member that has an LEI for a Customer must submit the Customer’s LEI
in addition to other information of sufficient detail to identify a Customer.

120

The Commission notes that Participant audit trails typically do not provide
customer information.

23

inclusion of Customer-IDs 121 in the CAT would significantly improve regulators’
surveillance capabilities, including surveillance designed to detect market manipulation
and insider trading. Because currently available data do not uniquely identify customers,
Participants performing insider trading and manipulation surveillance could be unable to
identify some suspicious trading and must undertake multiple steps to request additional
information after identifying suspect trades. Further, data available during exams often
require regulatory staff to link multiple data sources to analyze customer trading. These
linking processes can be labor-intensive and require the use of algorithms that may not
link with 100% accuracy. The Commission believes that with the CAT, regulators would
be able to conduct certain types of exams more efficiently because of the inclusion of
Customer-IDs in CAT. The inclusion and expected improvement in the accuracy of
customer identifying data could allow regulators to review the activity of specific market
participants more efficiently; currently, identifying the activity of a single market
participant across the markets is cumbersome and prone to error. This information would
be particularly helpful in identifying insider trading, manipulation and other potentially
violative activity that depends on the identity of market participants. Customer
information could also be helpful to regulators in more efficiently identifying investors
who qualify for disgorgement proceeds and in estimating such disgorgement proceeds.
Rule 613 provides that the CAT NMS Plan must require broker-dealers to report
“information of sufficient detail to identify the customer” and “customer account
information” to the Central Repository for the original receipt or origination of an order.
Rule 613 does not require the reporting of SSNs as part of the information to identify a
customer; however, as permitted by an exemption granted by the Commission, 122 the
CAT NMS Plan proposed to require the reporting of SSNs, along with other identifying
information, by broker-dealers to the Central Repository. 123 In their request for
exemptive relief, the Participants represented that the SROs considered an approach that
would have solely utilized account numbers, rather than account numbers and other
unique identifying information, such as SSNs. 124 The SROs concluded that relying solely
on account numbers may raise issues regarding duplicate numbers under certain
circumstances, and represented that the approach proposed was preferable. 125 Rule 613
and the CAT NMS Plan include requirements for enhanced safeguards with respect to the
121

Rule 613 requires the use of a unique Customer-ID that identifies the Customer
involved in CAT Reportable Events. Pursuant to the Plan, the Customer-ID
would be generated from the Firm Designated ID, and the Plan Processor would
create a unique Customer-ID that would be consistent across a Customer’s
activity regardless of the originating broker-dealer. See Rule 613(c)(7); see also
CAT NMS Plan, supra note 4, at Appendix D, Section 3.

122

See Exemption Order, supra note 7.

123

See CAT NMS Plan, supra note 4, at Appendix C, Section A.1(a)(iii).

124

See Letter from Robert Colby, FINRA, on behalf of the Participants, to Brent J.
Fields, Secretary, Commission, dated January 30, 2015, at 21.

125

Id.

24

privacy and confidentiality of consolidated audit trail data, including customer
information. Further, although Rule 613 does not require the reporting of SSNs, and that
this information would not be reported by broker-dealers to the Commission, the
Commission will establish appropriate secure protections within the agency to help
ensure the confidentiality of the records proposed to be accessible to the Commission
pursuant to the Rule.
The Commission notes that, at the earliest, broker-dealers would be required to
report data, including customer information, in November 2018. Pursuant to
Rule 608(b)(2), the Commission shall approve a proposed NMS plan that it finds is
necessary or 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
mechanisms of, a national market system, or otherwise in furtherance of the purposes of
the Act, within 180 days of publication of a notice of a proposed NMS Plan. 126 A notice
of the CAT NMS Plan was published in the Federal Register on May 17, 2016. The
Commission approved the CAT NMS Plan on November 15, 2016. 127 Broker-dealers are
required to begin reporting data, including customer information, to the Central
Repository within two years of approval of the CAT NMS Plan. 128 In accordance with
these dates, broker-dealers will be required to report data including PII in November
2018.
To the extent required, the Commission will develop a Systems of Records Notice
(“SORN”) and conduct a Privacy Impact Assessment.
12.

Burden of Information Collection

Rule 613 applies to the 21 Participants (the 20 national securities exchanges and
the one national securities association (FINRA)) currently registered with the
Commission.129 The Commission believes that Rule 613 applies to 1,800 broker126

17 CFR 242.608(b)(2).

127

See supra note 12.

128

17 CFR 242.613(a)(3)(v).

129

The Participants are: Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., BOX
Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board
Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Bats EDGA
Exchange, Inc., Bats EDGX Exchange, Inc., Financial Industry Regulatory
Authority, Inc., International Securities Exchange, LLC, ISE Gemini, LLC,
Miami International Securities Exchange LLC, NASDAQ BX, Inc., NASDAQ
PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc.,
New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. ISE
Mercury, LLC and Investors Exchange LLC will become Participants in the CAT
NMS Plan and are thus accounted for as Participants for purposes of this
Paperwork Reduction Act Analysis. Since the publication of the CAT NMS Plan

25

dealers. 130
A. Burden on National Securities Exchanges and National Securities
Associations
a.

Central Repository

Rule 613 requires the Participants to jointly establish a Central Repository tasked
with the receipt, consolidation, and retention of the reported order and execution
information. The Participants issued a request for proposal soliciting Bids from entities
to act as the consolidated audit trail’s Plan Processor. 131 Bidders were asked to provide
total one-year and annual recurring cost estimates to estimate the costs to the Participants
for implementing and maintaining the Central Repository. 132 There are currently three
remaining Bidders, any of which could be selected to be the Plan Processor. The Plan
Processor would be responsible for building, operating, administering and maintaining
the Central Repository.
The Plan’s Operating Committee, which consists of one voting representative of
each Participant, 133 would be responsible for the management of the CAT NMS, LLC
Notice, the Investors Exchange LLC became a registered national securities
exchange on June 17, 2016. See Securities Exchange Act Release No. 78101
(June 17, 2016), 81 FR 41142 (June 23, 2016). The Commission has adjusted its
estimates pertaining to the Participants due to the addition of IEX (from 20
Participants in the CAT NMS Plan Notice Paperwork Reduction Act analysis to
21 Participants in the CAT NMS Plan Order Paperwork Reduction Act analysis).
130

The Commission understands that there are currently 4,138 broker-dealers;
however, not all broker-dealers are expected to have CAT reporting obligations.
The Participants report that approximately 1,800 broker-dealers currently quote or
execute transactions in NMS Securities, Listed Options or OTC Equity Securities
and would likely have CAT reporting obligations. The Commission understands
that the remaining 2,338 registered broker-dealers either trade in asset classes not
currently included in the definition of Eligible Security or do not trade at all (e.g.,
broker-dealers for the purposes of underwriting, advising, private placements).

131

See supra note 4.

132

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(i)(B). The
CAT NMS Plan listed the following as primary drivers of Bid costs: (1)
reportable volumes of data ingested into the Central Repository; (2) number of
technical environments that would be have to be built to report to the Central
Repository; (3) likely future rate of increase of reportable volumes; (4) data
archival requirements; and (5) user support and/or help desk resource
requirements. See id. at Section B.7(b)(i)(B).

133

See id. at Section 4.2(a).

26

(“LLC”), 134 including the Central Repository, acting by majority or Supermajority Vote,
depending on the issue. In managing the Central Repository, among other things, the
Operating Committee would have the responsibility to authorize the following actions of
the LLC: (1) interpreting the Plan; 135 (2) determining appropriate funding-related
policies, procedures and practices consistent with Article XI of the CAT NMS Plan; 136
(3) terminating the Plan Processor; (4) selecting a successor Plan Processor (including
establishing a Plan Processor Selection Subcommittee to evaluate and review Bids and
make a recommendation to the Operating Committee with respect to the selection of the
successor Plan Processor); 137 (5) entering into, modifying or terminating any Material
Contract; 138 (6) making any Material Systems Change; 139 (7) approving the initial
Technical Specifications or any Material Amendment to the Technical Specifications
proposed by the Plan Processor; 140 (8) amending the Technical Specifications on its own
motion; 141 (9) approving the Plan Processor’s appointment or removal of the CCO, CISO,
or any Independent Auditor in accordance with Section 6.1(b) of the CAT NMS Plan; 142
(10) approving any recommendation by the CCO pursuant to Section 6.2(a)(v)(A) of the
CAT NMS Plan; 143 (11) selecting the members of the Advisory Committee; 144
(12) selecting the Operating Committee chair; 145 and (13) determining to hold an
Executive Session of the Operating Committee. 146
Additionally, in managing the Central Repository, the Operating Committee
would have the responsibility and authority, as appropriate, to: (1) direct the LLC to
enter into one or more agreements with the Plan Processor obligating the Plan Processor
to perform the functions and duties contemplated by the Plan to be performed by the Plan
Processor, as well as such other functions and duties the Operating Committee deems
134

The Participants have proposed to conduct the activities of the CAT through the
LLC, a jointly owned limited liability company formed under Delaware state law.
The LLC will create, implement and maintain the CAT.

135

See CAT NMS Plan, supra note 4, at Section 4.3(a)(iii).

136

See id. at Section 4.3(a)(vi).

137

See id. at Section 4.3(b)(i).

138

See id. at Section 4.3(b)(iv).

139

See id. at Section 4.3(b)(v).

140

See id. at Section 4.3(b)(vi).

141

See id. at Section 4.3(b)(vii).

142

See id. at Section 4.3(b)(iii).

143

See id. at Section 4.3(a)(iv).

144

See id. at Section 4.3(a)(ii).

145

See id. at Section 4.3(a)(i).

146

See id. at Section 4.3(a)(v).

27

necessary or appropriate; 147 (2) appoint as an Officer of the Company the individual who
has direct management responsibility for the Plan Processor’s performance of its
obligations with respect to the CAT; 148 (3) approve policies, procedures, and control
structures related to the CAT System that are consistent with Rule 613(e)(4), Appendix C
and Appendix D of the CAT NMS Plan that have been developed and will be
implemented by the Plan Processor; 149 (4) approve any policy, procedure or standard
(and any material modification or amendment thereto) applicable primarily to the
performance of the Plan Processor’s duties as the Plan Processor; 150 (5) for both the CCO
and CISO, render their annual performance reviews and review and approve their
compensation; 151 (6) review the Plan Processor’s performance under the Plan at least
once each year, or more often than once each year upon the request of two Participants
that are not Affiliated Participants; 152 (7) in conjunction with the Plan Processor, approve
and regularly review (and update as necessary) SLAs governing the performance of the
Central Repository; 153 (8) maintain a Compliance Subcommittee for the purpose of
aiding the CCO as necessary; 154 and (9) designate by resolution one or more
Subcommittees it deems necessary or desirable in furtherance of the management of the
business and affairs of the Company. 155
The CAT NMS Plan will also establish a Selection Committee comprised of one
Voting Senior Officer from each Participant, 156 which is tasked with the review and
evaluation of Bids and the selection of the Initial Plan Processor. 157 The Selection
Committee would determine, by Majority Vote, whether Shortlisted Bidders will have the
opportunity to revise their Bids. 158 The Selection Committee would review and evaluate
all Shortlisted Bids, including any permitted revisions submitted by Shortlisted Bidders,
and in doing so, may consult with the Advisory Committee (or the DAG until the
Advisory Committee is formed) and such other Persons as the Selection Committee
deems appropriate. 159 After receipt of any permitted revisions, the Selection Committee
147

See id. at Section 6.1(a).

148

See id. at Section 4.6(b).

149

See id. at Section 6.1(c).

150

See id. at Section 6.1(e).

151

See id. at Section 6.2(a)(iv) and Section 6.2(b)(iv).

152

See id. at Section 6.1(n).

153

See id. at Section 6.1(h).

154

See id. at Section 4.12(b).

155

See id. at Section 4.12(a).

156

See id. at Section 5.1(a).

157

See id. at Section 5.1.

158

See id. at Section 5.2(d)(i).

159

See id. at Section 5.2(d)(ii).

28

would select the Initial Plan Processor from the Shortlisted Bids in two rounds of voting
where each Participant has one vote via its Voting Senior Officer in each round. 160
Following the selection of the Initial Plan Processor, the Participants would file with the
Commission a statement identifying the Initial Plan Processor and including the
information required by Rule 608. 161
For its initial and ongoing internal burden and cost estimates associated with the
management of the Central Repository, the Commission is relying on estimates provided
in the CAT NMS Plan for the development of the CAT NMS Plan, which the Participants
“have accrued, and will continue to accrue,” 162 and have described in the CAT NMS Plan
as “reasonably associated with creating, implementing, and maintaining the CAT upon
the Commission’s adoption of the CAT NMS Plan.” 163
The Commission believes that the activities of the Operating Committee and the
Selection Committee overlap with those undertaken by the Participants to develop the
CAT NMS Plan. The CAT NMS Plan describes the costs incurred by the Participants to
develop the CAT NMS Plan as including “staff time contributed by each Participant to,
among other things, determine the technological requirements for the Central Repository,
develop the RFP, evaluate Bids received, design and collect the data necessary to
evaluate costs and other economic impacts, meet with Industry Members to solicit
feedback, and complete the CAT NMS Plan submitted to the Commission for
consideration.” 164 For the building and management of the Central Repository, the
Selection Committee and the Operating Committee would have comparable
responsibilities. The Selection Committee would be required to review and evaluate all
Shortlisted Bids, including any permitted revisions submitted by Shortlisted Bidders, and
then to select the initial Plan Processor from those Bids. As part of its overall
management of the Central Repository, the Operating Committee would have
responsibility for decisions associated with the technical requirements of the Central
Repository. 165 Furthermore, the Operating Committee would be required to establish a
160

See id. at Section 5.2(e).

161

See id. at Section 6.7(a)(i).

162

See id. at Appendix C, Section B.7(b)(iii).

163

See id.

164

See id.

165

For example, the Operating Committee would be required to authorize the
following actions of the LLC: entering into, modifying or terminating any
Material Contract (see id. at Section 4.3(b)(iv)); making any Material Systems
Change (see id. at Section 4.3(b)(v)); amending the Technical Specifications on
its own motion (see id. at Section 4.3(b)(vii)); and approving the initial Technical
Specifications or any Material Amendment to the Technical Specifications
proposed by the Plan Processor (see id. at Section 4.3(b)(vi)). Further, the
Operating Committee would be able to approve policies, procedures, and control
structures related to the CAT System that are consistent with Rule 613(e)(4),

29

Selection Subcommittee to evaluate Bids received to select a successor Plan Processor, 166
and would also be required to authorize the selection of the members of the Advisory
Committee, 167 comprising members of the Industry, to advise the Participants on the
implementation, operation, and administration of the Central Repository. 168 Because the
responsibilities of the Operating Committee and the Selection Committee are similar to
those described in the CAT NMS Plan for the development of the CAT NMS Plan itself,
the Commission believes that it is reasonable to use the CAT NMS Plan estimates as the
basis for its burden and cost estimates for the initial and ongoing management of the
Central Repository.
Each Participant would contribute an employee and a substitute for the employee
to serve on the Operating Committee that would oversee the Central Repository.
Additionally, each Participant would select a Voting Senior Officer to represent the
Participant as a member of the Selection Committee responsible for the selection of the
Plan Processor of the Central Repository.
The Commission estimates that, over the 12-month period after the effectiveness
of the CAT NMS Plan within which the Participants would be required to select an initial
Plan Processor 169 and begin reporting to the Central Repository, 170 each Participant
would incur an initial internal burden of 686.05 burden hours associated with the
management of the creation of the Central Repository and the selection of the Plan
Processor (including filing with the Commission the statement identifying the Initial Plan
Processor and including the information required by Rule 608), for an aggregate initial
estimate of 14,407 burden hours. 171
Appendix C and Appendix D of the CAT NMS Plan that have been developed
and will be implemented by the Plan Processor (see id. at Section 6.1(c)); and in
conjunction with the Plan Processor, approve and regularly review (and update as
necessary) SLAs governing the performance of the Central Repository (see id. at
Section 6.1(h)).
166

See id. at Section 4.3(b)(i).

167

See id. at Section 4.3(a)(ii).

168

See id. at Section 4.13(d).

169

Rule 613(a)(3)(i) requires the selection of the Plan Processor within 2 months
after effectiveness of the CAT NMS Plan. See 17 CFR 242.613(a)(3)(i).

170

Rule 613(a)(3)(iii) requires the Participants to provide to the Central Repository
the data required by Rule 613(c) within one year after effectiveness of the CAT
NMS Plan. See 17 CFR 242.613(a)(3)(iii).

171

The Commission is basing this estimate on the internal burden estimate provided
in the CAT NMS Plan related to the development of the CAT NMS Plan. See
CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii) (stating “…the
Participants have accrued, and will continue to accrue, direct costs associated with
the development of the CAT NMS Plan. These costs include staff time

30

The Operating Committee would continue to be responsible for the management
of the Central Repository. The Commission estimates that the Participants would incur
an ongoing annual internal burden of 686.05 burden hours associated with the continued
management of the Central Repository, for an aggregate annual estimate of 14,407
burden hours across the Participants. 172

172

contributed by each Participant to, among other things, determine the
technological requirements for the Central Repository, develop the RFP, evaluate
Bids received, design and collect the data necessary to evaluate costs and other
economic impacts, meet with Industry Members to solicit feedback, and complete
the CAT NMS Plan submitted to the Commission for consideration. The
Participants estimate that they have collectively contributed 20 FTEs in the first
30 months of the CAT NMS Plan development process”). The Commission
believes the staff time incurred for the development of the CAT NMS Plan would
be comparable to the staff time incurred for the activities required of the
Operating Committee and the Selection Committee for the creation and
management of the Central Repository once the Plan is effective). (20 FTEs / 30
months) = 0.667 FTEs per month for all of the Participants to develop the CAT
NMS Plan. Converting this into burden hours, (0.667 FTEs) x (12 months) x
(1,800 burden hours per year) =14,407 initial burden hours for all of the
Participants to develop the CAT NMS Plan. (14,407 burden hours for all
Participants / 21 Participants) = 686.05 initial burden hours for each Participant
associated with the management of the creation of the Central Repository and the
selection of the Plan Processor.
The Commission is basing this estimate on the internal burden estimate provided
in the CAT NMS Plan for the development of the CAT NMS Plan. The
Commission notes that the CAT NMS Plan describes the internal burden estimate
for the development of the CAT NMS Plan as a cost the Participants will continue
to accrue; therefore, the Commission believes that it is reasonable to use this
burden estimate as the basis for its ongoing internal burden estimate for the
maintenance of the Central Repository, particularly as the Commission believes
the reasons for the staff time incurred for the development of the CAT NMS Plan
would be comparable to those of the staff time to be incurred by the Operating
Committee and the Selection Committee for the continued management of the
Central Repository. See id. (stating “…the Participants have accrued, and will
continue to accrue, direct costs associated with the development of the CAT NMS
Plan. These costs include staff time contributed by each Participant to, among
other things, determine the technological requirements for the Central Repository,
develop the RFP, evaluate Bids received, design and collect the data necessary to
evaluate costs and other economic impacts, meet with Industry Members to solicit
feedback, and complete the CAT NMS Plan submitted to the Commission for
consideration. The Participants estimate that they have collectively contributed
20 FTEs in the first 30 months of the CAT NMS Plan development process”). (20
FTEs / 30 months) = 0.667 FTEs per month for all of the Participants to continue
management of the Central Repository. Converting this into burden hours, (0.667

31

The Commission estimates that it would take the Participants approximately
19,209.54 annualized burden hours to create and manage the Central Repository [(686.05
initial one-time burden hours amortized over three years) + (686.05 annual ongoing
burden hours) = 914.74 hours) x (21 Participants)].
b.

Data Collection and Reporting

Rule 613(c)(1) requires the CAT NMS Plan to provide for an accurate, timesequenced record of orders beginning with the receipt or origination of an order by a
Participant, and further to document the life of the order through the process of routing,
modification, cancellation and execution (in whole or in part) of the order. 173 Rule
613(c) requires the CAT NMS Plan to impose requirements on Participants to record and
report CAT information to the Central Repository in accordance with specified
timelines. 174
Rule 613(c) requires the CAT NMS Plan to require the collection and reporting of
some information that Participants already collect to operate their business and are
required to maintain in compliance with Section 17(a) of the Exchange Act and Rule 17a1 thereunder. 175 For instance, the Commission believes that the national securities
exchanges keep records pursuant to Section 17(a) of the Exchange Act and Rule 17a-1
thereunder in electronic form, of the receipt of all orders entered into their systems, as
well as records of the routing, modification, cancellation, and execution of those orders.
However, Rule 613 requires the CAT NMS Plan to require the Participants to collect and
report additional and more detailed information, and to report the information to the
Central Repository in a uniform electronic format, or in a manner that would allow the
Central Repository to convert the data to a uniform electronic format for consolidation
and storage.
The CAT NMS Plan provides estimated costs for hardware and software, FTE
costs, and third-party providers to be incurred by the Participants to report CAT Data. 176
FTEs) x (12 months) x (1,800 burden hours per year) = 14,407 ongoing annual
burden hours for all of the Participants to continue management of the Central
Repository. (14,407 ongoing annual burden hours for all Participants / 21
Participants) = 686.05 ongoing annual burden hours for each Participant to
continue management of the Central Repository.
173

17 CFR 242.613(c)(1). See also CAT NMS Plan, supra note 4, at Section 6.3.

174

17 CFR 242.613(c). See also CAT NMS Plan, supra note 4, at Section 6.3.

175

15 U.S.C. 78q(a); 17 CFR 240.17a-1.

176

Third-party provider costs are generally legal and consulting costs, but may
include other outsourcing. The template used by respondents is available at
http://catnmsplan.com/PastEvents/ under the Section titled “6/23/14” at the “Cost
Study Working Template” link.

32

For these estimates, the Commission is relying on the estimates provided by the
Participants because it believes that the Plan’s estimates for Participants to report CAT
Data are reliable since all of the Participants provided estimates, and most Participants
have experience collecting audit trail data, as well as knowledge of both the requirements
of Rule 613 as well as their current business practices.
The Commission notes that throughout this Paperwork Reduction Act analysis, it
is categorizing the FTE cost estimates for the Participants, as well as the broker-dealer
respondents, that were provided in the CAT NMS Plan as an internal burden. The
Commission: (1) divided the FTE cost estimates by a divisor of $424,350, which is the
Commission’s estimated average salary for a full-time equivalent employee in the
securities industry in a job category associated with regulatory data reporting; 177 and then
(2) multiplied the quotient by 1,800 (the number of hours a full-time equivalent employee
is estimated to work per year).
The CAT NMS Plan provides the following average cost that the Participants
would expect to incur to adopt the systems changes needed to comply with the data
reporting requirements of the consolidated audit trail: $10,300,000 in aggregate FTE
costs for internal operational, technical/development, and compliance functions. 178
Based on this estimate provided in the CAT NMS Plan, the Commission estimates
that the initial internal burden hours to develop and implement the needed systems
changes to capture the required information and transmit it to the Central Repository in
compliance with the Rule for each Participant would be approximately 2,080.8 burden

177

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(ii)(C), at n.192.
The Participants represented that the cost per FTE is $401,440. The $401,440
figure used in the CAT NMS plan was based on a Programmer Analyst’s salary
($193 per hour) from SIFMA’s Management & Professional Earnings in the
Securities Industry 2008, multiplied by 40 hours per week, then multiplied by 52
weeks per year. The Commission has updated this number to include recent
salary data for other job categories associated with regulatory data reporting in the
securities industry, using the hour and multiple methodology used by the
Commission in its paperwork burden analyses. The Commission is using
$424,350 as its annual cost per FTE for purposes of its cost estimates. The
$424,350 FTE cost = 25% Compliance Manager + 75% Programmer Analyst
(0.25) x ($283 per hour x 1,800 working hours per year) + (0.75) x ($220 per hour
x 1,800 working hours per year). The $283 per hour figure for a Compliance
Manager and the $220 per hour figure for a Programmer Analyst are from
SIFMA’s Management & Professional Earnings in the Securities Industry 2013,
modified by the Commission to account for an 1,800-hour work-year and
multiplied by 5.35 to account for bonuses, firm size, employee benefits and
overhead.

178

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(B)(2).

33

hours. 179 Therefore, the Commission estimates that, for all Participants, the estimated
aggregate one-time burden would be 43,696.8 hours. 180
Once a Participant has established the appropriate systems and processes required
for collection and transmission of the required information to the Central Repository, the
Commission estimates that Rule 613 would impose on each Participant ongoing annual
burdens associated with, among other things, personnel time to monitor each
Participant’s reporting of the required data and the maintenance of the systems to report
the required data; and implementing changes to trading systems that might result in
additional reports to the Central Repository. The CAT NMS Plan provides the following
average aggregate cost that the Participants would expect to incur to maintain data
reporting systems to be in compliance with Rule 613: $7,300,000 in anticipated annual
FTE costs for operational, technical/development, and compliance functions related to
data reporting. 181 Based on this estimate provided in the CAT NMS Plan, the
Commission believes that it would take each Participant 1,474.2 ongoing burden hours
per year 182 to continue compliance with Rule 613. Therefore, the Commission estimates
that the estimated aggregate ongoing burden for all Participants would be approximately
30,958.2 hours. 183
The Commission estimates that it would take the Participants approximately
45,523.8 annualized burden hours to adopt and maintain systems changes needed to
comply with the data reporting requirements of the consolidated audit trail [(2,080.8
initial burden hours amortized over three years) + (1,474.2 ongoing burden hours) x (21
Participants)].
c.

Collection and Retention of NBBO, Last Sale Data and
Transaction Reports

179

($10,300,000 anticipated initial FTE costs) / (21 Participants) = $490,476.19 in
anticipated initial FTE costs per Participant. ($490,476.19 in anticipated initial
FTE costs per Participant) / ($424,350 FTE costs per Participant) = 1.156
anticipated FTEs per Participant for the implementation of data reporting. (1.156
FTEs) x (1,800 working hours per year) = 2,080.8 initial burden hours per
Participant to implement CAT Data reporting.

180

43,696.8 initial burden hours = (21 Participants) x (2,080.8 initial burden hours).

181

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(B)(2).

182

($7,300,000 in anticipated Participant annual FTE costs) / (21 Participants) =
$347,619.05 in anticipated per Participant annual FTE costs. ($347,619.05 in
anticipated per Participant FTE costs) / ($424,350 FTE cost per Participant) =
0.819 anticipated FTEs per Participant. (0.819 FTEs) x (1,800 working hours per
year) = 1,474.2 burden hours per Participant to maintain CAT Data reporting.

183

30,958.2 annual burden hours = (21 Participants) x (1,474.2 annual burden hours).

34

Rule 613(e)(7) provides that the CAT NMS Plan must require the Central
Repository to collect and retain on a current and continuous basis NBBO information for
each NMS security, transaction reports reported pursuant to an effective transaction
reporting plan, and Last Sale Reports reported pursuant to the Options Price Reporting
Authority (“OPRA”) Plan. 184
Additionally, the CAT NMS Plan must require the Central Repository to maintain
this data in a format compatible with the order and event information consolidated and
stored pursuant to Rule 613(c)(7). 185 Further, the CAT NMS Plan must require the
Central Repository to retain the information collected pursuant to paragraphs (c)(7) and
(e)(7) of Rule 613 for a period of not less than five years in a convenient and usable
uniform electronic format that is directly available and searchable electronically without
any manual intervention. 186 The Commission notes that the CAT NMS Plan includes
these data as “SIP Data” to be collected by the Central Repository. 187 The Commission
believes the burden associated with SIP Data is included in the burden to the Participants
associated with the implementation and maintenance of the Central Repository.
d.

Surveillance

Rule 613(f) provides that the CAT NMS Plan must require that every national
securities exchange and national securities association develop and implement a
surveillance system, or enhance existing surveillance systems, reasonably designed to
make use of the consolidated information contained in the consolidated audit trail.
Rule 613(a)(3)(iv) provides that the CAT NMS Plan must require that the surveillance
systems be implemented within fourteen months after effectiveness of the CAT NMS
Plan.
The CAT NMS Plan states that the estimated total initial FTE cost to the
Participants to implement surveillance programs within the Central Repository is
$17,500,000 for operational, technical/development, and compliance staff to be engaged
in the creation of surveillance programs. 188
Based on the estimates provided in the CAT NMS Plan, the Commission
estimates that the initial internal burden hours to implement new or enhanced surveillance
systems reasonably designed to make use of the consolidated audit trail data for each
Participant would be approximately 3,535.2 burden hours, 189 for an aggregate initial
184

See 17 CFR 242.613(e)(7).

185

Id.

186

See 17 CFR 242.613(e)(8).

187

See CAT NMS Plan, supra note 4, at Section 6.5(a)(ii).

188

See id. at Appendix C, Section B.7(b)(iii)(B)(2).

189

($17,500,000 in anticipated initial FTE costs) / (21 Participants) = $833,333.33 in
anticipated FTE costs per Participant. ($833,333.33 in anticipated initial FTE

35

burden hour amount of 74,239.2 burden hours. 190
The CAT NMS Plan states that the estimated total annual FTE cost associated
with the maintenance of surveillance programs for the Participants is $66,700,000 for
internal operational, technical/development, and compliance staff to be engaged in the
maintenance of surveillance programs. 191 Based on the estimates provided in the CAT
NMS Plan, the Commission estimates that the ongoing internal burden hours to maintain
the new or enhanced surveillance systems reasonably designed to make use of the
consolidated audit trail data for each Participant would be approximately 13,473 annual
burden hours, 192 for an aggregate annual burden hour amount of 282,933 burden hours. 193
The Commission estimates that it would take the Participants approximately
307,679.4 annualized burden hours to develop, implement (or enhance existing)
surveillance systems reasonably designed to make use of the consolidated information
contained in the consolidated audit trail, and to maintain such systems [(3,535.2 initial
burden hours amortized over three years) + (13,473 ongoing burden hours) x (21
Participants)].
e. Written Assessment of Operation of the Consolidated Audit
Trail
Rule 613(b)(6) provides that the CAT NMS Plan must require the Participants to
provide the Commission a written assessment of the consolidated audit trail’s operation at
least every two years, once the CAT NMS Plan is effective. 194 The assessment must
costs per Participant) / ($424,350 FTE cost per Participant) = 1.964 anticipated
initial FTEs per Participant. (1.964 FTEs) x (1,800 working hours per year) =
3,535.2 initial burden hours per Participant to implement new or enhanced
surveillance systems.
190

(3,535.2 initial burden hours per Participant to implement new or enhanced
surveillance systems) x (21 Participants) = 74,239.2 aggregate initial burden
hours.

191

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(B)(2).

192

($66,700,000 in anticipated ongoing FTE costs) / (21 Participants) =
$3,176,190.48 in anticipated ongoing FTE costs per Participant. ($3,176,190.48
in anticipated ongoing FTE costs per Participant) / ($424,350 FTE cost per
Participant) = 7.485 anticipated FTEs per Participant. (7.485 FTEs) x (1,800
working hours per year) = 13,473 ongoing burden hours per Participant to
maintain the new or enhanced surveillance systems.

193

(13,473 annual burden hours per Participant to maintain new or enhanced
surveillance systems) x (21 Participants) = 282,933 aggregate annual burden
hours.

194

17 CFR 242.613(b)(6).

36

address, at a minimum, with respect to the consolidated audit trail: (i) an evaluation of its
performance; (ii) a detailed plan for any potential improvements to its performance;
(iii) an estimate of the costs associated with any such potential improvements; and (iv) an
estimated implementation timeline for any such potential improvements, if applicable. 195
Thus, the Participants must, among other things, undertake an analysis of the
consolidated audit trail’s technological and computer system performance.
The CAT NMS Plan states that the CCO would oversee the assessment required
by Rule 613(b)(6), and would allow the Participants to review and comment on the
assessment before it is submitted to the Commission. 196 The CCO would be an employee
of the Plan Processor and would be compensated by the Plan Processor. 197 The
Commission assumes that the overall cost and associated burden on the Participants to
implement and maintain the Central Repository includes both the compensation for the
Plan Processor as well as its employees for the implementation and maintenance of the
Central Repository.
Accordingly, the Commission has amended Section 6.6 of the Plan to change the
frequency of the assessment contemplated by Rule 613(b)(6) from biannual to annual.
The Commission also amended Section 6.6 of the Plan to provide further detail
regarding elements of the written assessment to be conducted by the Participants.
Specifically, as amended, the Participants’ annual written assessment must also
include: (1) an evaluation of the information security program of the CAT to ensure that
the program is consistent with the highest industry standards for protection of data; (2) an
evaluation of potential technological upgrades based upon a review of technological
developments over the preceding year, drawing on necessary technological expertise,
whether internal or external; (3) an assessment of efforts to reduce the time to restore and
recover CAT Data at a back-up site; (4) an assessment of how the Plan Processor and
SROs are monitoring Error Rates and addresses the application of Error Rates based on
product, data element or other criteria; (5) a copy of the evaluation required by Section
6.8(c) of the Plan as to whether industry standards have evolved such that: (i) the clock
synchronization standard in Section 6.8(a) should be shortened; or (ii) the required
timestamp in Section 6.8(b) should be in finer increments; and (6) an assessment of
whether any data elements should be added, deleted or changed. 198
Section 6.6 of the Plan as filed also requires the Participants to provide an
estimate of the costs associated with any potential improvements to the performance of
the CAT, including an assessment of the potential impact on competition, efficiency and
capital formation. The Commission has also amended Section 6.6 of the Plan to require
195

Id.

196

See CAT NMS Plan, supra note 4, at Section 6.6.

197

Id. at Section 6.2(a).

198

See CAT NMS Plan Order, supra note 12, at Section IV.H.

37

the annual assessment to consider the benefits of potential improvements to the CAT,
including to investor protection. 199
As a result, the Commission is modifying its estimates of the ongoing burden and
costs related to the written assessment of the operation of the CAT, as well as to account
for an increase in the expected number of Participants from 20 to 21, subsequent to the
publication of the CAT NMS Plan Notice. 200 The Commission now estimates that it
would take each Participant approximately 171.43 annual burden hours of internal legal,
compliance, business operations, and information technology staff time to review and
comment on the assessment prepared by the CCO of the operation of the CAT. 201
Therefore, the Commission estimates that the ongoing annual burden of submitting a
written assessment each year would be 171.43 ongoing burden hours per Participant, for
an estimated aggregate annual ongoing burden of 3,600.03 hours. 202
199

Id.

200

See supra note 129.

201

As it did when making its preliminary estimate, the Commission calculated the
total estimated burden hours based on a similar formulation used for calculating
the total estimated burden hours of Rule 613(i)’s requirement for a document
addressing expansion of the CAT to other securities. See Section 12.A.f., infra.
Specifically, as noted above, the Commission assumed that the review and
potential revision of the written assessment would be approximately one-half as
burdensome as the document required by Rule 613(i) when making its
preliminary estimate. The Commission then further divided the burden by half
because this report is required to be furnished every two years. The Commission
has amended the CAT NMS Plan to add more specificity to the requirement to
provide the written assessment. As a result, the Commission now estimates that
the written assessment would now be as burdensome (instead of half as
burdensome) as the document addressing expansion required by Rule 613(i). 2
FTEs needed for all of the Participants to create and submit the document
required by Rule 613(i) (and now for all of the Participants to review and
comment on the written assessment). (2 FTEs) x (1,800 working hours per year)
= 3,600 ongoing annual burden hours per year for all of the Participants to review
and comment on the written assessment. (3,600 burden hours per year) / (21
Participants) = 171.43 ongoing annual burden hours per Participant to review and
comment on the written assessment prepared by the CCO.
The Commission also has amended the CAT NMS Plan to require this assessment
to be provided annually instead of once every two years. To account for this
change, the Commission is no longer dividing the ongoing burden hours for
providing the written assessment in half to determine the annualized estimate of
the burden.

202

3,600.03 ongoing annual burden hours = (171.43 ongoing annual burden hours) x
(21 Participants).

38

The Commission estimates that it would take the Participants approximately
3,600.03 annualized burden hours to review, comment on, and submit the written
assessment to the Commission [(171.43 ongoing burden hours) x (21 Participants)].
f.

Document on Expansion to Other Securities

Rule 613(i) provides that the CAT NMS Plan must require the Participants to
jointly provide to the Commission, within six months after the CAT NMS Plan becomes
effective, a document outlining how the Participants could incorporate into the
consolidated audit trail information regarding: (1) equity securities that are not NMS
securities; 203 (2) debt securities; and (3) primary market transactions in equity securities
that are not NMS securities and debt securities. 204 The document must also detail the
order and Reportable Event data that each market participant may be required to provide,
which market participants may be required to provide such data, an implementation
timeline, and a cost estimate. Thus, the Participants must, among other things, undertake
an analysis of technological and computer system acquisitions and upgrades that would
be required to incorporate such an expansion.
The Commission estimates that it would take each Participant approximately
171.43 burden hours of internal legal, compliance, business operations and information
technology staff time to create a document addressing expansion of the consolidated audit
trail to additional securities as required by Rule 613(i). 205 Therefore, the Commission
estimates that the one-time initial burden of drafting the document required by Rule 613
203

The CAT NMS Plan would require the inclusion of OTC Equity Securities, while
Rule 613 does not include such a requirement. See supra note 8.

204

See 17 CFR 242.613(i).

205

The Commission is basing this estimate on the internal burden provided in the
CAT NMS Plan related to the development of the CAT NMS Plan. See CAT
NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii) (stating “[t]he
Participants estimate that they have collectively contributed 20 FTEs in the first
30 months of the CAT NMS Plan development process”). Because this document
is much more limited in scope than the CAT NMS Plan, and because the
Commission assumes that in drafting the CAT NMS Plan, the Participants have
already contributed time toward considering how the CAT can be expected to be
expanded in accordance with Rule 613(i), the Commission is applying the CAT
NMS Plan development internal burden over a 6-month period (Rule 613(i)
requires this document to be submitted to the Commission within six months
after effectiveness of the CAT NMS Plan), divided by half. 0.667 FTEs required
for all Participants per month to develop the CAT NMS Plan = (20 FTEs / 30
months). 0.667 FTEs x 6 months = 4 FTEs. 4 FTEs/ 2 = 2 FTEs needed for all of
the Participants to create and submit the document. 2 FTEs x 1,800 working
hours per year = 3,600 burden hours. 3,600 burden hours / 21 Participants =
171.43 burden hours per Participant to create and file the document.

39

would be 171.43 initial burden hours per Participant, for an estimated aggregate initial
burden of 3,600.03 burden hours. 206
The Commission estimates that it would take the Participants approximately
1,199.94 annualized burden hours to create a document addressing expansion of the
consolidated audit trail to additional securities as required by Rule 613(i) [(171.43 initial
burden hours amortized over three years) x (21 Participants)].
B.

Burden on Broker-Dealer Members
a. Data Collection and Reporting

Rule 613(c)(1) requires the CAT NMS Plan to provide for an accurate, timesequenced record of orders beginning with the receipt or origination of an order by a
broker-dealer member of a Participant, and further documenting the life of the order
through the process of routing, modification, cancellation and execution (in whole or in
part) of the order. Rule 613(c) requires the CAT NMS Plan to impose requirements on
broker-dealer members to record and report CAT information to the Central Repository
in accordance with specified timelines.
The Commission’s estimates delineate broker-dealer firms by whether they
insource or outsource, or are likely to insource or outsource, CAT Data reporting
obligations. The Commission believes that firms that currently report high numbers of
OATS Reportable Order Events (“ROEs”) 207 strategically would decide to either selfreport their CAT Data or outsource their CAT Data reporting functions, while the firms
with the lowest levels of activity would be unlikely to have the infrastructure and
specialized employees necessary to insource CAT Data reporting and would almost
certainly outsource their CAT Data reporting functions. The Commission recognizes that
more active firms that will likely be CAT Reporters and insource regulatory data
reporting functions may not have current OATS reporting obligations because they either
are not FINRA members, or because they do not trade in NMS equity securities. 208
206

The initial burden hour estimate is based on: (21 Participants) x (171.43 initial
burden hours to draft the report).

207

The Commission uses for its estimates the number of OATS ROEs reported by
firms that report to OATS. The Commission believes that because OATS
reportable events, such as order originations, routes, and executions are also CAT
Reportable Events, these two measures are likely to be highly correlated, making
the number of OATS records a proxy for the anticipated level of CAT reporting.
The Commission believes that the higher the number of OATS ROEs reported,
the higher the anticipated number of CAT records to report. As noted below,
however, the Commission anticipates that the number of CAT records would
exceed the number of OATS ROEs.

208

The Commission also recognizes as discussed above that some broker-dealer
firms may strategically choose to outsource despite the Plan’s working

40

The Commission estimates that there are 126 OATS-reporting Insourcers and 45
non-OATS reporting Insourcers. 209 The Commission’s estimation categorizes the
remaining 1,629 broker-dealers that the Plan anticipates would have CAT Data reporting
obligations as Outsourcers. 210
(1)

Insourcers
A.

Large Non-OATS-Reporting Broker-Dealers

The Commission relies on the Plan’s large broker-dealer FTE estimates in
estimating burden hours for large broker-dealers that can practicably decide between
insourcing or outsourcing their regulatory data reporting functions. 211 The Commission
estimates that there are 14 large broker-dealers that are not OATS reporters currently in
the business of electronic liquidity provision that would be classified as Insourcer
firms. 212
Additionally, the Commission estimates that there are 31 broker-dealers that may
transact in options but not in equities that can be classified as Insourcer firms. 213 These
firms may have customer orders and other activity off-exchange that would cause them to
incur a CAT reporting obligation. The Commission assumes the 31 Options Market
Makers and 14 ELPs would be typical of the Plan’s large non-OATS-reporting firms; for

assumption that these broker-dealers would insource their regulatory data
reporting functions.
209

These are 126 current OATS reporters that report more than 350,000 OATS
ROEs per month; 31 Options Market Making firms; and 14 electronic liquidity
providers (“ELPs”).

210

These broker-dealers are assumed to already outsource data reporting services.

211

See CAT NMS Plan, supra note 4, at Appendix C, Section A.6(c).

212

These broker-dealers are not FINRA members and thus have no regular OATS
reporting obligations. The category of Insourcers that do not currently report
OATS data includes firms that have multiple SRO memberships that exclude
FINRA. This category includes Options Market Makers and at least 14 ELPs;
these are firms that carry no customer accounts and directly route proprietary
orders to Alternative Trading Systems.

213

The Commission identified 39 CBOE-member broker-dealers that are not FINRA
members, but are members of multiple SROs; eight of these broker-dealers were
previously identified as ELPs, leaving 31 firms with multiple SRO memberships
that are unlikely to be CBOE floor brokers. These 31 firms are likely to include
some ELPs. This methodology implicitly assumes that there are no Options
Market Makers that are not members of the CBOE.

41

these firms, the Commission relies on the burden hour estimates provided under
Approach 1 214 for large non-OATS-reporting firms in the CAT NMS Plan.
The CAT NMS Plan provides the following average initial FTE count figure that
a large non-OATS reporting broker-dealer would expect to incur to adopt the systems
changes needed to comply with the data reporting requirements of Rule 613 under
Approach 1: 8.05 internal FTEs. 215 Based on this information, the Commission
estimates that the average initial burden associated with implementing regulatory data
reporting to capture the required information and transmit it to the Central Repository in
compliance with the Rule for each large, non-OATS reporting broker-dealer would be
approximately 14,490 initial burden hours, 216 for an estimated aggregate initial burden of
652,050 hours. 217
Once a large non-OATS reporting broker-dealer has established the appropriate
systems and processes required for collection and transmission of the required
information to the Central Repository, the Commission preliminarily estimates that the
Rule would impose ongoing annual burdens associated with, among other things,
personnel time to monitor each large non-OATS reporting broker-dealer’s reporting of
the required data and the maintenance of the systems to report the required data; and
implementing changes to trading systems that might result in additional reports to the
214

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(i)(A)(2).
Approach 1 assumes CAT Reporters would submit CAT Data using their choice
of industry protocols. Approach 2 assumes CAT Reporters would submit data
using a pre-specified format. Approach 1’s aggregate costs are higher than those
for Approach 2 for all market participants except in one case where service
bureaus have lower Approach 1 costs. For purposes of this Paperwork Reduction
Act analysis, the Commission is not relying on the estimates for Approach 2
because overall the Approach 1 aggregate estimates represent the higher of the
proposed approaches. The Commission believes it would be more comprehensive
to use the higher of the two estimates for its Paperwork Reduction Act analysis
estimates.

215

Approach 1 also provided $3,200,000 in initial internal FTE costs. The
Commission believes the $3,200,000 in internal FTE costs is the Participants’
estimated cost of the 8.05 FTEs. (8.05 FTEs) x ($401,440 Participants’ assumed
annual cost per FTE provided in the CAT NMS Plan) = $3,231,592. See CAT
NMS Plan, supra note 4, at Appendix C, Section B.7(b)(ii)(C), at n. 192. See also
supra note 177.

216

14,490 initial burden hours = (8.05 FTEs for implementing CAT Data reporting
systems) x (1,800 working hours per year).

217

The Commission preliminarily estimates that 45 large non-OATS reporting
broker-dealers would be impacted by this information collection. (45 large nonOATS reporting broker-dealers) x (14,490 burden hours) = 652,050 initial burden
hours to implement data reporting systems.

42

Central Repository. The CAT NMS Plan provides the following average ongoing
internal FTE count figure that a large non-OATS reporting broker-dealer would expect to
incur to maintain data reporting systems to be in compliance with Rule 613: 7.41 internal
FTEs. 218 Based on this information, the Commission preliminarily believes that it would
take a large non-OATS reporting broker-dealer 13,338 burden hours per year 219 to
continue to comply with the Rule, for an estimated aggregate ongoing burden of 600,210
hours. 220
The Commission estimates that it would take large non-OATS reporting brokerdealers approximately 817,560 annualized burden hours to adopt and maintain systems
changes needed to comply with the data reporting requirements of the consolidated audit
trail [(14,490 initial burden hours amortized over three years) + (13,338 ongoing burden
hours) x (45 large non-OATS reporting broker-dealers)].
B.

Large OATS-Reporting Broker-Dealers

The Commission estimates that 126 broker-dealers, which reported more than
350,000 OATS ROEs between June 15 and July 10, 2015, would strategically decide to
either self-report CAT Data or outsource their CAT data reporting functions. 221 To
218

Approach 1 also provided $3,000,000 in internal FTE costs related to
maintenance. The Commission believes the $3,000,000 in ongoing internal FTE
costs is the Participants’ estimated cost of the 7.41 FTEs. (7.41 FTEs) x
($401,440 Participants’ assumed annual cost per FTE provided in the CAT NMS
Plan) = $2,974,670. See CAT NMS Plan, supra note 4, at n.192. See also supra
note 177.

219

13,338 ongoing burden hours = (7.41 ongoing FTEs to maintain CAT data
reporting systems) x (1,800 working hours per year).

220

The Commission estimates that 45 large non-OATS reporting broker-dealers
would be impacted by this information collection. (45 large non-OATS reporting
broker-dealers) x (13,338 burden hours) = 600,210 aggregate ongoing burden
hours.

221

The Commission believes this decision is strategic and discretionary because
FINRA data reveals that while many broker-dealers at these activity levels selfreport most or all of their regulatory data, other broker-dealers outsource most or
all of their regulatory reporting at these activity levels. At lower activity levels,
most, but not all, broker-dealers outsource most if not all of their regulatory data
reporting. The Commission is cognizant that some broker-dealers reporting fewer
than 350,000 OATS ROEs per month can and do opt to self-report their
regulatory data. However, based on conversations with broker-dealers, the
Commission believes that most broker-dealers at these activity levels do not have
the infrastructure and specialized staff that would be required to report directly to
the Central Repository, and electing to self-report would be cost-prohibitive in
most but not all cases.

43

conduct its Paperwork Burden Analysis for the 126 broker-dealers, the Commission is
relying on the estimates used by the CAT NMS Plan of the expected FTE count that a
large OATS-reporting broker-dealer would incur as a result of the implementation of the
consolidated audit trail under Approach 1. 222
The CAT NMS Plan provides the following average initial internal FTE count
figures that a large OATS-reporting broker-dealer would expect to incur as a result of the
implementation of the consolidated audit trail under Approach 1: 14.92 internal FTEs. 223
Based on this information the Commission estimates that the average initial burden to
develop and implement the needed systems changes to capture the required information
and transmit it to the Central Repository in compliance with the Rule for large OATSreporting broker-dealers would be approximately 26,856 internal burden hours, 224 for an
estimated aggregate initial burden of 3,383,856 hours. 225
Once a large OATS-reporting broker-dealer has established the appropriate
systems and processes required for collection and transmission of the required
information to the Central Repository, the Commission estimates that the Rule would
impose on each broker-dealer ongoing annual burdens associated with, among other
things, personnel time to monitor each broker-dealer’s reporting of the required data and
the maintenance of the systems to report the required data; and implementing changes to
trading systems which might result in additional reports to the Central Repository.
The CAT NMS Plan provides the following average ongoing internal FTE count
figures that a large OATS-reporting broker-dealer would expect to incur to maintain data
reporting systems to be in compliance with Rule 613: 10.03 internal FTEs. 226 Based on
222

See supra note 214.

223

Approach 1 also provided $6,000,000 in initial internal FTE costs. The
Commission believes the $6,000,000 in initial internal FTE costs is the
Participants’ estimated cost of the 14.92 FTEs. (14.92 FTEs) x ($401,440
Participants’ assumed annual cost per FTE provided in the CAT NMS Plan) =
$5,989,485. See CAT NMS Plan, supra note 4, at Appendix C, Section
B.7(b)(ii)(C), at n. 192. See also supra note 177.

224

26,856 initial burden hours per large OATS-reporting broker-dealer = (14.92
FTEs for implementation of CAT data reporting systems) x (1,800 working hours
per year).

225

The Commission estimates that 126 large OATS-reporting broker-dealers would
be impacted by this information collection. 126 large OATS-reporting brokerdealers x 26,856 burden hours = 3,383,856 initial burden hours to implement data
reporting systems.

226

Approach 1 also provided $4,000,000 in internal FTE costs related to
maintenance. The Commission believes the $4,000,000 in ongoing internal FTE
costs is the Participants’ estimated cost of the 10.03 FTEs. (10.03 FTEs) x
($401,440 Participants’ assumed annual cost per FTE provided in the CAT NMS

44

this information the Commission believes that it would take a large OATS-reporting
broker-dealer 18,054 ongoing burden hours per year 227 to continue compliance with the
Rule. Therefore, the Commission estimates that the average ongoing annual burden per
large OATS-reporting broker-dealer would be approximately 18,054 burden hours, for an
estimated aggregate burden of 2,274,804 hours. 228
The Commission estimates that it would take large OATS reporting brokerdealers approximately 3,402,756 annualized burden hours to adopt and maintain systems
changes needed to comply with the data reporting requirements of the consolidated audit
trail [(26,856 initial burden hours amortized over three years) + (18,054 ongoing burden
hours) x (126 large OATS reporting broker-dealers)].
(2)

Outsourcing Firms
A.

Small OATS-Reporting Broker-Dealers

The Commission estimates that there are 806 broker-dealers that report fewer than
350,000 OATS ROEs monthly. The Commission believes that these broker-dealers
generally outsource their regulatory reporting obligations because during the period June
15 – July 10, 2015, approximately 88.9% of their 350,000 OATS ROEs were reported
through service bureaus, with 730 of these broker-dealers reporting more than 99% of
their OATS ROEs through one or more service bureaus. 229
Firms that outsource their regulatory data reporting still face internal staffing
burdens associated with this activity. These employees perform activities such as
answering inquiries from their service bureaus, and investigating reporting exceptions.
Based on conversations with market participants, the Commission estimates that these
firms currently have 0.5 full-time employees devoted to these activities. The
Commission estimates that these firms would need to hire one additional full-time
employee for one year to implement CAT reporting requirements.
Based on this information, the Commission estimates that the average initial
burden to implement the needed systems changes to capture the required information and
Plan) = $4,026,443. See CAT NMS Plan, supra note 4, at Appendix C, Section
B.7(b)(ii)(C), at n. 192. See also supra note 177.
227

18,054 ongoing burden hours = (10.03 ongoing FTEs for maintenance of CAT
data reporting systems) x (1,800 working hours per year).

228

The Commission estimates that 126 large OATS-reporting broker-dealers would
be impacted by this information collection. (126 large OATS-reporting brokerdealers) x (18,054 burden hours) = 2,274,804 aggregate ongoing burden hours.

229

Because of the extensive use of service bureaus in these categories of brokerdealers, the Commission assumes that these broker-dealers are likely to use
service bureaus to accomplish their CAT data reporting. See supra note 221.

45

transmit it to the Central Repository in compliance with the CAT NMS Plan for small
OATS-reporting broker-dealers would be approximately 1,800 burden hours. 230 The
Commission believes the burden hours would be associated with work performed by
internal technology, compliance and legal staff in connection with the implementation of
CAT Data reporting. Therefore, the Commission estimates that the average one-time
initial burden per small OATS-reporting broker-dealer would be 1,800 burden hours, for
an estimated aggregate initial burden of 1,450,800 hours. 231
Small OATS-reporting broker-dealers that outsource their regulatory data
reporting would likely face internal staffing burdens and external costs associated with
ongoing activity, such as maintaining any systems that transmit data to their service
providers. The Commission estimates these firms would need 0.75 FTEs on an ongoing
basis to maintain CAT reporting.
Based on this information the Commission believes that it would take a small
OATS-reporting broker-dealer 1,350 ongoing burden hours per year 232 to continue
compliance with the Rule. The Commission believes the burden hours would be
associated with work performed by internal technology, compliance and legal staff in
connection with the ongoing operation of CAT Data reporting. Therefore, the
Commission estimates that the average ongoing annual burden per small OATS-reporting
broker-dealer would be approximately 1,350 hours, for an estimated aggregate ongoing
burden of 1,088,100 hours. 233
The Commission estimates that it would take small OATS-reporting brokerdealers approximately 1,571,700 annualized burden hours to implement the needed
systems changes to capture the required information and transmit it to the Central
Repository and to continue compliance with Rule 613 [(1,800 initial burden hours

230

This estimate assumes that, based on the expected FTE count provided, a small
OATS-reporting broker-dealer would have to hire 1 new FTE for implementation.
The salary attributed to the 1 FTE would be (1 x $424,350 FTE cost) = $424,350
per year. To determine the number of burden hours to be incurred by the current
0.5 FTE for implementation, multiply 0.5 FTE by 1,800 hours per year = 900
initial burden hours.

231

The Commission estimates that 806 small OATS-reporting broker-dealers would
be impacted by this information collection. (806 small OATS-reporting brokerdealers x 1,800 burden hours) = 1,450,800 aggregate initial burden hours.

232

1,350 ongoing burden hours = (0.75 FTE for maintenance of CAT Data reporting
systems) x (1,800 working hours per year).

233

The Commission estimates that 806 small OATS-reporting broker-dealers would
be impacted by this information collection. (806 small OATS-reporting brokerdealers x 1,350 burden hours) = 1,088,100 aggregate ongoing burden hours to
ensure ongoing compliance with Rule 613.

46

amortized over three years) + (1,350 ongoing burden hours) x (806 small OATSreporting broker-dealers)].
B.

Small Non-OATS-Reporting Broker-Dealers

In addition to firms that currently report to OATS, the Commission estimates
there are 799 broker-dealers that are currently exempt from OATS reporting rules due to
firm size, or excluded because all of their order flow is routed to a single OATS reporter,
such as a clearing firm, that would incur CAT reporting obligations. 234 A further 24
broker-dealers have Participant memberships only with one Participant; 235 the
Commission believes this group is comprised mostly of floor brokers and further believes
these firms would experience CAT implementation and ongoing reporting costs similar in
magnitude to small equity broker-dealers that currently have no OATS reporting
responsibilities.
The Commission assumes these broker-dealers would have very low levels of
CAT reporting, similar to those of the lowest activity firms that currently report to OATS.
Because these firms have more limited data reporting requirements than other firms, the
Commission assumes these firms currently have only 0.1 full-time employees currently
dedicated to regulatory data reporting activities. The Commission assumes these firms
would require 2 full-time employees for one year to implement CAT.
Based on this information, the Commission estimates that the average initial
burden to develop and implement the needed systems changes to capture the required
information and transmit it to the Central Repository in compliance with the Rule for
small, non-OATS-reporting broker-dealers would be approximately 3,600 initial burden
hours. 236 The Commission believes the burden hours would be associated with work
performed by internal technology, compliance and legal staff in connection with the
implementation of CAT Data reporting. Therefore, the Commission estimates that the
234

The Commission notes that Rule 613 does not exclude from data reporting
obligations Participant members that quote or execute transactions in NMS
Securities and Listed Options that route to a single market participant. See CAT
NMS Plan, supra note 4, at Appendix C, Section B.7(b)(ii)(B)(2).

235

This group comprises 24 broker-dealers that have SRO memberships only with
CBOE; the Commission believes this group is comprised primarily of CBOE
floor brokers and, further, believes these firms would incur CAT implementation
and ongoing reporting costs similar in magnitude to small equity broker-dealers
that currently have no OATS reporting responsibilities because they would face
similar tasks to implement and maintain CAT reporting.

236

3,600 initial burden hours = (2 FTEs for implementation of CAT Data reporting
systems) x (1,800 working hours per year).

47

average one-time initial burden per small non-OATS-reporting broker-dealer would be
3,600 burden hours, for an estimated aggregate initial burden of 2,962,800 hours. 237
Small non-OATS-reporting broker-dealers that outsource their regulatory data
reporting would likely face internal staffing burdens associated with ongoing activity,
such as maintaining any systems that transmit data to their service providers. Based on
conversations with market participants, the Commission estimates these firms would
need 0.75 full-time employees annually to maintain CAT reporting.
Based on this information the Commission believes that it would take a small
non-OATS-reporting broker-dealer 1,350 ongoing burden hours per year 238 to continue
compliance with the Rule. Therefore, the Commission estimates that the average
ongoing annual burden per small non-OATS-reporting broker-dealer would be
approximately 1,350 hours, for an estimated aggregate ongoing burden of 1,111,050
hours. 239
The Commission estimates that it would take small non-OATS-reporting brokerdealers approximately 2,098,650 annualized burden hours to implement the needed
systems changes to capture the required information and transmit it to the Central
Repository and to continue compliance with Rule 613 [(3,600 initial burden hours
amortized over three years) + (1,350 ongoing burden hours) x (823 small non-OATSreporting broker-dealers)].

237

The Commission estimates that 823 small non-OATS-reporting broker-dealers
would be impacted by this information collection. (823 small non-OATSreporting broker-dealers x 3,600 burden hours) = 2,962,800 aggregate initial
burden hours.

238

1,350 ongoing burden hours = (0.75 FTEs for maintenance of CAT data reporting
systems) x (1,800 working hours per year).

239

The Commission estimates that 823 small non-OATS-reporting broker-dealers
would be impacted by this information collection. (823 small non-OATSreporting broker-dealers x 1,350 burden hours) = 1,111,050 aggregate ongoing
burden hours to ensure ongoing compliance with Rule 613.

48

Summary of Hourly Burdens
Name of
Information
Collection

Central
Repository
Data
Collection and
Reporting
(Participants)
Data
Collection and
Reporting
(Large, NonOATS
Reporting
BrokerDealers) ELPs
Data
Collection and
Reporting
(Large, NonOATS
Reporting
BrokerDealers) –
Options
Market Makers
Data
Collection and
Reporting
(Large OATS
Reporting
BrokerDealers)
Data
Collection and
Reporting
(Small OATS
Reporting
BrokerDealers)

Type of
Burden

[A.]
Number of
Entities
Impacted

[B.]
Annual
Responses
per Entity

Recordkeeping

21

1

686.05

228.68

686.05

914.73

914.73

19,209.4

0.00

Third Party
Disclosure

21

1

2,080.8

693.6

1,474.2

2,167.8

2,167.8

45,523.8

0.00

Third Party
Disclosure

14

1

14,490.00

4,830.00

13,338.00

18,168.00

18,168.00

254,352.00

0.00

Third Party
Disclosure

31

1

14,490.00

4,830.00

13,338.00

18,168.00

18,168.00

563,208.00

0.00

Third Party
Disclosure

126

1

26,856.00

8,952.00

18,054.00

27,006.00

27,006.00

3,402,756.00

0.00

Third Party
Disclosure

806

1

1,800.00

600.00

1,350.00

1,950.00

1,950.00

1,571,700.00

Estimated
395 240

240

[C.]
Initial Burden per
Entity per
Response

[D.]
Initial Burden
Annualized per
Entity per
Response
[ = C ÷ 3 years]

[E.]
Ongoing Burden
per Entity per
Response

[F.]
Annual Burden
Per Entity per
Response
[ = D + E]

[G.]
Total Annual
Burden Per Entity
[ = (D + E) * B]

[H.]
Total Industry
Burden
[ = G * A]

The Commission believes that the 1,234 Commission-registered broker-dealers
(as of 2015) that are considered “small entities” could be impacted by two
categories of information collection: “data collection and reporting (small OATSreporting broker-dealers)” and “data collection and reporting (non-OATS
reporting broker-dealers).” The Commission estimates that the 823 respondents
affected by the “data collection and reporting (non-OATS reporting brokerdealers)” would all be considered small entities as these firms are currently
exempt from OATS reporting rules due to firm size, or are excluded because all
of their order flow is routed to a single OATS reporter, or are floor brokers with
an SRO membership with a single Participant. The Commission believes these
broker-dealers would have very low levels of CAT reporting and would outsource
CAT data collection and reporting to a third party, such as a service bureau. The
Commission estimates that the remaining 395 broker-dealers (of the estimated
1,234 small entity broker-dealers) would be impacted by the information
collection “data collection and reporting (small OATS-reporting broker-dealers).”
These firms would not be small enough to be exempt from OATS reporting, but
the Commission preliminarily believes that they would have low levels of OATS
reporting and would likely outsource CAT data collection and reporting to a
service bureau.

49

Small
Business
Entities
Affected

Name of
Information
Collection

Type of
Burden

[A.]
Number of
Entities
Impacted

[B.]
Annual
Responses
per Entity

[C.]
Initial Burden per
Entity per
Response

[D.]
Initial Burden
Annualized per
Entity per
Response
[ = C ÷ 3 years]

[E.]
Ongoing Burden
per Entity per
Response

[F.]
Annual Burden
Per Entity per
Response
[ = D + E]

[G.]
Total Annual
Burden Per Entity
[ = (D + E) * B]

[H.]
Total Industry
Burden
[ = G * A]

Small
Business
Entities
Affected

Data
Collection and
Reporting
(Small NonOATS
Reporting
BrokerDealers)

Third Party
Disclosure

823

1

3,600.00

1,200.00

1,350.00

2,550.00

2,550.00

2,098,650.00

Estimated
823 241

Surveillance

Recordkeeping

21

1

3,535.2

1,178.4

13,473

14,651.4

14,651.4

307,679.4

0.00

Written
Assessment of
Operation of
CAT

Reporting

21

1

0.00

0.00

171.43

171.43

171.43

3,600.03

0.00

Document on
Expansion to
Other
Securities

Reporting

21

1

171.43

57.14

0.00

57.14

57.14

1,199.94

0.00

TOTAL HOURLY BURDEN FOR ALL RESPONDENTS

8,267,878.57

13.

Costs to Respondents
A.

Costs to National Securities Exchanges and National Securities
Associations
a.

Central Repository

The Commission estimates that, over the 12-month period after the effectiveness
of the CAT NMS Plan within which the Participants would be required to select an initial
Plan Processor 242 and begin reporting to the Central Repository, 243 the Participants would
collectively spend $2,400,000 on external public relations, legal and consulting costs
associated with the building of the Central Repository and the selection of the Plan
Processor for the Central Repository, or $114,285.71 per Participant. 244 The Commission
is basing this estimate on the estimate provided in the CAT NMS Plan for public
relations, legal and consulting costs incurred in preparation of the CAT NMS Plan.
241

Id.

242

Rule 613(a)(3)(i) requires the selection of the Plan Processor within 2 months
after effectiveness of the CAT NMS Plan. See 17 CFR 242.613(a)(3)(i).

243

Rule 613(a)(3)(iii) requires the Participants to provide to the Central Repository
the data required by Rule 613(c) within one year after effectiveness of the CAT
NMS Plan. See 17 CFR 242.613(a)(3)(iii).

244

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii) (stating “the
Participants have incurred public relations, legal and consulting costs in
preparation of the CAT NMS Plan. The Participants estimate the costs of these
services to be $8,800,000”). $2,400,000 for all Participants over 12 months =
($8,800,000/44 months between the adoption of Rule 613 and the filing of the
CAT NMS Plan) x (12 months). ($2,400,000 / 21 Participants) = $114,285.71 per
Participant over 12 months.

50

Because the Participants described such costs as “reasonably associated with creating,
implementing and maintaining the CAT,” 245 the Commission believes these external cost
estimates should also be applied to the creation and implementation of the Central
Repository.
The CAT NMS Plan provides the estimates given by the six Shortlisted Bidders 246
for the one-time total cost associated with the Plan Processor that would build the Central
Repository. 247 The CAT NMS Plan states that these include technological, operational,
administrative and “any other material costs.” 248
Subsequent to the publication of the CAT NMS Plan Notice, the Participants
submitted revised Central Repository cost estimates to reflect the proposed development
and maintenance costs of the final three Shortlisted Bidders. 249 Using the revised
245

Id.

246

The Selection Committee narrowed the list of Shortlisted Bidders from six to
three Shortlisted Bidders. See “Participants, SROs Reduce Short List Bids from
Six to Three for Consolidated Audit Trail” (November 16, 2015), available at
http://www.catnmsplan.com/pastevents/catnms_release_downselect_111615.pdf.
However, the costs provided by the Participants in the CAT NMS Plan are based
on the Bids of the six Shortlisted Bidders.

247

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(i)(B); see also
id. at Appendix C, Section B.7(b)(iv)(A)(1). The Commission notes that the cost
associated with the build and maintenance of the Central Repository includes
compliance with the requirement in Rule 613(e)(8) that the Central Repository
retain information collected pursuant to Rule 613(c)(7) and (e)(7) in a convenient
and usable standard electronic data format that is directly available and searchable
electronically without any manual intervention for a period of not less than five
years. See id. at Section 6.1(d)(i) (requiring the Plan Processor to comply with
the recordkeeping requirements of Rule 613(e)(8)). See also id. at Appendix C,
Section D.12(l) (stating that Rule 613(e)(8) requires data to be available and
searchable for a period of not less than five years, that broker-dealers are currently
required to retain data for six years under Rule 17a-4(a), and that the Participants
are requiring CAT Data to be kept online in an easily accessible format for
regulators for six years, though this may increase the cost to run the CAT). The
Commission notes that a Shortlisted Bidder may be permitted to revise its Bid
prior to approval of the CAT NMS Plan if the CAT Selection Committee
determines by Majority Vote that such revisions are necessary or appropriate, so
the estimates provided in the CAT NMS Plan may be subject to change. See id. at
Section 5.2(c)(ii). In addition, changes in technology between the time the Bids
were submitted and the time the Central Repository is built could result in
changes to the costs to build and operate the Central Repository.

248

See id. at Appendix C, Section B.7(b)(i)(B).

249

See Response Letter III at 14–15.

51

estimates, the Commission estimates that the initial one-time cost to develop the Central
Repository would be an aggregate initial external cost to the Participants of $65
million,250 or $3,095,238.09 per Participant. 251 Therefore, the Commission estimates that
each Participant would incur initial one-time external costs of $3,209,523.8 252 to build
the Central Repository, or an aggregate initial one-time external cost across all
Participants of $67,399,999.8. 253
After the Central Repository has been developed and implemented, there would
be ongoing costs for operating and maintaining the Central Repository, including the cost
of systems and connectivity upgrades or changes necessary to receive, consolidate, and
store the reported order and execution information from Participants and their members;
the costs to store data, and make it available to regulators, in a uniform electronic format,
and in a form in which all events pertaining to the same originating order are linked
together in a manner that ensures timely and accurate retrieval of the information; the
cost, including storage costs, of collecting and maintaining the NBBO and transaction
data in a format compatible with the order and event information collected pursuant to the
Rule; the cost of monitoring the required validation parameters, which would allow the
Central Repository to automatically check the accuracy and completeness of the data
submitted and reject data not conforming to these parameters consistent with the
requirements of the Rule; and the cost of compensating the CCO. The CAT NMS Plan
provides that the Plan Processor would be responsible for the ongoing operations of the
Central Repository. 254 In addition, the CAT NMS Plan states that the Participants would
incur costs for public relations, legal, and consulting costs associated with maintaining
the CAT upon approval of the CAT NMS Plan. 255 The Commission estimates that the
Participants will collectively spend $800,000 annually on external public relations, legal
and consulting costs associated with the continued management of the Central
Repository, or $38,095.24 per Participant. 256
250

See id.

251

Id. The Participants provided a range of Bidder estimates. For purposes of this
Paperwork Burden Act analysis, the Commission is using the build cost of the
maximum estimate. $3,095,238.09 = $65,000,000/21 Participants.

252

$3,209,523.8 for each Participant to build the Central Repository =
($3,095,238.09 per Participant in initial one-time costs to compensate the Plan
Processor to build the Central Repository) + ($114,285.71 per Participant in initial
one-time public relations, legal and consulting costs associated with the building
of the Central Repository and the selection of the initial Plan Processor).

253

$67,399,999.8 for all of the Participants to build the Central Repository =
$3,209,523.8 per Participant to build the Central Repository) x (21 Participants).

254

See CAT NMS Plan, supra note 4, at Section 6.1.

255

See id. at Appendix C, Section B.7(b)(iii).

256

The Commission is basing this external cost estimate on the public relations, legal
and consulting external cost estimate provided in the CAT NMS Plan associated

52

The CAT NMS Plan includes the estimates the six Shortlisted Bidders provided
for the annual ongoing costs to the Participants to operate the Central Repository. 257 The
CAT NMS Plan did not categorize the costs included in the ongoing costs, but the
Commission believes they would comprise external technological, operational and
administrative costs, as the Participants described the costs included in the initial onetime external cost to build the Central Repository. 258 As noted above, the Participants
updated the Central Repository estimates to reflect the estimates of the final three
Shortlisted Bidders. 259 Using the revised estimates, the Commission now estimates that
the annual ongoing cost to the Participants to compensate the Plan Processor for building,
operating and maintaining the Central Repository would be an aggregate ongoing
external cost of $55 million, 260 or $2,619,047.62 per Participant. 261 Therefore, the
with the preparation of the CAT NMS Plan (which the Participants consider
“reasonably associated with creating, implementing, and maintaining the CAT
upon the Commission’s adoption of the CAT NMS Plan”). See id. (stating “the
Participants have incurred public relations, legal and consulting costs in
preparation of the CAT NMS Plan. The Participants estimate the costs of these
services to be $8,800,000”). $2,400,000 for all Participants over 12 months =
($8,800,000/44 months between the adoption of Rule 613 and the filing of the
CAT NMS Plan) x (12 months). Because the Central Repository will have
already been created, the Commission believes it is reasonable to assume that the
Participants will have a lesser need for public relations, legal and consulting
services. The Commission is estimating that the Participants will incur one-third
of the external cost associated with development and implementation of the
Central Repository to maintain the Central Repository. $800,000 = (0.333) x
($2,400,000). ($800,000 / 21 Participants) = $38,095.24 per Participant over 12
months.
257

See id. at Appendix C, Section B.7(b)(i)(B).

258

See id.

259

See Response Letter III at 14–15.

260

Id.

261

The Participants provided a range of Bidder estimates. See id. For purposes of
this Paperwork Burden Act analysis, the Commission is using the maximum
operation and maintenance cost estimate. $2,619,047.62 = $55,000,000 / 21
Participants. The Commission noted several uncertainties that may affect the
Central Repository cost estimates, including (1) that the Participants have not yet
selected a Plan Processor and the Shortlisted Bidders have submitted a wide range
of cost estimates for building and operating the Central Repository; (2) the Bids
submitted by the Shortlisted Bidders may not be final because they may be
revised before the final selection of the CAT Processor; and (3) neither the
Bidders nor the Commission can anticipate the evolution of technology and
market activity with precision, as improvements in available technology may
allow the Central Repository to be built and operated at a lower cost than is
currently anticipated, but if levels of anticipated market activity are materially

53

Commission estimates that each Participant would incur ongoing annual external costs of
$2,657,142.86 262 to maintain the Central Repository, or aggregate ongoing annual
external costs across all Participants of $55,800,000.06. 263
The Commission estimates that the Participants would incur an aggregate,
annualized external cost of approximately $78,266,666.66 to create and manage the
Central Repository [($3,209,523.8 in initial external costs amortized over three years) +
($2,657,142.86 in annual ongoing external costs) x (21 Participants)].
b.

Data Collection and Reporting

The CAT NMS Plan provides estimated costs for hardware and software, FTE
costs, and third-party providers to be incurred by the Participants to report CAT Data. 264
For these estimates, the Commission is relying on the cost data provided by the
Participants because it believes that the Plan’s estimates for Participants to report CAT
Data are reliable since all of the Participants provided cost estimates, and most
Participants have experience collecting audit trail data, as well as knowledge of both the
requirements of Rule 613 as well as their current business practices.
The CAT NMS Plan provides the following average costs that the Participants
would expect to incur to adopt the systems changes needed to comply with the data
reporting requirements of the consolidated audit trail: $770,000 in aggregate third party
legal and consulting costs and $17,900,000 in aggregate total costs. 265
underestimated, the capacity of the Central Repository may need to be increased,
resulting in an increase in costs.
262

$2,657,142.86 for each Participant to maintain the Central Repository =
($2,619,047.62 per Participant in ongoing annual costs to maintain the Central
Repository) + ($38,095.24 per Participant in ongoing annual public relations,
legal and consulting costs associated with the maintenance of the Central
Repository).

263

$55,800,000.06 for all of the Participants to maintain the Central Repository =
($2,657,142.86 per Participant to compensate the Plan Processor and for external
public relations, legal and consulting costs associated with the maintenance of the
Central Repository) x (21 Participants).

264

Third-party provider costs are generally legal and consulting costs, but may
include other outsourcing. The template used by respondents is available at
http://catnmsplan.com/PastEvents/ under the Section titled “6/23/14” at the “Cost
Study Working Template” link.

265

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(B)(2). Of
the $17,900,000 in aggregate total costs, $11,070,000 is identified (subtotal of
FTE costs and outsourcing), but the remaining $6,830,000 is not identified in the
CAT NMS Plan. The Commission believes that the $6,830,000 may be attributed
to hardware costs because the Participants have not provided any hardware costs

54

Based on estimates provided in the CAT NMS Plan, the Commission estimates
that each Participant would, on average, incur approximately $36,666.67 in initial third
party legal and consulting costs 266 for a total of $361,904.76 in initial external costs to
adopt the systems changes needed to comply with the data reporting requirements of the
consolidated audit trail. 267 Therefore, the Commission estimates that, for all Participants,
the estimated aggregate initial external cost would be $7,600,000. 268
Once a Participant has established the appropriate systems and processes required
for collection and transmission of the required information to the Central Repository, the
Commission estimates that Rule 613 would impose on each Participant ongoing annual
burdens associated with, among other things, personnel time to monitor each
Participant’s reporting of the required data and the maintenance of the systems to report
the required data; and implementing changes to trading systems that might result in
additional reports to the Central Repository. The CAT NMS Plan provides the following
average aggregate costs that the Participants would expect to incur to maintain data
reporting systems to be in compliance with Rule 613: $720,000 in annual third-party
legal, consulting, and other costs 269 and $14,700,000 total annual costs. 270
associated with data reporting elsewhere and the Commission believes that the
Participants will likely incur external costs to purchase upgraded hardware to
report data to the Central Repository.
266

($770,000 anticipated initial third party costs) / (21 Participants) = $36,666.67 in
initial anticipated third party costs per Participant.

267

To determine the total initial external cost per Participant, the Commission
subtracted the anticipated initial FTE cost estimates for the Participants as
provided in the Plan from the total aggregate initial costs to the Participants and
divided the remainder by 21 Participants. ($17,900,000 total aggregate initial cost
to Participants) – ($10,300,000 initial FTE cost to Participants) = $7,600,000
(which includes the $770,000 in total anticipated initial third party costs).
($7,600,000) / 21 Participants = $361,904.76 in initial external costs per
Participant. See CAT NMS Plan, supra note 4, at Appendix C, Section
B.7(b)(iii)(B)(1) for the Participants’ anticipated costs associated with the
implementation of regulatory reporting to the Central Repository.

268

$7,600,000 = ($361,904.76 in initial external costs) x (21 Participants).

269

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(B)(2). The
CAT NMS Plan did not identify the other costs.

270

Of the $14,700,000 in aggregate total annual costs, $8,020,000 is identified
(subtotal of FTE costs and outsourcing), but the remaining $6,680,000 is not
identified in the CAT NMS Plan. The Commission believes that this amount may
be attributed to hardware costs because the Participants have not provided any
hardware costs associated with data reporting elsewhere and the Commission
believes that the Participants will likely incur costs to upgrade their hardware to
report data to the Central Repository.

55

Based on estimates provided in the CAT NMS Plan, the Commission estimates
that it would cost, on average, approximately $34,285.71 in ongoing third-party legal and
consulting and other costs 271 and $352,380.95 in total ongoing external costs per
Participant. 272 Therefore, the Commission estimates that the estimated aggregate
ongoing external cost for all Participants would be $7,400,000. 273
The Commission estimates that the Participants would incur an aggregate,
annualized external cost of approximately $9,933,333.27 to adopt and maintain systems
changes needed to comply with the data reporting requirements of the consolidated audit
trail [($361,904.76 in initial external costs amortized over three years) + ($352,380.95 in
annual, ongoing external costs) x (21 Participants)].
c.

Collection and Retention of NBBO, Last Sale Data and
Transaction Reports

Rule 613(e)(7) provides that the CAT NMS Plan must require the Central
Repository to collect and retain on a current and continuous basis NBBO information for
each NMS security, transaction reports reported pursuant to an effective transaction
reporting plan, and Last Sale Reports reported pursuant to the OPRA Plan. 274
Additionally, the CAT NMS Plan must require the Central Repository to maintain this
data in a format compatible with the order and event information consolidated and stored
pursuant to Rule 613(c)(7). 275 Further, the CAT NMS Plan must require the Central
Repository to retain the information collected pursuant to paragraphs (c)(7) and (e)(7) of
Rule 613 for a period of not less than five years in a convenient and usable uniform
electronic format that is directly available and searchable electronically without any
manual intervention. 276 The Commission notes that the CAT NMS Plan includes these
271

($720,000 in annual third party costs) / (21 Participants) = $34,285.71 per
Participant in anticipated annual third party costs.

272

To determine the total external annual cost per Participant, the Commission
subtracted the anticipated annual FTE cost estimates for the Participants as
provided in the Plan from the total aggregate annual costs to the Participants and
divided the remainder by 21 Participants. ($14,700,000 total aggregate annual
cost to Participants) – ($7,300,000 annual FTE cost to Participants) = $7,400,000
(which includes the $720,000 in total anticipated annual third party costs).
($7,400,000) / 21 Participants = $352,380.95 in annual external costs per
Participant. See CAT NMS Plan, supra note 4, at Appendix C, Section
B.7(b)(iii)(B)(1) for the Participants’ anticipated maintenance costs associated
with regulatory reporting to the Central Repository.

273

$7,400,000 = ($352,380.95 in total annual external costs) x (21 Participants).

274

See 17 CFR 242.613(e)(7).

275

Id.

276

See 17 CFR 242.613(e)(8).

56

data as “SIP Data” to be collected by the Central Repository. 277 The Commission
believes the burden associated with SIP Data is included in the burden to the Participants
associated with the implementation and maintenance of the Central Repository.
d.

Surveillance

Rule 613(f) provides that the CAT NMS Plan must require that every national
securities exchange and national securities association develop and implement a
surveillance system, or enhance existing surveillance systems, reasonably designed to
make use of the consolidated information contained in the consolidated audit trail.
Rule 613(a)(3)(iv) provides that the CAT NMS Plan must require that the surveillance
systems be implemented within fourteen months after effectiveness of the CAT NMS
Plan.
The CAT NMS Plan states that the estimated total cost to the Participants to
implement surveillance programs within the Central Repository is $23,200,000. 278 This
amount includes legal, consulting, and other costs of $560,000, as well as $17,500,000 in
FTE costs for operational, technical/development, and compliance staff to be engaged in
the creation of surveillance programs. 279
Based on the estimates provided in the CAT NMS Plan, the Commission
estimates that each Participant would, on average, incur an initial external cost of
approximately $26,666.67 280 for outsourced legal, consulting and other costs in order to
implement new or enhanced surveillance systems, for a total of $271,428.57 in initial
external costs, 281 for an aggregate one-time initial external cost of $5,700,000 across the
21 Participants to implement new or enhanced surveillance systems. 282
277

See CAT NMS Plan, supra note 4, at Section 6.5(a)(ii).

278

See id. at Appendix C, Section B.7(b)(iii)(B)(2).

279

Id. For purposes of the Paperwork Reduction Act analysis, the Commission is
treating the FTE cost as an internal burden. See text accompanying notes 188–
190, supra. The Commission also notes that based upon the data provided by the
Participants, the source of the remaining $5,140,000 in initial costs to implement
new or enhanced surveillance systems is unspecified. The Commission believes
that this amount may be attributed to hardware costs because the Participants have
not provided any hardware costs associated with surveillance elsewhere and the
Commission believes that the Participants will likely incur costs to implement
new or enhanced surveillance systems reasonably designed to make use of the
consolidated audit trail data.

280

$26,666.67 = $560,000 / 21 Participants.

281

($23,200,000 in total initial surveillance costs - $17,500,000 in FTE costs) = $5.7
million in aggregate one-time initial external costs (which includes the $560,000
in intial external third party costs). $5.7 million / (21 Participants) = $271,428.57.

282

$5,700,000 = $271,428.57 x 21 Participants.

57

The CAT NMS Plan states that the estimated total annual cost associated with the
maintenance of surveillance programs for the Participants is $87,700,000. 283 This
amount includes annual legal, consulting, and other costs of $1,000,000, as well as
$66,700,000 in annual FTE costs for internal operational, technical/development, and
compliance staff to be engaged in the maintenance of surveillance programs. 284 Based on
the estimates provided in the CAT NMS Plan, 285 the Commission estimates that each
Participant would, on average, incur an annual external cost of approximately
$47,619.05 286 for outsourced legal, consulting and other costs in order to maintain the
new or enhanced surveillance systems, for a total estimated ongoing external cost of
$1,000,000, 287 for an estimated aggregate ongoing external cost of $21,000,000 across
the 21 Participants to maintain the surveillance systems. 288
The Commission estimates that the Participants would incur an aggregate,
annualized external cost of approximately $22,899,999.99 to develop, implement (or
enhance existing) surveillance systems reasonably designed to make use of the
consolidated information contained in the consolidated audit trail, and to maintain such
systems [($271,428.57 in initial external costs amortized over three years) + ($1,000,000
in annual, ongoing external costs) x (21 Participants)].
e.

Written Assessment of Operation of the Consolidated Audit
Trail

283

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(B)(2).

284

Id. For purposes of the Paperwork Reduction Act analysis, the Commission is
treating the FTE cost as an internal burden. See text accompanying notes 191–
193, supra. The Commission also notes that based upon the data provided by the
Participants, the source of the remaining $21,000,000 in ongoing costs to maintain
the new or enhanced surveillance systems is unspecified. The Commission
believes that this amount may be attributed to hardware costs because the
Participants have not provided any hardware costs associated with surveillance
elsewhere and the Commission believes that the Participants would likely incur
costs associated with maintaining the new or enhanced surveillance systems.

285

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(B)(2).

286

$47,619.05 = $1,000,000 for ongoing legal, consulting and other costs associated
with maintenance of surveillance programs / 21 Participants.

287

($87,700,000 in total ongoing surveillance costs - $66,700,000 in ongoing FTE
costs) = $21,000,000 in total ongoing external costs (which includes $1,000,000
in total ongoing external third party costs). $21,000,000 / 21 Participants =
$1,000,000.

288

$21,000,000 = $1,000,000 x 21 Participants.

58

Rule 613(b)(6) provides that the CAT NMS Plan must require the Participants to
provide the Commission a written assessment of the CAT’s operation at least every two
years, once the CAT NMS Plan is effective. 289 The assessment must address, at a
minimum, with respect to the consolidated audit trail: (i) an evaluation of its
performance; (ii) a detailed plan for any potential improvements to its performance;
(iii) an estimate of the costs associated with any such potential improvements; and (iv) an
estimated implementation timeline for any such potential improvements, if applicable. 290
Thus, the Participants must, among other things, undertake an analysis of the
consolidated audit trail’s technological and computer system performance.
The CAT NMS Plan states that the CCO would oversee the assessment required
by Rule 613(b)(6), and would allow the Participants to review and comment on the
assessment before it is submitted to the Commission. 291 The CCO would be an employee
of the Plan Processor and would be compensated by the Plan Processor. 292 The
Commission assumes that the overall cost to the Participants to implement and maintain
the Central Repository includes both the compensation for the Plan Processor as well as
its employees for the implementation and maintenance of the Central Repository.
As noted above, 293 the Commission has amended Section 6.6 of the Plan to
change the frequency of the assessment contemplated by Rule 613(b)(6) from biannual
to annual.
The Commission has also amended Section 6.6 of the Plan to provide further
detail regarding elements of the written assessment to be conducted by the Participants.
Specifically, as amended, the Participants’ annual written assessment must also
include: (1) an evaluation of the information security program of the CAT to ensure that
the program is consistent with the highest industry standards for protection of data; (2) an
evaluation of potential technological upgrades based upon a review of technological
developments over the preceding year, drawing on necessary technological expertise,
whether internal or external; (3) an assessment of efforts to reduce the time to restore and
recover CAT Data at a back-up site; (4) an assessment of how the Plan Processor and
SROs are monitoring Error Rates and addresses the application of Error Rates based on
product, data element or other criteria; (5) a copy of the evaluation required by Section
6.8(c) of the Plan as to whether industry standards have evolved such that: (i) the clock
synchronization standard in Section 6.8(a) should be shortened; or (ii) the required
timestamp in Section 6.8(b) should be in finer increments; and (6) an assessment of
whether any data elements should be added, deleted or changed.
289

17 CFR 242.613(b)(6).

290

Id.

291

See CAT NMS Plan, supra note 4, at Section 6.6.

292

Id. at Section 6.2(a).

293

See Section 12.A.e., supra.

59

Section 6.6 of the Plan as filed also requires the Participants to provide an
estimate of the costs associated with any potential improvements to the performance of
the CAT, including an assessment of the potential impact on competition, efficiency and
capital formation. The Commission has also amended Section 6.6 of the Plan to require
the annual assessment to consider the benefits of potential improvements to the CAT,
including to investor protection.
The Commission now estimates that on average, each Participant would outsource
2.5 hours of legal time annually to assist in the review of the assessment, for an ongoing
annual external cost of approximately $1,000. 294 Therefore, the Commission estimates
that the ongoing annual external cost for outsourced legal counsel would be $1,000 per
Participant per year, for an estimated aggregate annual external cost of $21,000. 295
The Commission estimates that the Participants would incur an aggregate,
annualized external cost of approximately $21,000 to review the written assessment
[($1,000 in annual, ongoing external costs) x (21 Participants)].
f.

Document on Expansion to Other Securities

Rule 613(i) provides that the CAT NMS Plan must require the Participants to
jointly provide to the Commission, within six months after the CAT NMS Plan is
effective, a document outlining how the Participants could incorporate into the
consolidated audit trail information regarding: (1) equity securities that are not NMS
securities; 296 (2) debt securities; and (3) primary market transactions in equity securities
that are not NMS securities and debt securities. 297 The document must also detail the
order and Reportable Event data that each market participant may be required to provide,
which market participants may be required to provide such data, an implementation
timeline, and a cost estimate. Thus, the Participants must, among other things, undertake
an analysis of technological and computer system acquisitions and upgrades that would
be required to incorporate such an expansion.
294

$1,000 = ($400 per hour rate for outside legal services) x (2.5 hours). The
Commission has amended the CAT NMS Plan to add more specificity to the
requirement to provide the written assessment and is now requiring this
assessment to be provided annually instead of once every two years. Because the
written assessment is no longer a biennial requirement, the Commission is no
longer dividing the cost of the written assessment in half (over two years) to
estimate the annual ongoing external cost per Participant for outside legal services
to review and comment on the written assessment prepared by the CCO.

295

$21,000 = 21 Participants x ($400 per hour rate for outside legal services) x (2.5
hours).

296

The CAT NMS Plan would require the inclusion of OTC Equity Securities, while
Rule 613 does not include such a requirement. See supra note 8.

297

See 17 CFR 242.613(i).

60

The Commission estimates that on average, each Participant would outsource 25
hours of external legal time to create the document, for an aggregate one-time external
cost of approximately $10,000. 298 Therefore, the Commission preliminarily estimates
that the one-time initial external cost per Participant to draft the document would be
$10,000, for an estimated aggregate initial external cost of $210,000. 299
The Commission estimates that the Participants would incur an aggregate,
annualized external cost of approximately $70,000 to create the document addressing
expansion of the consolidated audit trail to additional securities as required by Rule
613(i) [($10,000 in initial external costs) / (amortized over three years) x (21
Participants)].
B.

Costs to Broker-Dealer Members
a.

Data Collection and Reporting

Rule 613(c)(1) requires the CAT NMS Plan to provide for an accurate, timesequenced record of orders beginning with the receipt or origination of an order by a
broker-dealer member of a Participant, and further documenting the life of the order
through the process of routing, modification, cancellation and execution (in whole or in
part) of the order. Rule 613(c) requires the CAT NMS Plan to impose requirements on
broker-dealer members to record and report CAT information to the Central Repository
in accordance with specified timelines.
The Commission’s estimates delineate broker-dealer firms by whether they
insource or outsource, or are likely to insource or outsource, CAT Data reporting
obligations. The Commission believes that firms that currently report high numbers of
OATS ROEs 300 strategically would decide to either self-report their CAT Data or
outsource their CAT Data reporting functions, while the firms with the lowest levels of
activity would be unlikely to have the infrastructure and specialized employees necessary
298

$10,000 = (25 hours of outsourced legal time per Participant) x ($400 per hour
rate for outside legal services). The Commission derived the total estimated cost
for outsourced legal counsel based on the assumption that the report required by
Rule 613 would require approximately fifteen percent of the Commission’s
approximated burden of drafting and filing the CAT NMS Plan. This assumption
is based on the Participants leveraging their knowledge gained from their drafting
and filing of the CAT NMS Plan and applying it to efficiently preparing the report
required by Rule 613 with respect to other securities’ order and Reportable
Events, implementation timeline and cost estimates.

299

The initial external cost estimate is based on: (21 Participants) x ($10,000 for
outsourced legal counsel).

300

See supra note 207.

61

to insource CAT Data reporting and would almost certainly outsource their CAT Data
reporting functions. The Commission recognizes that more active firms that will likely
be CAT Reporters and insource regulatory data reporting functions may not have current
OATS reporting obligations because they either are not FINRA members, or because
they do not trade in NMS equity securities. 301
As noted above, the Commission estimates that there are 126 OATS-reporting
Insourcers and 45 non-OATS reporting Insourcers. 302 The Commission’s estimation
categorizes the remaining 1,629 broker-dealers that the Plan anticipates would have CAT
Data reporting obligations as Outsourcers. 303
(1)

Insourcers
A.

Large Non-OATS Reporting Broker-Dealers

The Commission relies on the Plan’s large broker-dealer cost estimates in
estimating costs for large broker-dealers that can practicably decide between insourcing
or outsourcing their regulatory data reporting functions. 304 The Commission estimates
that there are 14 large broker-dealers that are not OATS reporters currently in the
business of electronic liquidity provision that would be classified as Insourcer firms. 305
Additionally, the Commission estimates that there are 31 broker-dealers that may
transact in options but not in equities that can be classified as Insourcer firms. 306 These
firms may have customer orders and other activity off-exchange that would cause them to
incur a CAT reporting obligation.
The Commission assumes the 31 options firms and 14 ELPs would be typical of
the Plan’s large, non-OATS reporting firms; for these firms, the Commission relies on

301

The Commission also recognizes as discussed above that some broker-dealer
firms may strategically choose to outsource despite the Plan’s working
assumption that these broker-dealers would insource their regulatory data
reporting functions.

302

See supra note 209.

303

See supra note 210.

304

See CAT NMS Plan, supra note 4, at Appendix C, Section A.6(c).

305
306

See supra note 212.
See supra note 213. 307
See supra note 214.308
See CAT NMS Plan,
supra note 4, at Section B.7(b)(iii)(c)(2)(a). The Commission believes that the
third party/outsourcing costs may be attributed to the use of service bureaus
(potentially), technology consulting, and legal services.

62

the cost estimates provided under Approach 1 307 for large, non-OATS reporting firms in
the CAT NMS Plan.
The CAT NMS Plan provides the following average initial external cost figures
that a large non-OATS reporting broker-dealer would expect to incur to adopt the
systems changes needed to comply with the data reporting requirements of Rule 613
under Approach 1: $450,000 in external hardware and software costs, and $9,500 in
external third party/outsourcing costs. 308 Based on this information, the Commission
estimates that these broker-dealers would, on average, incur approximately $450,000 in
initial costs for hardware and software to implement the systems changes needed to
capture the required information and transmit it to the Central Repository, and an
additional $9,500 in initial third party/outsourcing costs.
Based on the comment that provided estimates for a modified allocation
timestamp requirement, 309 the Commission is adding the cost of the allocation timestamp
requirement to the external costs to be incurred by large non-OATS-reporting brokerdealers. The Commission estimates that the initial cost to an ELP and an Options Market

307

See supra note 214.308
See CAT NMS Plan, supra note 4, at Section
B.7(b)(iii)(c)(2)(a). The Commission believes that the third party/outsourcing
costs may be attributed to the use of service bureaus (potentially), technology
consulting, and legal services.

308

See CAT NMS Plan, supra note 4, at Section B.7(b)(iii)(c)(2)(a). The
Commission believes that the third party/outsourcing costs may be attributed to
the use of service bureaus (potentially), technology consulting, and legal services.

309

FIF Letter at 88, Table 6. See also Section 8.D.d, supra. The commenter based
its implementation and ongoing estimates on a survey it conducted of brokerdealers to estimate the costs associated with the allocation report timestamp
requirement. The commenter noted that the estimates do not account for all
Insourcers (the cost estimates cover the 126 large OATS-reporting broker-dealer
Insourcers, but not the 14 ELPs or 31 Options Market Makers), nor do they cover
Outsourcing broker-dealers. The Commission believes those categories may not
have been included in the estimates due to a lack of participation by such brokerdealers in the survey. The Commission is assuming, for its Paperwork Reduction
Act cost estimates, that the portion of the estimates attributed by the commenter to
service bureaus will be passed-through to their Outsourcing broker-dealer clients
that rely on service bureaus to perform their regulatory data reporting. The
Commission is thus applying the portion of the commenter’s cost estimates
attributed to the 126 Insourcers to all 171 Insourcers, as well as the portion of the
cost estimates attributed to the 13 service bureaus across the 1,629 broker-dealers
that are categorized as Outsourcing broker-dealers.

63

Maker to implement the modified allocation timestamp requirement would be
$250,000. 310
Based on this information, the Commission estimates that the average initial
external cost per ELP would be $709,500, 311 for an estimated aggregate initial external
cost of $9,933,000. 312
The Commission also is adding a cost estimate for the requirement that an
Options Market Maker submit a Quote Sent Time to an exchange. 313 The Commission
estimates that this requirement will impose an additional initial hardware and software
cost per Options Market Maker of $561,290.32. 314
Based on this information, the Commission estimates that the initial external cost
per Options Market Maker would be $1,270,790.32, 315 for an estimated aggregate initial
external cost of $39,394,499.92. 316

310

The commenter stated that this requirement would cost the industry $44,050,000
in initial implementation costs. The commenter attributed $42,750,000 of the
implementation cost estimate to 126 Insourcers. For purposes of this Paperwork
Reduction Act analysis, the Commission is applying the portion of the cost
estimates attributed to the 126 Insourcers to all 171 Insourcers. $42,750,000 / 171
Insourcers = $250,000 in initial costs to implement the modified allocation
timestamp requirement per Insourcer. The Commission believes that this cost
would be an external hardware and software cost related to adding this
functionality to servers.

311

($450,000 in external hardware and software costs) + ($250,000 to implement the
modified allocation timestamp requirement) + ($9,500 initial third
party/outsourcing costs) = $709,500 in initial external costs to implement data
reporting systems.

312

($700,000 in initial hardware and software costs) + ($9,500 initial third
party/outsourcing costs) x 14 ELPs = $9,933,000 in initial external costs to
implement data reporting systems for ELPs.

313

FIF Letter at 65. See also Section 8.D.e., supra.

314

The Commission estimates that the implementation cost of the Quote Sent Time
requirement is approximately $17,400,000. See text accompanying note 99,
supra. ($17,400,000 in implementation costs) / (31 Options Market Makers) =
$561,290.32 in initial external costs to implement the Quote Sent Time
requirement per Options Market Maker.

315

($450,000 in external hardware and software costs) + ($250,000 to implement the
modified allocation timestamp requirement) + ($9,500 initial third
party/outsourcing costs) + $561.290.32 to implement the Quote Sent Time
requirement) = $1,270,790.32 in initial external costs per Options Market Maker.

64

Once a large non-OATS reporting broker-dealer has established the appropriate
systems and processes required for collection and transmission of the required
information to the Central Repository, the Commission preliminarily estimates that the
Rule would impose ongoing annual burdens associated with, among other things,
personnel time to monitor each large non-OATS reporting broker-dealer’s reporting of
the required data and the maintenance of the systems to report the required data; and
implementing changes to trading systems that might result in additional reports to the
Central Repository. The CAT NMS Plan provides the following average ongoing
external costs that a large non-OATS reporting broker-dealer would expect to incur to
maintain data reporting systems to be in compliance with Rule 613: $80,000 in external
hardware and software costs, and $1,300 in external third party/outsourcing costs. 317
Based on this information, the Commission preliminarily estimates that it would cost, on
average, approximately $80,000 per year per large non-OATS reporting broker-dealer to
maintain systems connectivity to the Central Repository and purchase any necessary
hardware, software, and other materials, and an additional $1,300 in third
party/outsourcing costs. 318
Additionally, the Commission now estimates that the ongoing cost to an ELP and
an Options Market Maker to maintain the modified allocation timestamp requirement
would be $29,166.67. 319

316

($1,270,790.32 in initial hardware and software costs) x (31 Options Market
Makers) = $39,394,499.92 in initial external costs to implement data reporting
systems.

317

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(C)(2)(b).
The CAT NMS Plan did not break down these third party costs into categories.

318

Id.319 See supra note 309. The commenter stated that this requirement would
cost the industry $5,035,833 in ongoing costs. The commenter attributed
$4,987,500 of the ongoing cost estimate to 126 Insourcers. For purposes of this
Paperwork Reduction Act analysis, the Commission is applying the portion of the
cost estimates attributed to the 126 Insourcers to all 171 Insourcers.
$4,987,500/171 Insourcers = $29,166.67 in ongoing costs to maintain the
modified allocation timestamp requirement per Insourcer. The Commission
believes that this cost would be an external hardware and software cost related to
maintenance of the modified allocation timestamp.

319

See supra note 309. The commenter stated that this requirement would cost the
industry $5,035,833 in ongoing costs. The commenter attributed $4,987,500 of
the ongoing cost estimate to 126 Insourcers. For purposes of this Paperwork
Reduction Act analysis, the Commission is applying the portion of the cost
estimates attributed to the 126 Insourcers to all 171 Insourcers. $4,987,500/171
Insourcers = $29,166.67 in ongoing costs to maintain the modified allocation
timestamp requirement per Insourcer. The Commission believes that this cost

65

The Commission estimates that the average ongoing external cost per ELP would
be $110,466.68 320 to maintain the systems necessary to collect and transmit information
to the Central Repository, for an estimated aggregate ongoing external cost for the ELPs
of $1,546,533.52 321
The Commission also is adding an ongoing external cost estimate for the
requirement that an Options Market Maker submit a Quote Sent Time to an exchange. 322
The Commission estimates that this requirement will impose an additional ongoing
hardware and software cost per Options Market Maker of $383,255.81. 323
Based on this information, the Commission estimates that the ongoing external
cost per Options Market Maker would be $493,722.48 324 to maintain the systems
necessary to collect and transmit information to the Central Repository, for an estimated
aggregate ongoing external cost to Options Market Makers of $15,305,396.88. 325
The Commission estimates that ELPs would incur an aggregate, annualized
external cost of approximately $4,857,533.52 to adopt and maintain systems changes
needed to comply with the data reporting requirements of the consolidated audit trail
[($709,500 in initial external costs amortized over three years) + ($110,466.68 in annual,
ongoing external costs) x (14 ELPs)].

would be an external hardware and software cost related to maintenance of the
modified allocation timestamp.
320

($80,000 in external hardware and software costs) + ($29,166.67 to maintain the
modified allocation timestamp requirement) + ($1,300 ongoing external third
party/outsourcing costs) = $110,466.68 in ongoing external costs per ELP.

321

($110,466.68 in ongoing external costs per ELP) x (14 ELPs) = $1,546,533.52 in
aggregate ongoing external costs.

322

See supra note 313319.

323

The Commission estimates that the ongoing cost of the Quote Sent Time
requirement is approximately $11,880,000. See text accompanying note 99,
supra. ($11,880,000 in ongoing costs) / (31 Options Market Maker) =
$383,255.81 in ongoing external costs to maintain the Quote Sent Time
requirement per Options Market Maker.

324

($80,000 in external hardware and software costs) + ($1,300 in external third
party/outsourcing costs) + ($29,166.67 in ongoing costs to maintain the modified
allocation timestamp requirement) + ($383,255.81 in ongoing external costs to
maintain the Quote Sent Time requirement) = $493,722.48 in ongoing external
costs per Options Market Maker.

325

($493,722.48 in ongoing external costs per Options Market Maker) x (31 options
firms) = $15,305,396.88 in aggregate ongoing external costs.

66

The Commission estimates that Options Market Makers would incur an
aggregate, annualized external cost of approximately $28,436,896.85 to adopt and
maintain systems changes needed to comply with the data reporting requirements of the
consolidated audit trail [($1,270,790.32 in initial external costs amortized over three
years) + ($493,722.48 in annual, ongoing external costs) x (31 options firms)].
B.

Large OATS-Reporting Broker-Dealers

The Commission estimates that 126 broker-dealers, which reported more than
350,000 OATS ROEs between June 15 and July 10, 2015, would strategically decide to
either self-report CAT Data or outsource their CAT data reporting functions. 326 To
conduct its Paperwork Burden Analysis for the 126 broker-dealers, the Commission is
relying on the estimates used by the CAT NMS Plan of expected costs that a large
OATS-reporting broker-dealer would incur as a result of the implementation of the
consolidated audit trail under Approach 1. 327
The CAT NMS Plan provides the following average initial external cost figures
that a large OATS-reporting broker-dealer would expect to incur as a result of the
implementation of the consolidated audit trail under Approach 1: $750,000 in hardware
and software costs, and $150,000 in external third party/outsourcing costs. 328
Based on the comment that provided estimates for a modified allocation
timestamp requirement, 329 the Commission is estimating that the initial cost to a large
OATS-reporting broker-dealer to implement the modified allocation timestamp
requirement would be $250,000. 330
Based on this information, the Commission estimates that a large OATS-reporting
broker-dealer would incur approximately $750,000 in initial external costs for hardware
and software to implement the systems changes needed to capture the required
information and transmit it to the Central Repository, and an additional $150,000 in
initial external third party/outsourcing costs, 331 and $250,000 to implement the modified
326

See supra note 221.

327

See supra note 214.

328

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(C)(2)(a).
The CAT NMS Plan did not break down these third party costs into categories.
The Commission preliminarily believes that these costs may be attributed to the
use of service bureaus, technology consulting, and legal services.

329

See supra note 309.

330

See supra note 310. $42,750,000 / 171 Insourcers = $250,000 in initial costs to
implement the modified allocation timestamp requirement per Insourcer.

331

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(C)(2)(a).
The CAT NMS Plan did not break down these third party costs into categories.

67

allocation timestamp requirement. Therefore, the Commission preliminarily estimates
that the average one-time initial external cost per large OATS-reporting broker-dealer
would be $1,250,000 to implement CAT data reporting systems, 332 for an estimated
aggregate initial external cost of $157,500,000. 333
Once a large OATS-reporting broker-dealer has established the appropriate
systems and processes required for collection and transmission of the required
information to the Central Repository, such broker-dealers would be subject to ongoing
external costs associated with, among other things, personnel time to monitor each
broker-dealer’s reporting of the required data and the maintenance of the systems to
report the required data; and implementing changes to trading systems which might result
in additional reports to the Central Repository. The CAT NMS Plan provides the
following average ongoing external cost figures that a large OATS-reporting brokerdealer would expect to incur to maintain data reporting systems to be in compliance with
Rule 613: $380,000 in ongoing external hardware and software costs, and $120,000 in
ongoing external third party/outsourcing costs. 334 Based on this information the
Commission preliminarily believes that it would cost, on average, approximately
$380,000 per year per large OATS-reporting broker-dealer to maintain systems
connectivity to the Central Repository and purchase any necessary hardware, software,
and other materials, and an additional $120,000 in external ongoing third
party/outsourcing costs. 335 Therefore, the Commission estimates that the average
ongoing annual external cost per large OATS-reporting broker-dealer would be

The Commission preliminarily believes that these costs may be attributed to the
use of service bureaus, technology consulting, and legal services.
332

($750,000 in initial external hardware and software costs) + ($150,000 initial
external third party/outsourcing costs) + ($250,000 modified allocation timestamp
initial external cost) = $1,250,000 in initial external costs per large OATSreporting broker-dealer to implement CAT data reporting systems.

333

($750,000 in initial external hardware and software costs) + ($150,000 in external
third party/outsourcing costs) + ($250,000 modified allocation timestamp external
cost) x (126 large OATS-reporting broker-dealers) = $157,500,000 in initial
external costs to implement data reporting systems.

334

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(iii)(C)(2)(b).
The CAT NMS Plan did not categorize these third party costs. The Commission
preliminarily believes that these costs may be attributed to the use of service
bureaus, technology consulting, and legal services.

335

See id.336
($380,000 in ongoing external hardware and software costs +
$120,000 in ongoing external third party/outsourcing costs) = $500,000 in
ongoing external costs per large OATS-reporting broker-dealer.337 See supra note
319. $4,987,500 / 171 Insourcers = $29,166.67 in ongoing costs to maintain the
modified allocation timestamp requirement per Insourcer.

68

approximately $500,000 336 to maintain the systems necessary to collect and transmit
information to the Central Repository.
Additionally, the Commission estimates that the ongoing cost to a large OATSreporting broker-dealer to maintain the modified allocation timestamp requirement would
be $29,166.67. 337
Based on this information, the Commission believes that the average ongoing
annual external cost per large OATS-reporting broker-dealer would be approximately
$529,166.67 338 to maintain the systems necessary to collect and transmit information to
the Central Repository, for an estimated aggregate ongoing external cost of
$66,675,000.42. 339
The Commission estimates that large OATS reporting broker-dealers would incur
an aggregate, annualized external cost of approximately $119,175,000.42 annualized
external cost to adopt and maintain systems changes needed to comply with the data
reporting requirements of the consolidated audit trail [($1,250,000 initial external costs
amortized over three years) + ($529,166.67 ongoing annual, external costs) x (126 large
OATS reporting broker-dealers)].
(2)

Outsourcing Firms
A.

Small OATS-Reporting Broker-Dealers

The Commission estimates that there are 806 broker-dealers that report fewer than
350,000 OATS ROEs monthly. The Commission believes that these broker-dealers
generally outsource their regulatory reporting obligations because during the period June
15 – July 10, 2015, approximately 88.9% of their 350,000 OATS ROEs were reported
336

($380,000 in ongoing external hardware and software costs + $120,000 in
ongoing external third party/outsourcing costs) = $500,000 in ongoing external
costs per large OATS-reporting broker-dealer.337 See supra note 319.
$4,987,500 / 171 Insourcers = $29,166.67 in ongoing costs to maintain the
modified allocation timestamp requirement per Insourcer.

337

See supra note 319. $4,987,500 / 171 Insourcers = $29,166.67 in ongoing costs to
maintain the modified allocation timestamp requirement per Insourcer.

338

($380,000 in ongoing external hardware and software costs) + ($29,166.67 to
maintain the modified allocation timestamp requirement) + ($120,000 in ongoing
external third party/outsourcing costs) = $529,166.67 in ongoing external costs
per large OATS-reporting broker-dealer.

339

($380,000 in ongoing external hardware and software costs) + ($29,166.67 to
maintain the modified allocation timestamp requirement) + ($120,000 in ongoing
external third party/outsourcing costs) x (126 large OATS-reporting brokerdealers) = $66,675,000.42 in aggregate ongoing external costs.

69

through service bureaus, with 730 of these broker-dealers reporting more than 99% of
their OATS ROEs through one or more service bureaus. 340 The Commission estimates
that these firms currently spend an aggregate of $100.1 million on annual outsourcing
costs. 341 The Commission estimates these 806 broker-dealers would spend $100.2
million in aggregate to outsource their regulatory data reporting to service bureaus to
report in accordance with Rule 613, 342 or $124,373 per broker-dealer. 343 Therefore, the
Commission estimates that each small OATS-reporting broker-dealer would incur
approximately $124,373 in initial external costs.
Additionally, based on the comment that provided estimates for a modified
allocation timestamp requirement, 344 the Commission estimates that the initial cost to a
small OATS-reporting broker-dealer to implement this requirement would be $798.04. 345
Therefore, the Commission estimates that each small OATS-reporting broker-dealer
would incur approximately $125,171.04 in initial external costs, 346 for an estimated
aggregate initial external cost of $100,887,858.24. 347

340

See supra note 221.

341

The average broker-dealer in this category reported 15,185 OATS ROEs from
June 15-July 10, 2015; the median reported 1,251 OATS ROEs. Of these brokerdealers, 39 reported more than 100,000 OATS ROEs during the sample period.

342

See CAT NMS Plan Order, supra note 12, at Section V.F.1.c.(2)(B).

343

$124,373 = $100,200,000/806 broker-dealers. This amount is the average
estimated annual outsourcing cost to firms that currently report fewer than
350,000 OATS ROEs per month. Id.

344

See supra note 309.

345

See supra note 310. The commenter attributed $1,300,000 of the implementation
cost estimate to 13 service bureaus. For purposes of this Paperwork Reduction
Act analysis, the Commission is assuming that the portion of the estimates
attributed by the commenter to service bureaus will be passed-through to their
Outsourcing broker-dealer clients that rely on service bureaus to perform their
regulatory data reporting. The Commission is thus applying the portion of the
commenter’s cost estimates attributed to the 13 service bureaus across the 1,629
broker-dealers that are categorized as Outsourcing broker-dealers. $1,300,000 /
1,629 Outsourcing broker-dealers = $798.04 in initial costs to implement the
modified allocation timestamp requirement per Outsourcing broker-dealer.

346

$125,171.04 = ($124,373 in initial outsourcing costs) + ($798.04 to implement the
allocation timestamp).

347

($124,373 in initial outsourcing costs) + ($798.04 to implement the allocation
timestamp) x (806 small OATS-reporting broker-dealers) = $100,887,858.24 in
aggregate initial external costs.

70

The Commission estimates that it would cost small OATS-reporting brokerdealers, on average, approximately $124,373 in ongoing external outsourcing costs 348 to
ensure ongoing compliance with Rule 613. Additionally, the Commission estimates that
the ongoing cost to a small OATS-reporting broker-dealer to maintain the modified
allocation timestamp requirement would be $66.50. 349
Therefore, the Commission estimates that the average ongoing external cost per
small OATS-reporting broker-dealer would be approximately $124,439.50, 350 for an
estimated aggregate ongoing external cost of $100,298,237. 351
The Commission estimates that small OATS-reporting broker-dealers would incur
an aggregate, annualized external cost of approximately $133,927,523.08 to outsource
their regulatory data reporting to service bureaus and to ensure ongoing compliance with
Rule 613 [($125,171.04 in initial external costs amortized over three years) +
($124,439.50 in annual, ongoing external costs) x (806 small OATS-reporting brokerdealers)].
B.

Small Non-OATS-Reporting Broker-Dealers

In addition to firms that currently report to OATS, the Commission estimates
there are 799 broker-dealers that are currently exempt from OATS reporting rules due to
firm size, or excluded because all of their order flow is routed to a single OATS reporter,
such as a clearing firm, that would incur CAT reporting obligations. 352 A further 24
broker-dealers have Participant memberships only with one Participant; 353 the
Commission believes this group is comprised mostly of floor brokers and further believes
348

See supra note 343.

349

See supra note 319. The commenter attributed $108,333 of the ongoing cost
estimate to 13 service bureaus. For purposes of this Paperwork Reduction Act
analysis, the Commission is assuming that the portion of the estimates attributed
by the commenter to service bureaus will be passed-through to their Outsourcing
broker-dealer clients that rely on service bureaus to perform their regulatory data
reporting. The Commission is thus applying the portion of the commenter’s cost
estimates attributed to the 13 service bureaus across the 1,629 broker-dealers that
are categorized as Outsourcing broker-dealers. $108,333 / 1,629 Outsourcing
broker-dealers = $66.50 in ongoing costs to maintain the modified allocation
timestamp requirement per Outsourcing broker-dealer.

350

$124,439.50 = ($124,373 in ongoing outsourcing costs) + ($66.50 to maintain the
allocation timestamp)

351

$100,298,237 = ($124,373 in ongoing outsourcing costs) + ($66.50 to maintain
the allocation timestamp) x (806 broker-dealers).

352

See supra note 234.

353

See supra note 235.

71

these firms would experience CAT implementation and ongoing reporting costs similar in
magnitude to small equity broker-dealers that currently have no OATS reporting
responsibilities. 354
The Commission assumes these broker-dealers would have very low levels of
CAT reporting, similar to those of the lowest activity firms that currently report to OATS.
For these firms, the Commission assumes that under CAT they would incur the average
estimated service bureau cost of broker-dealers that currently report fewer than 350,000
OATS ROEs per month, which is $124,373 annually. 355
Additionally, based on the comment that provided estimates for a modified
allocation timestamp requirement, 356 the Commission estimates that the initial cost to a
small non-OATS-reporting broker-dealer would be $798.04. 357
Based on this information, the Commission estimates that each small non-OATSreporting broker-dealer would incur approximately $125,171.04 in initial external
costs. 358 Therefore, the Commission estimates that the average one-time initial external
cost per small non-OATS-reporting broker-dealer would be $125,171.04, for an
estimated aggregate initial external cost of $103,015,765.92. 359
The Commission estimates that it would cost, on average, approximately
$124,373 in ongoing external outsourcing costs 360 to ensure ongoing compliance with
Rule 613. Additionally, the Commission estimates that the ongoing cost to a small nonOATS-reporting broker-dealer to maintain the modified allocation timestamp
requirement would be $66.50. 361 Therefore, the Commission estimates that the average
354

Id.

355

Id.

356

See supra note 309.

357

See supra note 345. $1,300,000 / 1,629 Outsourcing broker-dealers = $798.04 in
initial costs to implement the modified allocation timestamp requirement per
Outsourcing broker-dealer.

358

$125,171.04 = ($124,373 in initial outsourcing costs) + ($798.04 to implement the
allocation timestamp).

359

$103,015,765.92 = ($124,373 in initial outsourcing costs) + ($798.04 to
implement the allocation timestamp) x (823 small non-OATS-reporting brokerdealers).

360

The Commission assumes these firms would have very low levels of CAT
reporting, similar to those of the lowest activity firms that currently report to
OATS. For these firms, the Commission assumes that under CAT they would
incur the average estimated service bureau cost of firms that currently OATS
report fewer than 350,000 OATS ROEs per month of $124,373 annually.

361

See supra note 349.

72

ongoing external cost per small non-OATS-reporting broker-dealer would be
approximately $124,439.50, 362 for an estimated aggregate ongoing external cost of
$102,413,708.50. 363
The Commission estimates that small non-OATS-reporting broker-dealers would
incur aggregate, annualized external costs of approximately $136.752,297.14 to
outsource data collection and reporting and to ensure ongoing compliance with Rule
613[($125,171.04 in initial external costs amortized over three years) + $124,439.50 in
annual, ongoing external costs) x (823 small non-OATS-reporting broker-dealers)].

362

$124,439.50 = ($124,373 in ongoing outsourcing costs) + ($66.50 to maintain the
allocation timestamp)

363

$102,413,708.50 = ($124,373 in ongoing outsourcing costs) + ($66.50 to maintain
the allocation timestamp) x (823 small non-OATS reporting broker-dealers). x
(823 small non-OATS-reporting broker-dealers) = $104,661,477.87 in aggregate
ongoing external costs to ensure ongoing compliance with Rule 613.

73

Summary of Dollar Costs
Type of Burden

[A.]
Number
of Entities
Impacted

[B.]
Annual
Responses
per Entity

[C.]
Initial Cost
per Entity per
Response

[D.]
Initial Cost
Annualized
per Entity per
Response
[ = C ÷ 3 years]

[E.]
Ongoing Cost
per Entity per
Response

[F.]
Annual Cost
Per Entity per
Response
[ = D + E]

[G.]
Total Annual
Cost Per
Entity
[ = (D + E) *
B]

[H.]
Total Industry
Cost
[ = G * A]

Recordkeeping

21

1

$3,209,523.8

$1,069,841.27

$2,657,142.86

$3,726,984.13

$3,726,984.13

$78,266,666.73

Third Party
Disclosure

21

1

$361,904.76

$120,634.92

$352,380.95

$473,015.87

$473,015.87

$9,933,333.27

Third Party
Disclosure

14

1

$709,500

$236,500

$110,466.68

$346,966.68

$346,966.68

$4,857,533.52

Third Party
Disclosure

31

1

$1,270,790.32

$423,596.77

$493,722.48

$917,319.25

$917,319.25

$28,436,896.75

Third Party
Disclosure

126

1

$1,250,000

$416,666.67

$529,166.67

$945,833.34

$945,833.34

$119,175,000.84

Third Party
Disclosure

806

1

$125,171.04

$41,723.68

$124,439.50

$166,163.18

$166,163.18

$133,927,523.08

Estimated
395 364

Third Party
Disclosure

823

1

$125,171.04

$41,723.68

$124,439.50

$166,163.18

$166,163.18

$136,752,297.14

Estimated
823 365

Surveillance

Recordkeeping

21

1

$271,428.57

$90,476.19

$1,000,000.00

$1,090,476.19

$1,090,476.19

$22,899,999.99

Written
Assessment of
Operation of
CAT

Reporting

21

1

$1,000.00

$1,000.00

$1,000.00

$21,000.00

Document on
Expansion to
Other
Securities

Reporting

21

1

$3,333.33

$3,333.33

$69,999.93

Name of
Information
Collection

Central
Repository
Data
Collection and
Reporting
(Participants)
Data
Collection and
Reporting
(Large, NonOATS
Reporting
BrokerDealers ELPs)
Data
Collection and
Reporting
(Large, NonOATS
Reporting
Broker-dealers
– Options
Market
Makers)
Data
Collection and
Reporting
(Large OATS
Reporting
BrokerDealers)
Data
Collection and
Reporting
(Small OATS
Reporting
BrokerDealers)
Data
Collection and
Reporting
(Small NonOATS
Reporting
BrokerDealers)

$10,000.00

$3,333.33

TOTAL COST FOR ALL RESPONDENTS

364

See supra note 240.

365

Id.

74

$ 534,340,251.25

Small
Business
Entities
Affected

14.

Costs to Federal Government

The Commission has incurred an external cost of $250,000 for technology
consulting services to date, and has incurred an external cost of $250,000 for activities in
2017 related to programmatic and IT requirements development.
15.

Changes in Burden

The collection of information associated with the adoption of Rule 613 (Rule 613
- Consolidated Audit Trail-Filing a National Market System Plan) pertained to the
development and submission of the CAT NMS Plan. Such NMS plan has been
developed and submitted, published for comment in the CAT NMS Plan Notice and
subsequently approved by the Commission on November 15, 2016. 366 Changes in burden
have occurred because the Plan has already been submitted, so, as described more fully
above, the current costs and burdens of the information collection requirement are now
related to implementation of the CAT NMS Plan, rather than the development and
submission of the CAT NMS Plan.
16.

Information Collection Planned for Statistical Purposes
The Commission does not intend for the collection of information to be published.

17.

Approval to Omit the OMB Expiration Date
The Commission is not seeking approval to omit the OMB expiration date.

18.

Exceptions to Certification
This collection complies with the requirements in 5 CFR 1320.9.

B.

Collections of Information Employing Statistical Methods
This information collection does not involve statistical methods.

366

See note 12, supra.

75