DGL FINAL REVISED Rule 613 PRA Renewal 2020 Supporting Statement (DRAFT) TM

DGL FINAL REVISED Rule 613 PRA Renewal 2020 Supporting Statement (DRAFT) TM.pdf

Consolidated Audit Trail NMS Plan (NMS Plan Required to be Filed under Commission Rule 613)

OMB: 3235-0671

⚠️ Notice: This form may be outdated. More recent filings and information on OMB 3235-0671 can be found here:

2023-07-25 - Extension without change of a currently approved collection

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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)
(OMB Control No. 3235-0671)
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 a
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must rely is generally outdated and inadequate to effectively oversee a complex,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 natures 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 have 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 On April
27, 2016, the Commission published a notice soliciting comments from the public (“CAT
NMS Plan Notice”). 5 On November 15, 2016, the Commission approved the CAT NMS
Plan (“CAT NMS Plan Order”), including the information collections proposed in the
CAT NMS Plan Notice and certain additional information collections that were the
subject of a supplemental information collections submission.6 The CAT NMS Plan
1

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

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”).

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

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. Unless the context otherwise requires, the “CAT NMS Plan” shall
refer to the Amended and Restated CAT NMS Plan, as modified by the
Amendment.

See Securities Exchange Act Release No. 77724 (April 27, 2016), 81 FR 30613
(May 17, 2016). The burdens associated with the CAT NMS Plan Notice were
submitted under OMB number 3235-0671 which relates to the NMS Plan required
to be filed under Rule 613.

See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR
84696 (November 23, 2016). The supplemental information collections burdens
associated with the CAT NMS Plan Order were submitted under OMB number

Order information collections that were first noticed in the CAT NMS Plan Notice were
approved by OMB on March 9, 2017. 7 The supplemental submission information
collections were approved by OMB on July 10, 2017.
This instant information collections submission incorporates both the information
collections that were first noticed in the CAT NMS Plan Notice and approved by OMB
on March 9, 2017 with the supplemental submission information collections that were
approved by OMB on July 10, 2017.
Subsequent to the two prior information collections relating to the CAT NMS
Plan Notice and CAT NMS Plan Order, the Commission believes three information
collection requirements have been completed. Specifically, 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 trail information regarding certain products
that are not NMS securities. Section 6.6(a)(ii) of the CAT NMS Plan requires a written
assessment of clock synchronization standards, including consideration of industry
standards based on the type of CAT Reporter, Industry Member and type of system.
Both of these information collections requirements have been met by Participants, and
the relevant documents are publicly available on the CAT NMS Plan website. 8 In
addition, the Participants have submitted a coordinated surveillance report as required by
Section 6.6(a)(iii) of the CAT NMS Plan, which requires the Participants to provide the
Commission with a written report that discusses the Participants’ assessment of
implementing coordinated surveillance, whether through 17d-2 agreements, regulatory

3235-0671 which relates to the NMS Plan required to be filed under Rule 613.
The Commission further acknowledged that the CAT NMS Plan filed by the
Participants contains provisions in addition to those required by the Commission
in Rule 613. These additional requirements include the inclusion of OTC Equity
Securities, 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, 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. See CAT
NMS Plan, supra note 4, at Sections 1.1 and 6.5(b)(i); Appendix C, Section
A.1(a); Appendix D, Section 2.
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”).

See “One-Time Written Assessments,” Consolidated Audit Trail, LLC at:
https://www.catnmsplan.com/one-time-written-assessments/index.html.

services agreements, or some other approach, within 12 months of effectiveness of the
Plan.
2.

Purposes and Use of the Information Collection

The Commission believes that the CAT NMS Plan, once fully implemented, will
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. 9 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. 10 The Central Repository is required to receive,
consolidate and retain the data required to be submitted by the Participants and their
broker-dealer members. 11 Participant and Commission staffs would have access to the
data for regulatory purposes. 12
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
accurate analysis of market activity for reconstruction of broad-based market events in
support of regulatory decisions.

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).

See 17 CFR 242.613(e)(1).

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.

See 17 CFR 242.613(e)(2).

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). 13 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. 14 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. 15
D. Surveillance
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

See 17 CFR 242.613(e)(7).

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 Options 5, Section 2 and Phlx Rule 1084.

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.

the consolidated audit trail. 16 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. 17 The CAT NMS Plan states that the Chief
Compliance Officer would oversee the assessment. 18 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. Independent Audit of Expenses Incurred Prior to Effective
Date
The Commission understands that the Participants intend to recover, through CAT
fees, the amounts spent on the development of the CAT to date. Section 6.6(a)(i) of the
CAT NMS Plan requires the Participants to provide to the Commission, and make public,
an independent audit of fees, costs and expenses incurred by the Participants on behalf of
the Company, prior to the Effective Date, in connection with the creation and
implementation of the CAT, at least one month prior to submitting any rule filing to
establish initial fees to the Commission. To facilitate public comment and Commission
16

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

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

See CAT NMS Plan, supra note 4, at Section 6.6(a)(ii). See also id. at Section
6.6(a)(i).
6

review of such fee filings to ensure the fees imposed on Industry Members are
reasonable, equitable and not unfairly discriminatory, the Commission believes it is
appropriate for the Participants to obtain an audit of the fees, costs and expenses incurred
by the Participants on behalf of the Company prior to the Effective Date.
G. Assessment of Industry Member Bulk Access to Reported Data
Section 6.6(a)(iv) of the CAT NMS Plan requires the Participants to provide a
written report discussing the feasibility, benefits and risks of allowing an Industry
Member to bulk download the Raw Data it submitted to the Central Repository, within 24
months of effectiveness of the Plan. Commenters expressed a desire for bulk access to
their own data for surveillance and internal compliance purposes, as well as to facilitate
the error correction process. While the Participants did not permit such access in the
Plan, citing security and cost concerns, they did represent that they would consider
allowing bulk access to the audit trail data reported by Industry Members once CAT is
operational. The Commission believes it is important to consider the potential
efficiencies of allowing Industry Members bulk access to their own CAT data, so long as
such access does not impact the security of the CAT Data, and accordingly added this
requirement.
H. Assessment of Errors in Customer Information Fields
Section 6.6(a)(v) of the CAT NMS Plan requires the Participants to submit a
written assessment of the nature and extent of errors in the Customer information
submitted to the Central Repository and whether the correction of certain data fields
should be prioritized, within 36 months of effectiveness of the Plan. The Commission
believes that requiring such an assessment, which was intended to coincide with the date
all Industry Members are reporting to the CAT, could help ensure that the accuracy of
CAT Data is achieved in the most prompt and efficient manner.
I. Report on Impact of Tiered Fees on Market Liquidity
Section 6.6(a)(vi) of the CAT NMS Plan requires the Participants to submit a
written report on the impact of tiered-fees on market liquidity, including an analysis of
the impact of the tiered-fee structure on Industry Members provision of liquidity, within
36 months of effectiveness of the Plan. To help determine whether the Plan’s funding
model actually achieves the Participants’ stated objective, the Commission believes it is
appropriate to require them to prepare such an assessment of the impact of tiered fees
once the CAT becomes fully operational.
J. Assessment of Material Systems Change on Error Rate
The CAT NMS Plan requires the Participants to provide the Commission a
written assessment of the projected impact of any Material Systems Change on the
Maximum Error Rate, prior to the implementation of any Material Systems Change. The

Commission believes that Material Systems Changes either could result in new
challenges for CAT Reporters or simplify the means for reporting data. In either case,
the appropriateness of the Maximum Error Rate could be impacted, and thus warrant a
change. Accordingly, the Commission believes it appropriate to require the Participants
to provide the Commission an assessment of the projected impact on the Maximum Error
Rate, including any recommended changes thereto, prior to the implementation of any
Material Systems Change.
K. Financial Statements
Section 9.2 of the CAT NMS Plan requires that the financials of the Consolidated
Audit Trail, LLC (“CAT LLC”) be (i) in compliance with GAAP, (ii) be audited by an
independent public accounting firm, and (iii) be made publicly available. 19 The
Commission believes that this requirement will promote will promote greater accuracy
and greater transparency with respect to the Company’s financial accounting.
L. Background Checks
Section 6.1(g) of the CAT NMS Plan requires that each Participant conduct
background checks for its employees and contractors that will use the CAT System. The
Commission believes that this is appropriate in order to ensure that only authorized and
qualified persons are using the CAT System.
3.

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, 20
which is required to receive, consolidate and retain the data required to be submitted
electronically by the Participants and their members. 21 The CAT NMS Plan requires
CAT Reporters to report data to the Central Repository either in a uniform electronic
19

The Participants conduct the activities of the CAT through the CAT LLC, a
jointly owned limited liability company formed under Delaware state law. The
CAT LLC is charged with creating, implementing and maintaining the CAT. The
Participants previously formed a Delaware Limited Liability company named
CAT NMS, LLC for the purpose of conducting activities related to the
consolidated audit trail, but formed Consolidated Audit Trail, LLC to replace and
serve as the CAT NMS Plan on August 29, 2019. See Securities Exchange Act
Release No. 87149 (September 27, 2019), 84 FR 52905 (October 3, 2019). The
LLC through which Participants conduct the activities of CAT is referred to as
“CAT LLC” in this Supporting Statement.

See 17 CFR 242.613(e)(1).

Id.

format, or in a manner that would allow the Central Repository to convert the data to a
uniform electronic format. 22 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. 23 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. 24
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
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.” 25 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 will bring
audit trail data related to trading on all venues into the Central Repository where it could
be accessed by all regulators.
The Commission believes that the collection of information requirement
“Background Checks” would involve the use of electronic submission and collection
techniques. The Commission believes that these would be background checks using
fingerprints that would be submitted either in hard copy or electronically to the Attorney
General of the United States for identification and processing.
22

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

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

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

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(ii)(A).
9

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.
4.

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). 26 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; 27 (B) if still appropriate,
whether such information should continue to be separately collected or should instead be
incorporated into the consolidated audit trail; 28 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). 29
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

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

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

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

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

proposed rule changes to implement the rule modifications or deletions and elimination
of the relevant rules and systems. 30
With the exception of the “Background Checks” information collection, the
proposed collection of information requirements pertain solely to the CAT LLC or the
operation of the CAT System and, is not required elsewhere. We are not aware of any
collection of information requirements that conflict with or substantially duplicate the
proposed collection of information requirements.
With respect to the “Background Checks” collection of information, Section
6.1(g) of the CAT NMS Plan requires each Participant to conduct background checks of
its employees and contractors that will use the CAT System. While Section 6.1(g) may
result in a duplication of requirement because other rules currently require Participants to
conduct fingerprint-based background checks, 31 the Commission believes that there will
be no duplication of effort because if an employee or contractor of a Participant who will
be a CAT user is already subject to a Participant’s existing background check
requirements, we anticipate that those requirements would satisfy the proposed
background checks requirements of the CAT NMS Plan. Further, if such Participant
believes that its employees and contractors should be subject to a more stringent or
different background check requirement to be a CAT user than currently required by the
Participant, then there will be no duplication of effort because the proposed background
check requirements would be more rigorous or different and thus differ from the
Participant’s existing background check requirements.
5.

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. 32
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
30

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

See e.g., 17 CFR 240.17f-2(a) (OMB Control Number 3235-0029); 17 CFR
240.17f-2(c) (OMB Control Number 3235-0034). Additionally, most Participants
currently have rules that permit them to conduct fingerprint-based background
checks of contractors. See e.g., BOX Rule 10080; CBOE Rule 7.10; ISE Rule
Options 6E, Section 8; Nasdaq Rule General 2, Section 13; NYSE Rule 28; and
IEX Rule 1.180.

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).
11

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
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. 33
The Commission estimates, based on FOCUS filings with the Commission, that
as of the third quarter of 2019, there were approximately 925 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. 34
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
33

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 11, 2020

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).

two years of approval. 35 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. The Commission notes that as of February 2020, neither large brokerdealers nor small broker-dealers have begun to report all required data to the Central
Repository.
6.

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
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.
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 the
implementation of the CAT. The Commission believes that the CAT NMS Plan would
improve the completeness, accuracy, accessibility and timeliness of the data available to
regulators. To ensure that the Plan is implemented in accordance with these objectives,
the Commission believes the audit, assessments and reports prepared by the Participants
are necessary.
The Plan imposes certain information collections burdens that were not in the
Plan as originally proposed by the Participants. First, the Plan requires that the
Participants provide the Commission, and make public, at least one month prior to
submitting any rule filing to establish initial fees for CAT Reporters, an independent
audit of the fees, costs, and expenses incurred by the Participants on behalf of the
Company prior to the Effective Date of the Plan. The Commission understands that the
Participants intend to recover through CAT fees the amounts spent on the development of
the CAT to date. Without this independent audit of expenses incurred prior to the
Effective Date of the Plan, it will be difficult for the public and the Commission to
accurately assess the propriety of the level of initial fees imposed in the fee filings filed
by the Participants.
Second, the Plan requires the Participants to submit to the Commission a written
report, within 24 months of effectiveness of the Plan, discussing the feasibility, benefits,
35

See CAT NMS Plan, supra note 4, at Section 6.4; see also 17 CFR
242.613(a)(3)(v) and (vi).
13

and risks of allowing an Industry Member to bulk download the Raw Data that it has
submitted to the Central Repository. Commenters on the CAT NMS Plan Notice
expressed a desire to have bulk access to their own data for surveillance and internal
compliance purposes, as well as to facilitate the error correction process. The
Commission believes it is important to consider the potential efficiencies of allowing
Industry Members bulk access to their own CAT data, so long as such access does not
impact the security of the CAT Data. Without this assessment, the Commission and the
Participants will not have sufficient information to consider the tradeoffs of bulk access,
and therefore not be able to fully consider whether to permit Industry Members bulk
access to their own CAT Data.
Third, the Plan requires the Participants to provide the Commission with a written
assessment, within 36 months of effectiveness of the Plan, of the nature and extent of
errors in the Customer information submitted to the Central Repository and whether the
correction of certain data fields over others should be prioritized. The Commission
believes that requiring such an assessment could help ensure that the accuracy of CAT
Data is achieved in the most prompt and efficient manner. Without this assessment, the
Commission believes that unanticipated issues concerning the accuracy of the customer
information fields may go unidentified and negatively impact the overall accuracy of
CAT Data.
Fourth, the Plan requires the Participants to provide the Commission with a
written report, 36 months after effectiveness of the Plan, on the impact of tiered fees on
market liquidity, including an analysis of the impact of the tiered-fee structure on
Industry Members’ provision of liquidity. One commenter on the CAT NMS Plan Notice
expressed concern that use of a tiered fee structure could discourage displayed quotes
and, in response, the Participants explained that one of the reasons they chose to use a
tiered-fee funding model was to limit disincentives to provide liquidity. To help
determine whether the Plan’s funding model actually achieves the Participants’ stated
objective, the Commission believes it appropriate to require them to prepare such an
assessment of the impact of tiered fees once the CAT becomes fully operational. Without
this assessment, the Participants and the Commission could lack insight into whether the
fee model affects liquidity provision and market quality, which could hamper any
necessary adjustments to the Funding Model.
Fifth, the Plan requires the Participants to provide the Commission a written
assessment of the projected impact of any Material Systems Change on the Maximum
Error Rate, prior to the implementation of any Material Systems Change. The
Commission believes that Material Systems Changes either could result in new
challenges for CAT Reporters or simplify the means for reporting data. In either case,
the appropriateness of the Maximum Error Rate could be impacted, and thus warrant a
change. Without this assessment, the Participants and the Commission may lack a
thorough understanding of how a particular Material Systems Change would impact Error
Rates and whether to temporarily adjust the Error Rates around that Material Systems
Change.

Sixth, the Plan requires that the CAT LLC’s financials be (i) in compliance with
GAAP, (ii) be audited by an independent public accounting firm, and (iii) be made
publicly available. The Commission believes that this requirement will promote greater
transparency with respect to the Company’s financial accounting. Without this
requirement, that purpose will not be achieved.
Finally, the Plan requires that each Participant conduct background checks for its
employees and contractors that will use the CAT System. The Commission believes that
this requirement is appropriate to ensure that only authorized and qualified persons are
using the CAT System. Without this requirement, that purpose would not be achieved.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

The information collection “Data Collection and Reporting” requires respondents
to record and report information to the Central Repository information more frequently
than quarterly; 36 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, 37 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. 38
In addition, the “Data Collection and Reporting” information collection requires
respondents to submit confidential information to the Central Repository, such as the
terms of an order, 39 customer account information, 40 and information sufficient to
identify a customer. 41 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 42 is intended to enable Participants to better monitor trading through use of
36

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

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

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

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

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).

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

See 17 CFR 242.613(f).

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 43 and these requirements are detailed in the CAT NMS Plan. 44
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.
The CAT NMS Plan requires the Participants to submit to the Commission the written
assessment annually. 45 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.
The information collections “Assessment of Material Systems Changes on Error
Rates” and “Background Checks” could potentially require the Participants to report and
disclose information more frequently than quarterly.
In addition, the information collections: “Bulk Access to Reported Data”; “Errors
in Customer Information”; “Impact of Tiered Fees on Market Liquidity”; and
“Assessment of Material Systems Changes on Error Rates” may require the Participants
to submit confidential information to the Commission. To the extent the Commission
receives confidential information pursuant to the CAT NMS Plan, such information will
be kept confidential, subject to the provisions of applicable law.
8.

Consultations Outside the Agency

The required Federal Register notice with a 60-day comment period soliciting
comments on this collection of information was published. No public comments were
received.
9.

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

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

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.

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

and reporting of confidential information, including Personally Identifiable Information 46
(“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. 47 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
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. 48 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. 49 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. 50 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. 51
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. 52 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. 53
46

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).

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

17 CFR 242.613(b)(6).

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

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

Id.

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

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

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. 54 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. 55 The Technical Specifications, which the Plan Processor must publish, must
include a detailed description of the data security standards for the consolidated audit
trail. 56
Appendix D of the CAT NMS Plan sets forth minimum data security
requirements for CAT that the Plan Processor must meet. 57 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. 58 Additional requirements regarding data storage,
data access, breach management, and PII data are also specified in Appendix D. 59
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, 60 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. 61 However, a Participant may use the Raw Data 62 it reports
54

Id. at Sections 6.1(m), 6.12.

Id. at Section 6.2(b).

Id. at Section 6.9.

Id. at Appendix D, Section 4.

Id. at Appendix D, Section 4.1.2.

Id. at Appendix D, Section 4.1.3–4.1.6.

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.

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

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.

to the Central Repository for “commercial or other” purposes if not prohibited by
applicable law, rule or regulation. 63
The Participants will not be submitting the Background Check information to the
Commission and the Commission is not collecting this information; however, if the
Commission receives any confidential information pursuant to the CAT NMS Plan, such
information will be kept confidential, subject to the provisions of applicable law.
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

The information collection pursuant to Rule 613 is collected by the CAT NMS
Plan Processor (FINRA CAT), which is managed by self-regulatory organizations
(national securities exchanges and FINRA). The information is not a collection by the
SEC or on behalf of the SEC and therefore does not constitute a Privacy Act system of
records. However, CAT NMS plan identifies and documents the collection of PII and
sensitive PII and has implemented considerable privacy controls to safeguard the
collection. The SEC will be a user of CAT data and the agency’s use of the data will be
subject to a separate privacy impact assessment.
12.

Burden of Information Collection

The Commission estimates that the information collection requirements of Rule
613 will apply to 1,524 respondents who will incur an average aggregate total of
approximately 7,572,610 burden hours per year to comply with the requirements. The
hour burden is calculated as discussed below.
Rule 613 applies to the 24 Participants (the 23 national securities exchanges and
the one national securities association (FINRA)) currently registered with the
Commission.64 This is an increase of 3 Participants from the previous Paperwork
63

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

The Participants are: BOX Exchange LLC, Cboe BYX Exchange, Inc., Cboe
BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc.,
Cboe C2 Exchange, Inc, Cboe Exchange, Inc., Financial Industry Regulatory
Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc.,
Miami International Securities Exchange LLC, MIAX Emerald, LLC, MIAX
PEARL, LLC, Nasdaq BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq
MRX, LLC, Nasdaq PHLX LLC, The NASDAQ Stock Market LLC, New York
Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago,
Inc. and NYSE National, Inc. The Commission has adjusted its estimates
pertaining to the Participants due to the addition of three new Participants (from

Reduction Act Analysis. The Commission also estimates that Rule 613 applies to 1,500
broker-dealers. 65
A. Burden on National Securities Exchanges and National Securities
Associations
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 previously issued a request for proposal soliciting Bids
from entities to act as the consolidated audit trail’s Plan Processor, and selected Thesys
Technologies, LLC as the Consolidated Audit Trail Plan Processor on January 17,
2017. 66 On February 27, 2019, the Participants announced that FINRA has been selected

21 Participants in the CAT NMS Plan Order Paperwork Reduction Act analysis to
24 Participants in the instant Paperwork Reduction Act analysis).
65

The Commission understands that there are approximately 3,734 broker-dealers,
as of December 2019; however, not all broker-dealers are expected to have CAT
reporting obligations. The Participants previously reported 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 believes that now, approximately 1,500 brokerdealers currently quote or execute transactions in NMS Securities, Listed Options
or OTC Equity Securities, and would likely have CAT reporting obligations. The
Commission believes that this is consistent with the reduced number of brokerdealers overall (from 4,138 to approximately 3,734 broker-dealers) and is making
this determination based on experience and knowledge gained in discussions with
Participants and the Plan Processor during the development of the consolidated
audit trail. The Commission further believes that this reduction is a reduction in
the number of Small OATS-Reporting Broker-Dealers, which was previously
calculated by identifying all other categories of CAT reporting broker-dealers and
determining that the remaining number of the estimated 1,800 broker-dealers
were Small OATS-Reporting Broker-Dealers. The Commission understands that
the approximately 2,234 remaining 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).

See “SROs Select Thesys Technologies, LLC as Consolidated Audit Trail Plan
Processor,” https://www.prnewswire.com/news-releases/sros-select-thesystechnologies-llc-as-consolidated-audit-trail-plan-processor-300392226.html.

as Plan Processor, replacing Thesys Technologies, LLC. 67 The Plan Processor is
responsible for building, operating, administering and maintaining the Central
Repository.
The Plan’s Operating Committee, which consists of one voting representative of
each Participant, 68 is responsible for the management of CAT LLC, 69 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 has the
responsibility to authorize the following actions of the CAT LLC: (1) interpreting the
Plan; 70 (2) determining appropriate funding-related policies, procedures and practices
consistent with Article XI of the CAT NMS Plan; 71 (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); 72 (5)
entering into, modifying or terminating any Material Contract; 73 (6) making any Material
Systems Change; 74 (7) approving the initial Technical Specifications or any Material
Amendment to the Technical Specifications proposed by the Plan Processor; 75 (8)
amending the Technical Specifications on its own motion; 76 (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; 77 (10) approving any
recommendation by the CCO pursuant to Section 6.2(a)(v)(A) of the CAT NMS Plan; 78
(11) selecting the members of the Advisory Committee; 79 (12) selecting the Operating

See “CAT NMS Selects FINRA as Consolidated Audit Trail Plan Processor”
available at: https://www.catnmsplan.com/wpcontent/uploads/2019/02/CAT_FINRA_Press_Release_FINAL.pdf.

See id. at Section 4.2(a).

See supra note 19.

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

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

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

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

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

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

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

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

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

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

Committee chair; 80 and (13) determining to hold an Executive Session of the Operating
Committee. 81
Additionally, in managing the Central Repository, the Operating Committee has
the responsibility and authority, as appropriate, to: (1) direct the CAT 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 necessary or
appropriate; 82 (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; 83 (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; 84 (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; 85 (5) for both the CCO and CISO, render their
annual performance reviews and review and approve their compensation; 86 (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; 87
(7) in conjunction with the Plan Processor, approve and regularly review (and update as
necessary) SLAs governing the performance of the Central Repository; 88 (8) maintain a
Compliance Subcommittee for the purpose of aiding the CCO as necessary; 89 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. 90
The Commission previously estimated the initial burden over the 12-month period
after the effectiveness of the CAT NMS Plan within which the Participants would be

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

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

See id. at Section 6.1(a).

See id. at Section 4.6(b).

See id. at Section 6.1(c).

See id. at Section 6.1(e).

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

See id. at Section 6.1(n).

See id. at Section 6.1(h).

See id. at Section 4.12(b).

See id. at Section 4.12(a).

required to select an initial Plan Processor 91 and begin reporting to the Central
Repository. 92 The Participants have subsequently selected a Plan Processor and have
begun reporting to the Central Repository, so the Commission deems the initial burden of
this information collection is completed. 93
For its ongoing time 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,” 94 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.” 95
The Commission believes that the activities of the Operating 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.” 96 For the management of the
Central Repository, the Operating Committee has comparable responsibilities. As part of
its overall management of the Central Repository, the Operating Committee has
responsibility for decisions associated with the technical requirements of the Central
Repository. 97 Furthermore, the Operating Committee is required to authorize the
91

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).

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). The Commission previously
estimated that

See “CAT NMS Announces Initiation of Reporting to the Consolidated Audit
Trail,” CAT NMS, LLC (November 16, 2018), available at:
https://www.catnmsplan.com/wp-content/uploads/2018/11/Press-Release-CATLaunch-final.pdf.

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

See id.

For example, the Operating Committee would be required to authorize the
following actions of the CAT 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

selection of the members of the Advisory Committee, 98 comprising members of the
Industry, to advise the Participants on the implementation, operation, and administration
of the Central Repository. 99 Because the responsibilities of the Operating 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 ongoing management of
the Central Repository.
Each Participant contributes an employee and a substitute for the employee to
serve on the Operating Committee oversees the Central Repository.
The Operating Committee will continue to be responsible for the management of
the Central Repository. The Commission estimates that each of the Participants would
incur an average ongoing annual time burden of 600 burden hours associated with the
continued management of the Central Repository, for an aggregate annual estimate of
14,400 burden hours across the Participants. 100 The Commission believes it is reasonable
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),
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)).
98

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

See id. at Section 4.13(d).

100

The Commission is basing this estimate on the hour 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 hour burden estimate for
the development of the CAT NMS Plan as a burden 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 hour 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 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

to assume that the ongoing aggregate annual internal burden, across all Participants,
associated with the continued management of the Central Repository does not increase or
decrease with changes to the number of Participants.
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. 101 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. 102
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. 103 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, software, third-party
providers, and Participants’ full-time employees (“FTE’s) to be incurred by the

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)
= 2/3 FTEs per month for all of the Participants to continue management of the
Central Repository. Converting this into burden hours, (2/3 FTEs) x (12 months)
x (1,800 burden hours per year) = 14,400.72 ongoing annual burden hours for all
of the Participants to continue management of the Central Repository. (14,400
ongoing annual burden hours for all Participants / 24 Participants) = 600 ongoing
annual burden hours for each Participant to continue management of the Central
Repository.
101

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

102

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

103

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

Participants to report CAT Data. 104 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 the Participants provided these numbers based on a
study (the “Participants Study”) that was distributed to 19 Participants on August 11,
2014. The Commission has divided certain numbers provided by the Participants Study
by 19 in order to calculate estimates of burdens and/or costs per Participant, where
appropriate, and further adjusted calculations to account for the increased number of
Participants (24). 105
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 compliance cost not
an actual Item 13 cost. 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; 106 and then (2) multiplied the quotient by 1,800 (the number of

104

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.

105

See CAT NMS Plan, supra note 4, at Appendix C, Section B.7(b)(i)(A)(1).
Specifically, estimates relating to Data Collection and Reporting (Participants)
and Surveillance, as described below, have been modified based on this approach.

106

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

hours a full-time equivalent employee is estimated to work per year). The Commission
believes it is appropriate to use the same calculation now because the Commission
continues to rely on estimated costs and figures provided by the Plan Participants in the
CAT NMS Plan.
The Commission previously estimated initial 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. As noted
above, the Participants have begun reporting to the consolidated audit trail and thus the
Commission believes that this information collections requirement is complete for most
Participants. 107
However, 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 FTE internal compliance 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. 108 Based on
this estimate provided in the CAT NMS Plan, the Commission believes that it would take
each Participant 1,629 ongoing burden hours per year 109 to continue compliance with
Rule 613. Therefore, the Commission estimates that the estimated aggregate ongoing
burden for all Participants would be approximately 39,096 hours. 110
The Commission estimates that it would take the Participants approximately
39,096 burden hours per year to maintain systems changes needed to comply with the
data reporting requirements of the consolidated audit trail [(1,629 ongoing burden hours)
x (24 Participants)]. This estimated burden has changed because the Commission is now
applying this estimation to 24 Participants, and because the Commission has adjusted the
method in which it estimates the per-Participant burden, by using the estimation provided
multiplied by 5.35 to account for bonuses, firm size, employee benefits and
overhead.
107

See, supra, note 93.

108

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

109

($7,300,000 in anticipated Participant annual FTE costs) / (19 Participants) =
$384,210.53 in anticipated per Participant annual FTE costs. ($384,210.53 in
anticipated per Participant FTE costs) / ($424,350 FTE cost per Participant) =
0.905 anticipated FTEs per Participant. (0.905 FTEs) x (1,800 working hours per
year) = 1,629 burden hours per Participant to maintain CAT Data reporting.

110

39,096 annual burden hours = (24 Participants) x (1,629 annual burden hours).

in the Participants Study, adjusted by the number of Participants that contributed to the
relevant CAT NMS Plan estimate (19). 111
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 Options Price Reporting
Authority (“OPRA”) Plan. 112
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). 113 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. 114 The Commission notes that the CAT NMS Plan includes
these data as “SIP Data” to be collected by the Central Repository. 115 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

111

See supra notes 104 and 105, and accompanying text.

112

See 17 CFR 242.613(e)(7).

113

Id.

114

See 17 CFR 242.613(e)(8).

115

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

is $17,500,000 for operational, technical/development, and compliance staff to be
engaged in the creation of surveillance programs. 116
Based on the estimates provided in the CAT NMS Plan, the Commission
estimates that the initial internal hour burden to implement new or enhanced surveillance
systems reasonably designed to make use of the consolidated audit trail data for each
Participant would be approximately 3,906 burden hours, 117 for an aggregate initial burden
of 93,744 burden hours. 118 Annualized over three years, this would be an average annual
burden of 1,302 hours per Participant or 31,248 hours for all Participants. This estimated
aggregate one-time burden has changed because the Commission is now applying this
estimation to 24 Participants, and because the Commission has adjusted the method in
which it estimates the per-Participant burden, by using the estimation provided in the
Participants’ Study, adjusted by the number of Participants that contributed to the
relevant CAT NMS Plan estimation (19). 119
The CAT NMS Plan states that the estimated total annual FTE internal
compliance cost associated with the ongoing 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. 120 Based on
the estimates provided in the CAT NMS Plan, the Commission estimates that the ongoing
annual internal hour burden 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 14,891.4 hours, 121 for an aggregate annual burden of 357,393.6

116

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

117

($17,500,000 in anticipated initial FTE costs) / (19 Participants) = $921,052.63 in
anticipated FTE costs per Participant. ($921,052.63 in anticipated initial FTE
costs per Participant) / ($424,350 FTE cost per Participant) = 2.17 anticipated
initial FTEs per Participant. (2.17 FTEs) x (1,800 working hours per year) =
3,906 initial burden hours per Participant to implement new or enhanced
surveillance systems.

118

(3,906 initial burden hours per Participant to implement new or enhanced
surveillance systems) x (24 Participants) = 93,744 aggregate initial burden hours.

119

See supra notes 104 and 105, and accompanying text.

120

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

121

($66,700,000 in anticipated ongoing FTE costs) / (19 Participants) =
$3,510,526.31 in anticipated ongoing FTE costs per Participant. ($3,510,526.31
in anticipated ongoing FTE costs per Participant) / ($424,350 FTE cost per
Participant) = 8.273 anticipated FTEs per Participant. (8.273 FTEs) x (1,800
working hours per year) = 14,891.4 ongoing burden hours per Participant to
maintain the new or enhanced surveillance systems.

burden hours. 122 This estimated burden has changed because the Commission is now
applying this estimation to 24 Participants, and because the Commission has adjusted the
method in which it estimates the per-Participant burden, by using the estimation provided
in the Participants Study, adjusted by the number of Participants that contributed to the
relevant CAT NMS Plan estimation (19). 123
The Commission thus estimates that, in the aggregate, it would take the 24
Participants an average of approximately 388,642 burden hours per year 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 [(3,906 initial burden hours amortized over three years) + (14,891.4
ongoing burden hours) x (24 Participants) = 388,641.6 rounded up to 388,642].
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. 124 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. 125
Thus, the Participants must, among other things, undertake an analysis of the
consolidated audit trail’s technological and computer system performance.
Section 6.6 of the CAT NMS Plan, as approved by the Commission, requires the
assessment contemplated by Rule 613(b)(6) to be submitted on an annual basis. Section
6.6 of the Plan 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. Section 6.6 of
the Plan also requires the annual assessment to consider the benefits of potential
improvements to the CAT, including to investor protection. 126
122

(14,891.4 annual burden hours per Participant to maintain new or enhanced
surveillance systems) x (24 Participants) = 357,393.6 aggregate annual burden
hours.

123

See supra notes 104 and 105, and accompanying text.

124

17 CFR 242.613(b)(6).

125

Id.

126

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

The CAT NMS Plan also states that the CCO will 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. 127 The CCO is an employee of the
Plan Processor and would be compensated by the Plan Processor. 128 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.
The Commission estimates that it would take each Participant approximately 150
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. 129 Therefore, the Commission estimates that the ongoing
annual burden of submitting a written assessment each year would be 150 ongoing
burden hours per Participant, for an estimated aggregate annual ongoing burden of 3,600

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. See CAT NMS Plan
Order, supra note 6, at Section IV.H.
127

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

128

Id. at Section 6.2(a).

129

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 the required
written assessment is much more limited in scope than the CAT NMS Plan, the
Commission is applying the CAT NMS Plan development internal burden over a
6-month period, 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 / 24 Participants = 150 burden hours per Participant to
create and file the document.

hours. 130 The individual burden for each Participant has fallen because of the increased
number of Participants (24 instead of 21), and because the Commission believes that the
aggregate annual ongoing burden of the written assessment should not change based on
an increase or decrease in the number of Participants.
The Commission estimates that it would take the Participants a total of
approximately 3,600 hours per year to review, comment on, and submit the written
assessment to the Commission [(150 ongoing burden hours) x (24 Participants)].
f. Assessment of Industry Member Bulk Access to Reported
Data
Section 6.6(a)(iv) of the CAT NMS Plan requires the Participants to provide a
written report discussing the feasibility, benefits, and risks of allowing an Industry
Member to bulk download the Raw Data it submitted to the Central Repository, within 24
months of effectiveness of the Plan.
The Commission estimates that it would take each Participant approximately 15
initial, one-time burden hours of internal legal, compliance, business operations, and
information technology staff time to prepare and submit the assessment. 131 Therefore,
the Commission estimates that the initial one-time burden of submitting a written
assessment would be 15 initial burden hours per Participant, for an estimated aggregate
initial burden of approximately 360 hours. 132 Annualized over three years, this would be
an average annual burden of 5 hours per Participant or 120 hours for all Participants.
The Commission estimates that it would take the Participants an aggregate
average of approximately 120 hours per year to submit a written report detailing the
Participants’ consideration of bulk access by Industry Members (15 initial, one-time
burden hours amortized over three years) x (24 Participants). This burden has changed
because of the increased number of Participants (24 Participants instead of 21
Participants).
g. Assessment of Errors in Customer Information Fields

130

3,600 ongoing annual burden hours = (150 ongoing annual burden hours) x (24
Participants).

131

The Commission estimates that 15 internal burden hours = (Computer Operations
Department Manager at 2 hours) + (Senior Database Administrator at 5 hours) +
(Senior Systems Analyst at 2 hours) + (Systems Analyst at 2 hours) + (Attorney at
2 hours) + (Assistant General Counsel at 2 hours).

132

360 initial one-time internal burden hours = (15 initial, one-time burden hours per
Participant) x (24 Participants).

Section 6.6(a)(v) of the CAT NMS Plan requires the Participants to submit a
written assessment of errors in the customer information submitted to the Central
Repository and whether to prioritize the correction of certain data fields over others,
within 36 months of effectiveness of the Plan.
The Commission estimates that it would take each Participant approximately 24
initial, one-time burden hours of internal legal, compliance, and information technology
staff time to prepare and submit the assessment of errors. 133 Therefore, the Commission
estimates that the initial, one-time burden of preparing and submitting a written
assessment would be 24 initial, one-time burden hours per Participant (8 hours per
Participant when annualized over three years), for an estimated aggregate initial, onetime burden of approximately 576 hours. 134
When annualized over three years, the average aggregate burden on Participants is
approximately 192 hours per year to submit the written assessment of errors in the
customer information fields (24 initial, one-time burden hours amortized over three
years) x (24 Participants). This burden has changed because of the increased number of
Participants (24 Participants instead of 21 Participants).
h. Report on Impact of Tiered Fees on Market Liquidity
Section 6.6(a)(vi) of the CAT NMS Plan requires the Participants to submit a
written report to study the impact of tiered-fees on market liquidity, including an analysis
of the impact of the tiered-fee structure on Industry Members provision of liquidity,
within 36 months of effectiveness of the Plan.

133

The Commission estimates that 24 internal burden hours = (Computer Operations
Department Manager at 3 hours) + (Senior Database Administrator at 4 hours) +
(Senior Systems Analyst at 2 hours) + (Systems Analyst at 2 hours) +
(Compliance Attorney at 5 hours) + (Attorney at 4 hours) + (Assistant General
Counsel at 4 hours). The Commission believes that the assessment of the errors
in the customer information submitted to the Central Repository and the
prioritization of the correction of certain data fields over others would require the
time of certain information technology staff and their managers. A Database
Administrator would be involved in analyzing the errors in the customer
information submitted to the Central Repository and in suggesting any changes to
the Central Repository, and Systems Analysts would assess the impact of any
proposed changes to the Central Repository on other systems. Further, the
Commission believes that the prioritization of the correction of data fields would
require the input of compliance and legal staff, and that legal staff would need to
review the assessment before it is submitted.

134

576 initial, one-time burden hours = (24 initial, one-time burden hours per
Participant) x (24 Participants).

The Commission estimates that it would take each Participant approximately
18.75 initial, one-time burden hours of internal legal and business operations staff time to
prepare and submit the report studying the impact of tiered fees on market liquidity. 135
Therefore, the Commission estimates that the initial, one-time burden of preparing and
submitting the report studying the impact of tiered fees on market liquidity would be
18.75 initial, one-time burden hours per Participant (6.25 hours per year when annualized
over three years), for an estimated aggregate initial, one-time burden of approximately
450 hours (150 hours per year when annualized over three years). 136
The Commission thus estimates that it would take the Participants an aggregate
average of approximately 150 hours per year to prepare and submit the report studying
the impact of tiered fees on market liquidity (18.75 initial, one-time burden hours
amortized over three years) x (24 Participants). This burden has changed because of the
increased number of Participants (24 Participants instead of 21 Participants).
i. Assessment of Material Systems Change on Error Rate
Section 6.6(a)(vii) of the CAT NMS Plan requires a written assessment of the
projected impact of any Material Systems Change on the Maximum Error Rate, prior to
the implementation of any Material Systems Change.
The Commission estimates that the CAT may have four Material Systems
Changes per year. Based on this estimate, the Commission estimates that each

135

The Commission previously 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. The Commission assumed that the preparation of the assessment
would be approximately one-eighth as burdensome as the document required by
Rule 613(i). To estimate the Rule 613(i) burden, the Commission applied the
internal burden estimate provided in the CAT NMS Plan for Plan development
over a 6-month period, and divided the result in half. See CAT NMS Plan, supra
note 4, at Appendix C, Section B.7(b)(iii). 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 Rule 613(i) document. (2 FTEs) x (1/8) =
0.25 FTE to prepare and submit the report studying the impact of tiered fees on
market liquidity. (0.25 FTE x 1,800 working hours per year) = 450 initial, onetime burden hours for all of the Participants to review and comment on the written
assessment. (450 burden hours / 24 Participants) = 18.75 initial, one-time burden
hours per Participant to prepare and submit the report.

136

450 initial, one-time burden hours = (18.75 initial, one-time burden hours) x (24
Participants).

Participant would incur approximately 5.21 137 burden hours to prepare and submit each
assessment, or approximately 20.84 annual burden hours per year, 138 for an aggregate,
ongoing estimate of 125 burden hours per report, 139 or an aggregate ongoing estimate of
approximately 500 burden hours per year. 140
The Commission estimates that it would take the Participants approximately 500
burden hours to prepare and submit each assessment (approximately 20.84 annual burden
hours per year) x (24 Participants). The individual burden for each Participant has fallen
because of the increased number of Participants (24 instead of 21), and because the
Commission believes that the aggregate annual ongoing burden of preparing and submit
each assessment should not change based on an increase or decrease in the number of
Participants.
j. Background Checks
Section 6.1(g) of the CAT NMS Plan requires each Participant to conduct
background checks of its employees and contractors that will use the CAT System. The
Commission estimates that this requirement will impact approximately 1,700 users. 141
The Commission estimates that each Participant would need to have background checks

137

This estimate is based on the quarterly material system change reports required
under Rule 1003(a)(1) of Regulation SCI. The Commission estimated that each
SCI entity would incur a burden of 125 hours to comply with the quarterly report
on material changes to SCI systems required under Rule 1003(a)(1) (7.5 hours by
an Attorney, 7.5 hours by a Compliance Manager, 5 hours by a Chief Compliance
Officer, 30 hours by a Senior Business Analyst, and 75 hours by a Senior Systems
Analyst). See Regulation Systems Compliance and Integrity, Securities Exchange
Act Release No. 73639 (December 5, 2014), 79 FR 72251, at 72390, n.1656.
Because the CAT is an SCI System of the Participants, the Commission is
assuming for its estimates that each Participant would incur an equal portion of
the 125 burden hours per report. (125 burden hours / 24 Participants =
approximately 5.21 burden hours per Participant).

138

The Commission estimates that there would be four Material System Changes per
year. (5.21 burden hours per report) x (4 reports per year) = 20.84 annual burden
hours per year.

139

(5.21 burden hours per report) x 24 Participants = 125.04 burden hours per report
rounded down to 125.

140

(125 burden hours) x (4 reports per year) = 500 annual burden hours.

141

Previously, the Commission estimated that approximately 1,500 users would be
impacted, based on conversations with Participants, when there were only 21
Participants in the CAT NMS Plan. The Commission is revising this estimate to
account for 3 additional Participants.

of approximately 71 users. 142 For its estimates, the Commission is assuming that these
would be background checks using fingerprints submitted to the Attorney General of the
United States for identification and processing. 143 The Commission estimates that it
would take approximately 15 minutes 144 to create and submit each fingerprint card. 145
The total reporting burden per Participant is therefore estimated to be 17.75 initial, onetime burden hours (approximately 5.92 hours when annualized over three years), 146 for an
aggregate, initial burden of approximately 426 hours (approximately 142 hours when
annualized over three years. 147
The Commission estimates that the ongoing internal burden hours for each
Participant would be approximately 4.23 annual burden hours, 148 for an aggregate annual
burden hour amount of approximately 101.52 burden hours. 149
The Commission thus estimates that it would take the Participants an aggregate
average of approximately 244 (243.6 rounded up to 244) hours to conduct a background
check [((17.75 initial, one-time burden hours amortized over three years) + (4.23 annual
burden hours)) x (24 Participants)]. This burden has changed because of the increased
number of Participants (24 Participants instead of 21 Participants).

142

70.83 users per Participant = (1,700 users) / (24 Participants).

143

The Commission is basing this assumption on the requirements of Section
17(f)(2). 15 U.S.C. 78q(f)(2).

144

This is based on the per respondent burden in Extension of Rule 17f-2, SEC File
No. 270-35, OMB Control No. 3235-0029, 79 FR 42563 (July 22, 2014).

145

The Commission is assuming that this would be a burden of 15 minutes for a
Compliance Manager per fingerprint card.

146

17.75 burden hours = (Compliance Manager at 15 minutes) x (71 users).

147

426 = (17.75 initial one-time burden hours) x (24 Participants).

148

The Commission assumes that the finance industry has a rate of 23.87% turnover
per year, based on a monthly rate for both employment separations and hires of
1.8% for the finance and insurance industry in September 2016. See
http://www.bls.gov/news.release/pdf/jolts.pdf (news release from the Bureau of
Labor Statistics, dated November 8, 2016). The Commission estimates that the
Participants will have to annually conduct background checks of 23.87% of the
1,700 users, or 405.79 users per year. (405.79 users) / (24 Participants) = 16.90
users that will need to be subject to background checks on an annual basis. Based
on this estimate, the Commission estimates that each Participant would incur a
burden of 4.23 ongoing annual burden hours = (Compliance Manager at 15
minutes) x (16.90 users).

149

101.52 annual ongoing burden hours = (4.23 ongoing annual burden hours per
Participant) x (24 Participants).

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 report high numbers of OATS
Reportable Order Events (“ROEs”) 150 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 to insource CAT Data reporting and would almost certainly
outsource their CAT Data reporting functions. The Commission recognizes that some
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. 151
The Commission estimates that there are 126 OATS-reporting Insourcers and 45
non-OATS reporting Insourcers. 152 The Commission’s estimation categorizes the

150

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.

151

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.

152

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

remaining 1,329 broker-dealers that the Plan anticipates would have CAT Data reporting
obligations as Outsourcers. 153
The Commission notes that while the CAT NMS Plan currently implements
reporting deadlines that have already past, the Commission understands that the
consolidated audit trail is not fully operational and that broker-dealers have not yet had
the ability to or begun to report the data required by the CAT NMS Plan as of January
2020. The Commission believes that it is appropriate to continue to estimate the initial
one-time burdens of development required from broker-dealers.
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. 154 The Commission
estimates that there are 14 large broker-dealers that are not OATS reporters currently in
the business of electronic liquidity provision (“ELP Firms”) that would be classified as
Insourcer firms. 155
Additionally, the Commission estimates that there are 31 Options Market Maker
broker-dealers (“OMM Firms”) that may transact in options but not in equities that can be
classified as Insourcer firms. 156 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 OMM Firms and 14 ELP Firms would be typical of the
Plan’s large non-OATS-reporting firms; for these firms, the Commission relies on the

153

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

154

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

155

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.

156

The Commission previously identified 39 CBOE-member broker-dealers that are
not FINRA members, but are members of multiple SROs; eight of these brokerdealers 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.

burden hour estimates provided under Approach 1 157 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. 158 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 (approximately 4,830 hours per year when
annualized over three years), 159 for an estimated aggregate initial burden of
approximately 652,050 hours (approximately 217,350 per year when annualized over
three years). 160
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 believes 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
157

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.

158

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 106.

159

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

160

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 (14,490 burden hours) = 652,050 initial burden hours to
implement data reporting systems.

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 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. 161 Based on this information, the Commission believes that it would take a large
non-OATS reporting broker-dealer approximately 13,338 burden hours per year 162 to
continue to comply with the Rule, for an estimated aggregate ongoing burden of 600,210
hours. 163
The Commission thus estimates that it would take large non-OATS reporting
broker-dealers an aggregate average of approximately 817,560 burden hours per year 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 = 4,830) + (13,338 ongoing burden hours) x (45 large non-OATS reporting
broker-dealers)]. 254, 352 of the hours (18,168 x 14) are attributable to the 14 ELP Firms
and 563,208 of the hours (18,168 x 31) are attributable to the 31 OMM 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. 164 To
161

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 106.

162

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

163

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.

164

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

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. 165
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. 166
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, 167 for an
estimated aggregate initial burden of 3,383,856 hours. 168 Annualized over three years,
this would be an average of approximately 8,952 hours per year for each broker-dealer
and 1,127,952 per year for all 126 broker-dealers.
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.

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.
165

See supra note 157.

166

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 106.

167

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).

168

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.

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. 169 Based on
this information the Commission believes that it would take a large OATS-reporting
broker-dealer approximately 18,054 ongoing burden hours per year 170 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. 171
Thus, the Commission estimates that it would take large OATS reporting brokerdealers an average of approximately 3,402,756 burden hours per year 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)].
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. 172
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.
169

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
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 106.

170

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

171

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.

172

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 164.

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
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. 173 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. 174 Annualized over three years,
this would be an average burden of approximately 600 hours per year for each brokerdealer and 483,000 for all broker-dealers.
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 approximately 1,350 ongoing burden hours per year 175 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

173

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 $463,050 FTE cost) = $463,050
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.

174

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.

175

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

broker-dealer would be approximately 1,350 hours, for an estimated aggregate ongoing
burden of 1,088,100 hours. 176
The Commission thus estimates that it would take small OATS-reporting brokerdealers an average total of approximately 1,571,700 burden hours per year 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 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 499 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. 177 As noted above,
this is a reduction of 300 broker-dealers based on the reduction of the overall number of
broker-dealers with CAT reporting obligations and Commission information and
belief. 178 A further 24 broker-dealers have Participant memberships only with one
Participant; 179 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
176

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.

177

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).

178

See supra note 65.

179

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.

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 per broker-dealer. 180 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 non-OATS-reporting brokerdealer would be 3,600 burden hours, for an estimated aggregate initial burden of
1,882,800 hours. 181 Annualized over three years, this would be an average burden of
1,200 hours per year for each broker-dealer and 627,600 per year hours for all brokerdealers. The estimated aggregate initial burden has fallen because of the reduced number
of estimated small non-OATS reporting broker-dealers (from 823 to 523).
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 182 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 706,050
hours. 183 The estimated aggregate ongoing burden has fallen because of the reduced
number of estimated small non-OATS reporting broker-dealers (523 from 823).
180

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

181

The Commission estimates that 523 small non-OATS-reporting broker-dealers
would be impacted by this information collection. (523 small non-OATSreporting broker-dealers x 3,600 burden hours) = 1,882,800 aggregate initial
burden hours.

182

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

183

The Commission estimates that 523 small non-OATS-reporting broker-dealers
would be impacted by this information collection. (523 small non-OATSreporting broker-dealers x 1,350 burden hours) = 706,050 aggregate ongoing
burden hours to ensure ongoing compliance with Rule 613.

The Commission thus estimates that it would take small non-OATS-reporting
broker-dealers an aggregate average of approximately 1,333,650 burden hours per year 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 (523 small
non-OATS- reporting broker-dealers)]. The Commission notes that there is a decrease in
the overall estimated burden due to the decrease in the estimated number of small nonOATS-reporting broker-dealers (523 from 823).
C.

Completed Information Collections Requirements

As discussed above, 184 the Commission believes that three information collections
requirements have been satisfied, specifically (1) a document outlining how the
Participants could incorporate into the consolidated audit trail information regarding
certain products that are not NMS securities; 185 (2) a one-time assessment of the clock
synchronization standards in the Plan before reporting begins for Industry Members,
which assessment shall take into account the diversity of CAT Reporters and systems; 186
and (3) a one-time report that discusses the Participants’ assessment of implementing
coordinated surveillance. 187 These one-time information collections have been
completed by the Participants, so the Commission believes that the annual burden for
each of the information collections is 0 hours.

Summary of Hourly Burdens
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

Central Repository

Recordkeeping

Data Collection and Reporting
(Participants)

Third Party Disclosure

Surveillance

Recordkeeping

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

600

1,629

3906

1302

14,891.4

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

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

Small
Business
Entities
Affected

600

14,400

1,629

39,096

16,193.4

388,642

184

See supra Section I.A.

185

See 17 CFR 242.613(i). See also “One-Time Written Assessments,”
Consolidated Audit Trail, LLC at: https://www.catnmsplan.com/one-time-writtenassessments/index.html.

186

See CAT NMS Plan Order, supra note 6, at 84940.

187

Id. at 84940–84941.
46

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

Written Assessment of Operation of
CAT

Reporting

150

3600

Assessment of Industry Member Bulk
Access to Reporter Data

Reporting

120

Assessment of Errors in Customer
Information Fields

Reporting

192

Report on Impact of Tiered Fees on
Market Liquidity

Reporting

18.75

6.25

150

Assessment of Material Systems
Change on Error Rate

Reporting

5.21

20.84

500

Background Checks

Disclosure

17.75

5.92

4.23

10.15

244

Data Collection and Reporting
(Large, Non-OATS Reporting
Broker-Dealers) - ELPs

Third Party Disclosure

14,490

4,830

13,338

18,168

254,352

Data Collection and Reporting
(Large, Non-OATS Reporting
Broker-Dealers) – Options Market
Makers

Third Party Disclosure

14,490

4,830

13,338

18,168

563,208

Data Collection and Reporting (Large
OATS Reporting Broker-Dealers)

Third Party Disclosure

126

26,856

8,952

18,054

27,006

3,402,756

Data Collection and Reporting (Small
OATS Reporting Broker-Dealers)

Third Party Disclosure

806

1,800

600

1,350

1,950

1,571,700

Estimated
402 188

188

The Commission believes that the 925 Commission-registered broker-dealers (as
of 2019) that are considered “small entities” could be impacted by two categories
of information collection: “data collection and reporting (small OATS-reporting
broker-dealers)” and “data collection and reporting (non-OATS reporting brokerdealers).” The Commission estimates that the 523 respondents affected by the
“data collection and reporting (non-OATS reporting broker-dealers)” would all be

Name of Information Collection

Type of Burden

[A.]
Number of
Entities
Impacted

[B.]
Annual
Responses
per Entity

Data Collection and Reporting (Small
Non-OATS Reporting BrokerDealers)

Third Party Disclosure

523

Review of Clock Synchronization
Standards

Reporting

Coordinated Surveillance Report

Document on Expansion to Other
Securities

13.

[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

3,600

1,200

1,350

2,550

1,333,650

Estimated
523 189

Reporting

TOTAL HOURLY BURDEN FOR ALL RESPONDENTS

7,572,610

Costs to Respondents

The Commission estimates that the information collection requirements of Rule
613 will apply to 1,524 respondents who will incur an average aggregate of
approximately $463,322,593 in costs per year to comply with the requirements. The cost
burden is calculated as discussed below.
A.

Costs to National Securities Exchanges and National Securities
Associations

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 402 broker-dealers (of the estimated 925 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, and the Commission believes
that they would have low levels of OATS reporting and would likely outsource
CAT data collection and reporting to a service bureau.
189

See, supra note 188.
48

Central Repository

The Commission previously estimated what the Participants would collectively
spend 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. In addition, the Commission previously estimated the Participants collective
costs over the 12-month period after the effectiveness of the CAT NMS Plan within
which the Participants were required to select an initial Plan Processor and begin
reporting to the Central Repository. However, as noted above, the Participants have
selected a Plan Processor and begun reporting to the consolidated audit trail. The
Commission believes it is appropriate to now only consider the ongoing costs associated
with ongoing costs for operating and maintaining the Central Repository.
The Commission believes that there will 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. 190 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. 191 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 $33,333.33
per Participant. 192
190

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

191

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

192

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
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

While the CAT NMS Plan includes estimates from six bidders for the annual
ongoing costs to the Participants to operate the Central Repository, 193 the Participants
provided updated cost estimates to reflect the estimates of three final shortlisted bidders
which were attempting to be the Plan Processor. 194 Using the revised estimates, the
Commission 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 approximately $55 million, 195 or $2,291,666.67 per
Participant. 196 Therefore, the Commission estimates that each Participant would incur
ongoing annual external costs of approximately $2,325,000 197 to maintain the Central
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 / 24 Participants) = $33,333.33 per Participant over 12
months.
193

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

194

See Letter to Brent J. Fields, Secretary, Commission, from Participants, dated
October 7, 2016, at 14–15.

195

Id.

196

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. $2,291,666.67 = $55,000,000 / 24
Participants. The Commission previously noted several uncertainties that may
affect the Central Repository cost estimates, including (1) that the Participants had
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
underestimated, the capacity of the Central Repository may need to be increased,
resulting in an increase in costs. The Commission believes that using the
maximum operation and maintenance cost estimate is appropriate even though the
CAT NMS Plan Processor has been selected, because the Participants have not
publicly disclosed the actual ongoing costs of operating and maintaining the CAT
NMS Plan Processor.

197

$2,325,000 for each Participant to maintain the Central Repository =
($2,291,666.67 per Participant in ongoing annual costs to maintain the Central

Repository, or aggregate ongoing annual external costs across all Participants of
$55,800,000. 198
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. 199
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. As noted above, the
Participants have begun reporting CAT Data and thus the Commission believes it is
appropriate to only consider ongoing costs related to data collection and reporting.
Because the Participants have 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 200 and $14,700,000 total annual costs. 201
Repository) + ($33,333.33 per Participant in ongoing annual public relations,
legal and consulting costs associated with the maintenance of the Central
Repository).
198

$55,800,000 for all of the Participants to maintain the Central Repository =
($2,325,000 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 (24 Participants).

199

200

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.

201

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

Based on estimates provided in the CAT NMS Plan, the Commission estimates
that it would cost, on average, approximately $37,894.74 per Participant in ongoing thirdparty legal and consulting and other costs 202 and $389,473.68 per Participant in total
ongoing external costs. 203 Therefore, the Commission estimates that the annual
aggregate ongoing external cost for all Participants would be approximately
$9,347,368.32. 204
The Commission estimates that the Participants would incur an aggregate, annual
external cost of approximately $9,347,368 to adopt and maintain systems changes needed
to comply with the data reporting requirements of the consolidated audit trail
[($389,473.68 in annual, ongoing external costs) x (24 Participants) = $9,347,368.32
rounded down to $9,347,368]. This estimate has changed because of the increased
number of Participants and because the initial costs have been completed.
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. 205
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
believes that the Participants will likely incur costs to upgrade their hardware to
report data to the Central Repository.
202

($720,000 in annual third party costs) / (19 Participants) = $37,894.73 per
Participant in anticipated annual third party costs.

203

To determine the total external annual cost per Participant, the Commission
subtracted the anticipated annual FTE internal compliance cost estimates for the
Participants as provided in the Plan (see notes 104 through 106 and accompanying
text) from the total aggregate annual costs and divided the remainder by 19
Participants, which is the number of Participants included in the initial cost
estimates provided by 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) /
19 Participants = $389,473.68 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.

204

$9,347,368.32 = ($389,473.68 in total annual external costs) x (24 Participants).

205

See 17 CFR 242.613(e)(7).

pursuant to Rule 613(c)(7). 206 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. 207 The Commission notes that the CAT NMS Plan includes these
data as “SIP Data” to be collected by the Central Repository. 208 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. 209 This
amount includes legal, consulting, and other costs of $560,000, as well as $17,500,000 in
FTE internal compliance costs for operational, technical/development, and compliance
staff to be engaged in the creation of surveillance programs. 210
Based on the estimates provided in the CAT NMS Plan, the Commission
estimates that each Participant would, on average, incur an initial one time external cost

206

Id.

207

See 17 CFR 242.613(e)(8).

208

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

209

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

210

Id. For purposes of the Paperwork Reduction Act analysis, the Commission is
treating the FTE cost as an internal compliance burden. See text accompanying
notes 116–118, 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.

of approximately $29,473.68 211 for outsourced legal, consulting and other costs in order
to implement new or enhanced surveillance systems, and a total of $300,000 in all one
time initial external costs, 212 for an aggregate one-time initial external cost of $7,200,000
across the 24 Participants to implement new or enhanced surveillance systems. 213
Annualized over three years this would be an average burden of approximately $100,000
per year for each Participant and $2,400,000 per year for all Participants.
The CAT NMS Plan states that the estimated total ongoing annual cost associated
with the maintenance of surveillance programs for the Participants is $87,700,000. 214
This amount includes annual legal, consulting, and other costs of $1,000,000, as well as
$66,700,000 in annual FTE internal compliance costs for internal operational,
technical/development, and compliance staff to be engaged in the maintenance of
surveillance programs. 215 Based on the estimates provided in the CAT NMS Plan, 216 the
Commission estimates that each Participant would, on average, incur an annual ongoing
external cost of approximately $52,631.58 217 for outsourced legal, consulting and other
costs in order to maintain the new or enhanced surveillance systems, and a total estimated

211

$29,473.68 = $560,000 / 19 Participants (the number of Participants in
Participants Study).

212

($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 initial external third party costs). $5.7 million / (19 Participants, the number of
Participants in the Participants Study) = $300,000.

213

$7,200,000 = $300,000 x 24 Participants.

214

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

215

Id. For purposes of the Paperwork Reduction Act analysis, the Commission is
treating the FTE cost as an internal burden. See text accompanying notes 120–
122, supra. The Commission also notes that based upon the data provided by the
Participants, the source of the remaining $20,000,000 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.

216

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

217

$52,631.58 = $1,000,000 for ongoing legal, consulting and other costs associated
with maintenance of surveillance programs / 19 Participants (the number of
Participants in Participants Study).

ongoing external cost of $1,105,263.16, 218 for an estimated aggregate ongoing external
cost of $26,526,315.84 across the 24 Participants to maintain the surveillance systems. 219
The Commission estimates that the Participants would, therefore, incur an average
aggregate, annual external cost of approximately $28,926,316 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 [($300,000 in initial external costs amortized over three years = $100,000 per
year) + ($1,105,263.16 in annual, ongoing external costs) x (24 Participants) =
$28,526,315.84 rounded up to $28,526,316.]. This burden has changed due to the
increased number of Participants (24 Participants instead of 21).
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 CAT’s operation at least every two
years, once the CAT NMS Plan is effective. 220 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. 221
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. 222 The CCO would be an employee
of the Plan Processor and would be compensated by the Plan Processor. 223 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.

218

($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 / 19 Participants (the
number of Participants in Participants Study) = $1,105,263.16.

219

$26,526,315.84 = $1,105,263.16 x 24 Participants.

220

17 CFR 242.613(b)(6).

221

Id.

222

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

223

Id. at Section 6.2(a).

In addition, Section 6.6 of the Plan changes the frequency of the assessment
contemplated by Rule 613(b)(6) from biannual to annual and provides further detail
regarding elements of the written assessment to be conducted by the Participants. 224
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. Section 6.6 of the Plan also requires the annual assessment to consider the
benefits of potential improvements to the CAT, including to investor protection. 225
The Commission 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. 226 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 $24,000. 227
The Commission estimates that the Participants would incur an aggregate,
annualized external cost of approximately $24,000 to review the written assessment
[($1,000 in annual, ongoing external costs) x (24 Participants)]. This has increased due
to the increased number of Plan Participants (24 Participants instead of 21 Participants).
e. Independent Audit of Expenses Incurred Prior to Effective
Date

224

Specifically, Section 6.6 of the Plan states that 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. See CAT NMS Plan Order, supra note 6, at Section IV.H.

225

Id.

226

$1,000 = ($400 per hour rate for outside legal services) x (2.5 hours).

227

$24,000 = 24 Participants x ($400 per hour rate for outside legal services) x (2.5
hours).

Section 6.6(a)(i) of the CAT NMS Plan requires the Participants to provide to the
Commission an independent one-time audit of fees, costs and expenses incurred by the
Participants on behalf of the Company, prior to the Effective Date, in connection with the
creation and implementation of the CAT, at least one month prior to submitting any rule
filing to establish initial fees to the Commission.
The Commission estimates that each Participant would incur an initial, one-time
external cost for the audit of $208.33. 228 The Commission estimates that the aggregate
initial, one-time external cost of the audit for all Participants would be approximately
$5,000. 229 Annualized over three years, the burden would be approximately $69.44 per
year for each Participant and approximately $1,666.56 per year for all Participants.
The Commission thus estimates that the Participants would incur an average
aggregate, external cost of approximately $1,667 per year to provide to the Commission
the independent audit of fees, costs and expenses incurred by the Participants on behalf of
the Company, prior to the Effective Date, in connection with the creation and
implementation of the CAT [($208.33 in initial external costs amortized over three years)
x (24 Participants) = $1,666.56 rounded up to $1,667]. The individual Participant costs
have increased because the number of Participants have increased (from 21 to 24
Participants) while the estimated aggregate one-time external cost has remained the same
($5,000).
f. Assessment of Industry Member Bulk Access to Reported
Data
Section 6.6(a)(iv) of the CAT NMS Plan requires the Participants to provide a
written report discussing the feasibility, benefits, and risks of allowing an Industry
Member to bulk download the Raw Data it submitted to the Central Repository, within 24
months of effectiveness of the Plan.
The Commission estimates that on average, each Participant would outsource five
hours of legal time to assist in the preparation and review of the assessment, for an initial,
228

The Commission estimates that the cost of the audit would be an aggregate,
external cost of $5,000. The CAT NMS Plan Order states that to arrive at this
estimate, the Commission relied on an industry source for the costs of an audit per
dollar of revenue, and assumed that the audit cost per unit of revenue would be
comparable to the audit cost per unit of development costs, which were
approximately $8.8 million. The Commission used an industry estimate of $479
in audit costs per $1 million in revenue. ($8,800,000 / $1,000,000) = $8.80 per $1
million in revenue. ($8.80) x ($479 in audit costs) = $4,215 for the audit. In the
CAT NMS Plan Order, the Commission rounded this amount up to $5,000. See
CAT NMS Plan Order, supra note 6, at 84856, n.2494. $5,000 / 24 Participants =
$208.33 per Participant for the independent audit.

229

Id.

one-time external cost of approximately $2,000. 230 Therefore, the Commission estimates
that each Participant would incur an initial one-time external cost of $2,000 for
outsourced legal counsel per Participant (or approximately $666.67 a year per Participant
when annualized over three years), for an estimated aggregate initial external cost of
$48,000 for all Participants (or approximately $16,000 per year for all Participants when
annualized over three years. 231
The Commission estimates that the Participants would incur an aggregate,
annualized external cost of approximately $16,000 to submit the written report [($2,000
in initial external costs amortized over three years) x (24 Participants) = $16,000.08
rounded down to $16,000]. This estimated cost has increased due to the increased
number of Participants (24 Participants instead of 21 Participants).
g. Assessment of Errors in Customer Information Fields
Section 6.6(a)(v) of the CAT NMS Plan requires the Participants to submit a
written assessment of errors in the customer information submitted to the Central
Repository and whether to prioritize the correction of certain data fields over others,
within 36 months of effectiveness of the Plan.
The Commission estimates that on average, each Participant would outsource 1.25
hours of legal time to assist in the review of the assessment, for an initial, one-time
external cost of approximately $500. 232 Therefore, the Commission estimates that each
Participant would incur $500 of initial, one-time external costs for outsourced legal
counsel per Participant (approximately $166.67 a year per Participant when annualized
over three years), for an estimated aggregate initial, one-time external cost of

230

$2,000 = ($400 per hour rate for outside legal services) x (5 hours).

231

$48,000 = (24 Participants) x ($400 per hour rate for outside legal services) x (5
hours). $48,000 ÷ 3 = $16,000.

232

The Commission calculated the total estimated external cost based on the revised
burden hour estimate for the written assessment of the operation of the CAT. See
CAT NMS Plan Order, supra note 6, at 84925. The Commission assumes that the
preparation and submission of the error assessment would cost approximately half
as much as the revised written assessment. The revised written assessment
estimate provides that each Participant would outsource 2.5 hours of legal time to
assist in the review of the assessment, for an external cost of approximately
$1,000. The Commission estimates that each Participant would outsource
approximately 1.25 hours of legal time, for an initial, one-time external cost of
$500 (1.25 hours x $400 per hour rate for outside legal services) to assist in
drafting the error assessment.

approximately $12,000 a year for all Participants (or approximately $4,000 per year when
annualized over three years). 233
The Commission estimates that the Participants would incur an aggregate, annual
external cost of approximately $4,000 to submit the written assessment of errors in the
customer information provide to the Commission [($500 in initial external costs
amortized over three years) x (24 Participants)]. This estimated cost has increased due to
the increased number of Participants (24 Participants instead of 21 Participants).
h. Report on Impact of Tiered Fees on Market Liquidity
Section 6.6(a)(vi) of the CAT NMS Plan requires the Participants to submit a
written report to study the impact of tiered-fees on market liquidity, including an analysis
of the impact of the tiered-fee structure on Industry Members provision of liquidity,
within 36 months of effectiveness of the Plan.
The Commission estimates that on average, each Participant would outsource 0.5
hours of legal time to assist in drafting the report, for an initial, one-time external cost of
approximately $200. 234 Therefore, the Commission estimates that each Participant would
incur $200 of initial, one-time external costs for outsourced legal counsel per Participant,
for an estimated aggregate initial, one-time external cost of $4,800. 235
When this one-time cost is annualized over three years, the Participants would
incur an average aggregate external cost of approximately $1,600.00 per year to provide
to the Commission the written report to study the impact of tiered-fees on market
liquidity ($200 in initial external costs amortized over three years) x (24 Participants).
This estimated cost has increased due to the increased number of Participants (24
Participants instead of 21 Participants).
i. Financial Statements
Section 9.2 of the CAT NMS Plan requires that the CAT LLC financials be (i) in
compliance with GAAP, (ii) be audited by an independent public accounting firm, and
(iii) be made publicly available. The Commission estimates that each Participant would

233

$12,000 = (24 Participants) x ($400 per hour rate for outside legal services) x
(1.25 hours).

234

$200 = ($400 per hour rate for outside legal services) x (0.5 hours).

235

$4,800 = (24 Participants) x ($400 per hour rate for outside legal services) x (0.5
hours).

incur an annual external cost of $2,708.33 236 associated with this requirement, for an
aggregate annual, ongoing external cost of $65,000 to the Participants. 237
The Commission estimates that the Participants would incur an aggregate,
external cost of approximately $65,000 to have the CAT LLC financials be (i) in
compliance with GAAP, (ii) be audited by an independent public accounting firm, and
(iii) be made publicly available [($2,708.33 in annual, ongoing external costs) x (24
Participants)]. The cost per individual Participant has decreased because the number of
Participants has increased (from 21 to 24 Participants) while the estimated aggregate
external cost has remained the same ($65,000).
j. Background Checks
Section 6.1(g) of the CAT NMS Plan requires each Participant to conduct
background checks of its employees and contractors that will use the CAT System. The
Commission estimates that this requirement will impact approximately 1,700 users. 238
The Commission estimates that each Participant would need to have background checks

236

In the CAT NMS Plan Order, the Commission estimated that the aggregate cost of
this requirement for the Participants is $65,000. To estimate this number, the
Commission drew from a Commission adopting release and an industry report.
Specifically, the Commission’s Crowdfunding Adopting Release estimated that
the audit costs for affected issuers would be $2,500 to $30,000. See Securities
Act Release No. 9974 (October 30, 2015), 80 FR 71499 (November 16, 2015).
The Commission believes this estimate could be reasonable if the Company’s
financials are of the same level of complexity as the larger issuers affected by the
Crowdfunding rule, which is realistic because the Company is not publicly traded,
is organized as a “business league”, and has a limited and predictable revenue
stream. As an alternative estimate, the Commission estimated an audit cost of
approximately $65,000 using an industry estimate of $479 in audit costs per $1
million in revenue, using the assumption that Company revenue will just offset
expected costs of $139 million. See Audit Analytics report “Audit Fees and NonAudit Fees: A Twelve Year Trend,” October 9, 2014, available at
http://www.auditanalytics.com/blog/audit-fees-and-non-audit-fees-a-twelve-yeartrend/. $479 x $139 = $64,665 ~ $65,000. The Commission incorporates the
higher estimate from the two methodologies ($65,000) into its cost estimates. See
CAT NMS Plan Order, supra note 6, at 84856, n.2503. ($65,000 annual, external
cost) / (24 Participants) = $2,708.33 per Participant.

237

Id.

238

of approximately 71 users. 239 For its estimates, the Commission is assuming that these
would be background checks using fingerprints submitted to the Attorney General of the
United States for identification and processing. 240 The Commission estimates that the
total initial external cost per Participant would be $2,596.76, 241 for an aggregate, initial
external cost of $62,322.24. 242 Annualized over three years, the cost would be
approximately $865.59 per year for each Participant and approximately $20,774 per year
for all Participants.
The Commission estimates that the ongoing external cost to be incurred by each
Participant would be approximately $619.98, 243 for an aggregate annual external cost of
$14,879.52. 244
The Commission thus estimates that the Participants would incur an aggregate,
average annual external cost of approximately $35,654 to conduct background checks of
its employees and contractors that will use the CAT System [($2,596.76 in initial external
costs amortized over three years) + ($619.98 in annual, ongoing external costs) x (24
Participants) = $35,653.60 rounded up to $35,654.00]. This estimated cost has increased
due to the increased number of estimated users (1,700 instead of 1,500) to account for the
increased number of Participants (24 Participants instead of 21 Participants).
239

70.83 users per Participant = (1,700 users) / (24 Participants).

240

The Commission is basing this assumption on the requirements of Section
17(f)(2). 15 U.S.C. 78q(f)(2).

241

70.83 x 45% hard copy fingerprinting = 31.87 users. 70.83 x 55% electronic
fingerprinting = 38.96 users. (31.87 hard copy fingerprinting users) x ($44.50 per
hard copy fingerprint) = $1,418.22 for hard copy fingerprinting users per
Participant. (38.96 electronic fingerprinting users) x ($30.25 per electronic
fingerprint) = $1,178.54 for electronic fingerprint users per Participant. $1,418.22
+ $1,178.54 = $2,596.76 per Participant in initial external costs for fingerprinting.

242

$62,322.24 = ($2,596.76 per Participant) x (24 Participants).

243

See supra note 148. Based on the Commission’s estimate that 16.90 users will
need to be subject to background checks annually, the Commission estimates that
45% of the 16.90 users would submit hard copy fingerprints and 55% of the 16.90
users would submit electronic fingerprints to conduct their background checks.
45% of 16.90 = 7.61 users that would submit hard copy fingerprints. 55% of
16.90 = 9.30 users that would submit electronic fingerprints. (7.61 hard copy
fingerprinting users) x ($44.50 per hard copy fingerprint) = $338.65 for hard copy
fingerprinting users per Participant. (9.30 electronic fingerprinting users) x
($30.25 per electronic fingerprint) = $281.33 for electronic fingerprint users per
Participant. $338.65 + $281.33 = $619.98 per Participant in initial external costs
for fingerprinting.

244

($619.98 per Participant in annual, ongoing external costs) x (24 Participants) =
$14,879.52 to conduct a fingerprint-based background check of the users.

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 245 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
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. 246
As noted above, the Commission estimates that there are 126 OATS-reporting
Insourcers and 45 non-OATS reporting Insourcers. 247 The Commission’s estimation
categorizes the remaining 1,329 broker-dealers that the Plan anticipates would have CAT
Data reporting obligations as Outsourcers. 248
(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
245

See supra note 150.

246

247

See supra note 152.

248

See supra note 153.

or outsourcing their regulatory data reporting functions. 249 The Commission estimates
that there are 14 large broker-dealers that are not OATS reporters currently in the
business of electronic liquidity provision (“ELP Firms”) that would be classified as
Insourcer firms. 250
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 (“OMM
Firms”). 251 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 OMM Firms and 14 ELP Firms would be typical
of the Plan’s large, non-OATS reporting firms; for these firms, the Commission relies on
the cost estimates provided under Approach 1 252 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. 253 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 a comment to the CAT NMS Plan Notice that provided estimates for a
modified allocation timestamp requirement, 254 the Commission is adding the cost of the
249
250

See CAT NMS Plan, supra note 4, at Appendix C, Section A.6(c).
See supra note 155.

251

See supra note 156.

252

See supra note 157.

253

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.

254

Letter to Brent J. Fields, Secretary, Commission, from Mary Lou Von Kaenel,
Managing Director, Financial Information Forum, dated July 18, 2016, at 88,
Table 6 (“FIF Letter”). The commenter based its implementation and ongoing
estimates on a survey it conducted of broker-dealers 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

allocation timestamp requirement to the external costs to be incurred by large non-OATSreporting broker-dealers. The Commission estimates that the initial cost to an ELP Firm
and an OMM Firm to implement the modified allocation timestamp requirement would
be $250,000. 255
Based on this information, the Commission estimates that the average initial
external cost per ELP Firm would be $709,500, 256 for an estimated aggregate initial
external cost of $9,933,000. 257 When annualized over three years, the average cost per
ELP Firm would be approximately $236,500 per year and the aggregate average cost for
all ELP Firms would be approximately $3,311,000 per year.
The Commission also is adding a cost estimate for the requirement that an OMM
Firm submit a Quote Sent Time to an exchange. 258 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

estimates due to a lack of participation by such broker-dealers 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 1,329 broker-dealers that are
categorized as Outsourcing broker-dealers.
255

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.

256

($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.

257

($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.

258

FIF Letter at 65.

years. 259 The Commission is using the maximum 5-year cost estimate and has divided it
into $17,400,000 in aggregate implementation external costs, and $11,880,000 in
aggregate ongoing external costs. 260 The Commission estimates that this requirement
will impose an additional initial hardware and software cost per OMM Firm of
$561,290.32. 261
Based on this information, the Commission estimates that the initial external cost
per OMM Firm would be $1,270,790.32, 262 for an estimated aggregate initial external
cost of $39,394,499.92. 263 When annualized over three years, the average cost per OMM
Firm would be approximately $423,596.77 per year and the aggregate average cost for all
OMM Firms would be approximately $13,131,500 per year.
Once a large non-OATS reporting broker-dealer has established the appropriate
systems and processes required for collection and transmission of the required
259

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).

260

The Commission notes that the Quote Sent Time cost estimate was not included
in the cost estimates of the CAT NMS Plan Notice, because the Commission
concluded that this requirement did not represent a significant source of costs.
However, 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, and the commenter further
stated that this is “not a trivial cost for providing one data element to the
consolidated audit trail.” See FIF Letter at 65. In response to the comment, the
Commission agrees that the costs of quote sent time are significant, and adds this
cost to its estimates for Options Market data collection and reporting. See also
CAT NMS Plan Order, supra note 6, at Section V.F.3.a(6). The Commission is
using the maximum 5-year 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.

261

($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.

262

($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.

263

($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.

information to the Central Repository, the Commission believes 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. 264 Based on this
information, the Commission 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. 265
Additionally, the Commission estimates that the ongoing cost to an ELP Firm and
an OMM Firm to maintain the modified allocation timestamp requirement would be
$29,166.67 per year. 266
The Commission estimates that the total average ongoing external cost per ELP
Firm would be $110,466.68 267 per year to maintain the systems necessary to collect and
transmit information to the Central Repository, for an estimated aggregate ongoing
external cost for the ELP Firms of $1,546,533.52 per year. 268
The Commission also believes there is an ongoing external cost for the
requirement that an OMM Firm submit a Quote Sent Time to an exchange. The
264

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.

265

Id.

266

See supra note 254. 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.

267

($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.

268

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

Commission estimates that this requirement will impose an additional ongoing hardware
and software cost per OMM Firm of $383,225.81 per year. 269
Based on this information, the Commission estimates that the total ongoing
external cost per OMM Firm would be $493,692.48 per year. 270 to maintain the systems
necessary to collect and transmit information to the Central Repository, for an estimated
aggregate ongoing external cost to OMM Firms of $15,304,466.88 per year. 271
The Commission thus estimates that ELP Firms would incur an aggregate,
average external cost of approximately $4,857,534 per year 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) = $4,857,533.52 rounded up
to $4,857,534].
The Commission thus estimates that OMM Firms would incur an aggregate,
average external cost of approximately $28,435,967 per year 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) + ($493,692.48 in annual, ongoing external costs) x (31 options firms) =
$28,435,966.75 rounded up to $28,435,967]. This figure has changed slightly since the
prior submission due to the correction of a minor computational error in the ongoing
external costs to maintain the Quote Sent Time requirement per Options Market Maker.
B.

Large OATS-Reporting Broker-Dealers

The Commission estimates that the ongoing cost of the Quote Sent Time
requirement is approximately $11,880,000. See supra note 260 and
accompanying text. ($11,880,000 in ongoing costs) / (31 Options Market Maker)
= $383,225.81 in ongoing external costs to maintain the Quote Sent Time
requirement per Options Market Maker. This figure has changed slightly since
the prior submission due to the correction of a minor computational error.

270

($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) + ($383,225.81 in ongoing external costs to
maintain the Quote Sent Time requirement) = $493,692.48 in ongoing external
costs per Options Market Maker.

271

($493,692.48 in ongoing external costs per Options Market Maker) x (31 options
firms) = $15,304,466.88 in aggregate ongoing external costs.

272

See supra note 164.

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. 273
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. 274
Based on the comment that provided estimates for a modified allocation
timestamp requirement, 275 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. 276
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, an additional $150,000 in initial
external third party/outsourcing costs, 277 and $250,000 to implement the modified
allocation timestamp requirement. Therefore, the Commission estimates that the average
one-time initial external cost per large OATS-reporting broker-dealer would be
$1,150,000 to implement CAT data reporting systems, 278 for an estimated aggregate

273

See supra note 157.

274

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

275

See supra note 254.

276

See supra note 255. $42,750,000 / 171 Insourcers = $250,000 in initial costs to
implement the modified allocation timestamp requirement per Insourcer.

277

278

($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) = $1,150,000 in initial external costs per large OATSreporting broker-dealer to implement CAT data reporting systems. The
Commission notes that due to a computational error, the Commission previously
estimated this cost to be $1,250,000.

initial external cost of $144,900,000. 279 When annualized over three years, the average
cost per broker-dealer would be approximately $383,333.33 per year and the aggregate
average cost for all broker-dealers would be approximately $48,300,000 per year.
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. 280 Based on this information the
Commission 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. 281 Therefore, the
Commission estimates that the average ongoing annual external cost per large OATSreporting broker-dealer would be approximately $500,000 282 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. 283
279

($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) = $144,900,000 in initial
external costs to implement data reporting systems. This number has been
reduced since the prior submission because of a computational error.

280

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

281

See id.

282

($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.

283

See supra note 266. $4,987,500 / 171 Insourcers = $29,166.67 in ongoing costs to
maintain the modified allocation timestamp requirement per Insourcer.

Based on this information, the Commission believes that the average ongoing
annual external cost per large OATS-reporting broker-dealer would be approximately
$529,166.67 284 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. 285
The Commission thus estimates that large OATS reporting broker-dealers would
incur an aggregate, average external cost of approximately $114,975,000 per year to
adopt and maintain systems changes needed to comply with the data reporting
requirements of the consolidated audit trail [($1,150,000 initial external costs amortized
over three years) + ($529,166.67 ongoing annual, external costs) x (126 large OATS
reporting broker-dealers)]. The estimated cost has be reduced by approximately
$4,200,001 due to correction of a computational error. 286
(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. 287 The Commission estimates
that these firms currently spend an aggregate of $100.2 million on annual outsourcing
costs. 288 The Commission estimates these 806 broker-dealers would spend $100.2
million in the aggregate to outsource their regulatory data reporting to service bureaus to

284

($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.

285

($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.

286

See supra note 279.

287

See supra note 164.

288

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.

report in accordance with Rule 613, 289 or $124,317.62 per broker-dealer. 290 Therefore,
the Commission estimates that each small OATS-reporting broker-dealer would incur
approximately $124,317.62 in initial external costs.
Additionally, based on the comment that provided estimates for a modified
allocation timestamp requirement, 291 the Commission estimates that the initial cost to a
small OATS-reporting broker-dealer to implement this requirement would be $978.18. 292
Therefore, the Commission estimates that each small OATS-reporting broker-dealer
would incur approximately $125,295.80 in initial external costs, 293 for an estimated
aggregate initial external cost of $100,988,414.80. 294 When annualized over three years,
the average cost per broker-dealer would be approximately $41,765.27 per year and the
average cost for all broker-dealers would be approximately $33,662,808 per year.
The Commission estimates that it would cost small OATS-reporting brokerdealers, on average, approximately $124,317.62 in ongoing external outsourcing costs 295
to ensure ongoing compliance with Rule 613. Additionally, the Commission estimates

289

See CAT NMS Plan Order, supra note 6, at Section V.F.1.c.(2)(B).

290

$124,317.62 = $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. This number is reduced from the prior
information collections submissions due to a computational error in the earlier
submissions, which calculated this figure as $124,373 per broker-dealer.

291

See supra note 254.

292

See supra note 255. 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 1,329
broker-dealers that are categorized as Outsourcing broker-dealers. $1,300,000 /
1,329 Outsourcing broker-dealers = $978.18 in initial costs to implement the
modified allocation timestamp requirement per Outsourcing broker-dealer.

293

$125,295.80 = ($124,317.62 in initial outsourcing costs) + ($978.18 to implement
the allocation timestamp).

294

($124,317.62 in initial outsourcing costs) + ($978.18 to implement the allocation
timestamp) x (806 small OATS-reporting broker-dealers) = $100,988,414.80 in
aggregate initial external costs.

295

See supra note 290.

that the ongoing cost to a small OATS-reporting broker-dealer to maintain the modified
allocation timestamp requirement would be $81.51. 296
Therefore, the Commission estimates that the average ongoing external cost per
small OATS-reporting broker-dealer would be approximately $124,399.13 per year, 297
for an estimated aggregate ongoing external cost of approximately $100,265,698.78 per
year for all such broker-dealers. 298
The Commission thus estimates that small OATS-reporting broker-dealers would
incur an aggregate, average external cost of approximately $133,928,506 per year to
outsource their regulatory data reporting to service bureaus and to ensure ongoing
compliance with Rule 613 [($125,295.80 in initial external costs amortized over three
years) + ($124,399.13 in annual, ongoing external costs) x (806 small OATS-reporting
broker-dealers)]. This estimated cost has changed because the Commission believes that
the cost of implementing and maintaining the modified allocation timestamp would be a
cost shared between all 1,329 Outsourcing broker-dealers (specifically, small OATS
reporting broker-dealers and small non-OATS reporting broker-dealers), and because of a
computational error in the prior submission. 299
B.

Small Non-OATS-Reporting Broker-Dealers

296

See supra note 266. 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 1,329 broker-dealers that
are categorized as Outsourcing broker-dealers. $108,333 / 1,329 Outsourcing
broker-dealers = $81.51 in ongoing costs to maintain the modified allocation
timestamp requirement per Outsourcing broker-dealer.

297

$124,399.13 = ($124,317.62 in ongoing outsourcing costs) + ($81.51 to maintain
the allocation timestamp)

298

$100,265,698.78 = ($124,317.62 in ongoing outsourcing costs) + ($81.51 to
maintain the allocation timestamp) x (806 broker-dealers).

299

See supra note 290.

300

See supra note 177.

broker-dealers have Participant memberships only with one Participant; 301 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. 302
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 $124,317.62 annually. 303
Additionally, based on the comment that provided estimates for a modified
allocation timestamp requirement, 304 the Commission estimates that the initial cost to a
small non-OATS-reporting broker-dealer would be $978.18. 305
Based on this information, the Commission estimates that each small non-OATSreporting broker-dealer would incur approximately $125,295.80 in initial external
costs. 306 Therefore, the Commission estimates that the average one-time initial external
cost per small non-OATS-reporting broker-dealer would be $125,295.80, for an
estimated aggregate initial external cost of $65,529,703.40. 307 When annualized over
three years, the average cost per broker-dealer would be approximately $41,765.27 per
year and the average cost for all such broker-dealers would be approximately
$21,843,236 per year.
The Commission estimates that it would cost, on average, approximately
$124,317.62 in ongoing external outsourcing costs 308 to ensure ongoing compliance with
301

See supra note 179.

302

Id.

303

See supra note 290.

304

See supra note 254.

305

See supra note 292. $1,300,000 / 1,329 Outsourcing broker-dealers = $978.18 in
initial costs to implement the modified allocation timestamp requirement per
Outsourcing broker-dealer.

306

$125,295.80 = ($124,317.62 in initial outsourcing costs) + ($978.18 to implement
the allocation timestamp).

307

$65,529,703.40 = ($124,317.62 in initial outsourcing costs) + ($978.18 to
implement the allocation timestamp) x (523 small non-OATS-reporting brokerdealers).

308

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

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 $81.51. 309 Therefore, the Commission estimates that the average
ongoing external cost per small non-OATS-reporting broker-dealer would be
approximately $124,399.13, 310 for an estimated aggregate ongoing external cost of
$65,060,744.99. 311
The Commission thus estimates that small non-OATS-reporting broker-dealers
would incur aggregate, average external costs of approximately $86,903,981to outsource
data collection and reporting and to ensure ongoing compliance with Rule 613
[($125,295.80 in initial external costs amortized over three years) + $124,399.13 in
annual, ongoing external costs) x (523 small non-OATS-reporting broker-dealers) =
$86,903,981.20 rounded down to $86,903,981].
This estimated cost has changed due to the decreased number of estimated small
non-OATS-reporting broker-dealers (from 823 to 523). This estimated cost has also
changed because the Commission believes that the cost of implementing and maintaining
the modified allocation timestamp would be a cost shared between all 1,329 Outsourcing
broker-dealers (specifically, small OATS reporting broker-dealers and small non-OATS
reporting broker-dealers). This estimated cost has also changed from the prior
information collections submission because of a computational error in the prior
submission. 312
C.

Completed Information Collections Requirements

As discussed above, 313 the Commission believes that three information collections
requirements have been satisfied, specifically (1) a document outlining how the
Participants could incorporate into the consolidated audit trail information regarding
certain products that are not NMS securities; 314 (2) a one-time assessment of the clock
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.
309

See supra note 296.

310

$124,399.13= ($124,317.62 in ongoing outsourcing costs) + ($81.51 to maintain
the allocation timestamp)

311

($124,317.62 in ongoing outsourcing costs) + ($81.51 to maintain the allocation
timestamp) x (523 small non-OATS reporting broker-dealers) = $65,060,744.99
in aggregate ongoing external costs to ensure ongoing compliance with Rule 613.

312

See supra note 290.

313

See supra Section I.A.

314

See 17 CFR 242.613(i). See also “One-Time Written Assessments,”
Consolidated Audit Trail, LLC at: https://www.catnmsplan.com/one-time-writtenassessments/index.html.

synchronization standards in the Plan before reporting begins for Industry Members,
which assessment shall take into account the diversity of CAT Reporters and systems; 315
and (3) a one-time report that discusses the Participants’ assessment of implementing
coordinated surveillance. 316 These one-time information collections have been
completed by the Participants, so the Commission believes that the annual dollar cost for
each of the information collections is $0.
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]

Small
Business
Entities
Affected

Central
Repository

Recordkeeping

$2,325,000

$55,800,000

Data Collection
and Reporting
(Participants)

Third Party
Disclosure

$389,473.68

$9,347,368

Surveillance

Recordkeeping

$300,000

$100,000

$1,105,263.16

$1,205,263.16

$28,926,316

Written
Assessment of
Operation of
CAT

Reporting

$1,000

$24,000

Independent
Audit of
Expenses
Incurred Prior
to the Effective
Date

Disclosure

$208.33

$69.44

$1,667

Assessment of
Industry
Member Bulk
Access to
Reporter Data

Reporting

$2,000

$666.67

$16,000

Assessment of
Errors in
Customer
Information
Fields

Reporting

$500

$166.67

$4,000

Report on
Impact of
Tiered Fees on
Market
Liquidity

Reporting

$200

$66.67

$1,600

Name of
Information
Collection

315

See CAT NMS Plan Order, supra note 6, at 84940.

316

Id. at 84940–84941.
75

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]

Small
Business
Entities
Affected

Financial
Statements

Disclosure

$2,708.30

$65,000

Background
Checks

Disclosure

$2,596.76

$865.59

$619.98

$1,485.57

$35,654

Data Collection
and Reporting
(Large, NonOATS
Reporting
Broker-Dealers
- ELPs)

Third Party
Disclosure

$709,500

$236,500

$110,466.68

$346,966.68

$4,857,534

Data Collection
and Reporting
(Large, NonOATS
Reporting
Broker-dealers
– Options
Market Makers)

Third Party
Disclosure

$1,270,790.32

$423,596.77

$493,692.48

$917,289.25

$28,435,967

Data Collection
and Reporting
(Large OATS
Reporting
Broker-Dealers)

Third Party
Disclosure

126

$1,150,000

$383,333.33

$529,166.67

$912,500

$114,975,000

Data Collection
and Reporting
(Small OATS
Reporting
Broker-Dealers)

Third Party
Disclosure

806

$125,295.80

$41,765.27

$124,399.13

$166,164.40

$133,928,506

Estimated
402 317

Data Collection
and Reporting
(Small NonOATS
Reporting
Broker-Dealers)

Third Party
Disclosure

523

$125,295.80

$41,765.27

$124,399.13

$166,164.40

$86,903,981

Estimated
523 318

Review of
Clock
Synchronization
Standards

Reporting

Coordinated
Surveillance
Report

Reporting

Document on
Expansion to
Other Securities

Reporting

Name of
Information
Collection

TOTAL COST FOR ALL RESPONDENTS

317

See supra note 188.

318

Id.
76

$ 463,322,593

14.

Costs to Federal Government
There will be no additional costs to the Federal Government.

15.

Changes in Burden

The aggregate time burden has decreased by 697,136 hours (from 8,269,746 hours
to 7,572,610 hours) and the aggregate cost burden has decreased by $71,142,974 (from
$534,465,567 to $463,322,593).
The changes in burden have occurred because, as discussed above, while the
number of Participants subject to the Plan has increased (from 21 Participants to 24
Participants), certain information collection requirements have been completed, the
number of overall broker-dealers subject to the CAT reporting requirements has
decreased (from 1,800 broker-dealers to 1,500 broker-dealers), and certain calculations
have been adjusted.
The Commission believes that certain information collection requirements have
been satisfied, as described above, including the initial burdens and costs associated with
the development of the consolidated audit trail and data collection and reporting for
Participants.
The Commission notes that the number of Participants has increased from 21
Participants to 24 Participants. The estimated burdens and costs for Participants have
also been impacted by a change in calculation relating to the Participants Study.
Specifically, some burden and cost calculations relating to Participants have been
adjusted to more accurately represent the information presented by Participants in the
CAT NMS Plan in the Participants Study. The Commission is relying on aggregate
estimates provided by Participants in the CAT NMS Plan, based on a survey of 19
Participants, but previously assumed that all of these aggregate estimates applied equally
to 21 Participants. The Commission is now adjusting certain aggregate estimates
provided by Participants to account for the fact that those numbers are based on 19
Participants, where appropriate. For collectively shared burdens and costs the
Commission did not adjust the Participants Study numbers in a similar fashion.
In addition, the Commission has reduced the estimated number of broker-dealers
subject to CAT reporting from 1,800 to 1,500, resulting in a reduction in the estimated
number of small non-OATS-reporting broker-dealers from 823 to 523. This has resulted
in a number of changed estimated burdens and costs, including a substantial decrease in
the overall burdens and costs estimated for small non-OATS-reporting broker-dealers in
the aggregate, as well as slight changes to the estimated costs for small non-OATSreporting broker-dealers because of the way the cost of implementing and maintaining the
modified timestamp is estimated to be shared between small OATS Reporting BrokerDealers and small non-OATS-reporting broker-dealers. In addition, the costs for data
collection and reporting for small OATS reporting broker-dealers and small non-OATS

reporting broker-dealers has changed due to the correction of a computational error. 319
Separately, the Commission has also corrected minor computational errors in calculating
the dollar costs associated with Data Collection and Reporting (Large Non-OATSBroker-Dealers – Options Market Makers) 320 and Data Collection and Reporting (Large
OATS Reporting Broker-Dealers). 321 The chart below identifies the Information
Collections whose burdens have changed and summarizes the amount of the changes and
the primary reason(s) for the changes.
Summary of Annual Burden Changes (rounded to the nearest hour or dollar):
Name of
Information
Collection
Central Repository

Change in
Hours

Change in Cost

(4,815) ($22,466,667)

Data Collection
and Reporting
(Participants)

(6,428) ($585,965)

Surveillance

80,971 $6,026,316

Written
Assessment of
Operation of CAT
Independent Audit
of Expenses
Incurred Prior to
the Effective Date
Assessment of
Industry Member
Bulk Access to
Reporter Data
Assessment of
Errors in Customer
Information Fields

Reason for Change
Elimination of one-time initial burdens and
costs.
Elimination of one-time initial burdens and
costs, increase in number of respondents
from 21 to 24, and change to calculation
based on Participants Study. See supra note
105, and accompanying text.
Increase in number of respondents
(Participants) from 21 to 24 and change to
calculation based on Participants Study. See
supra note 105, and accompanying text.
Increase in number of respondents
(Participants) from 21 to 24.

No change. $3,000

n/a No change.

No change.

15 $2000

Increase in number of respondents
(Participants) from 21 to 24.

24 $500

Increase in in number of respondents
(Participants) from 21 to 24.

319

See supra note 290.

320

See supra note 269.

321

See supra note 279.
78

Name of
Information
Collection
Report on Impact
of Tiered Fees on
Market Liquidity
Assessment of
Material Systems
Change on Error
Rate
Background
Checks
Data Collection
and Reporting
(Large, NonOATS Reporting
Broker-Dealers) 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 Non-OATS
Reporting BrokerDealers)
Review of Clock
Synchronization
Standards

Change in
Hours

Change in Cost

Reason for Change

No change. $200

Increase in number of respondents
(Participants) from 21 to 24.

No change. n/a

No change.
Increase in number of respondents
(Participants) from 21 to 24.

30 $4,306

No change. No change.

No change.

No change. ($930)

Correction of minor computational error in
costs. See supra note 269.

No change. ($4,200,001)

Correction of computational error. See
supra note 279.

No change. $983

Correction of minor computational error.
See supra note 290.

(765,000) ($49,848,316)

Reduction in number of estimated smallnon-OATS Reporting Broker-Dealers, from
823 to 523, and correction of minor
computational error. See supra note 290.
Elimination of one-time burdens because
information collections requirement has
been completed.

(133) ($1,400)

Name of
Information
Collection
Coordinated
Surveillance
Report
Document on
Expansion to
Other Securities
Total Change

16.

Change in
Hours

Change in Cost

Reason for Change

(600) ($7,000)

Elimination of one-time burdens because
information collections requirement has
been completed.

(1,200) ($70,000)

Elimination of one-time burdens because
information collections requirement has
been completed.

(697,136) ($71,142,974)

Information Collection Planned for Statistical Purposes
Not applicable. The information collection is not used for statistical purposes.

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.

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

File Type	application/pdf
File Title	Supporting Statement (July 6 2012)
Author	duffyl
File Modified	2020-04-01
File Created	2020-04-01