Notice2022-20950
Joint Industry Plan; Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail by BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc. and Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami International Securities Exchange LLC, MEMX, 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; and New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc.
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 28, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 187 (Wednesday, September 28, 2022)</title>
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[Federal Register Volume 87, Number 187 (Wednesday, September 28, 2022)]
[Notices]
[Pages 58876-58882]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-20950]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95874; File No. 4-698]
Joint Industry Plan; Notice of Filing of Amendment to the
National Market System Plan Governing the Consolidated Audit Trail by
BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange,
Inc. and Cboe Exchange, Inc., Financial Industry Regulatory Authority,
Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami
International Securities Exchange LLC, MEMX, 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; and New
York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE
Chicago, Inc., and NYSE National, Inc.
September 22, 2022.
I. Introduction
On September 8, 2022, the Operating Committee for Consolidated
Audit Trail, LLC (``CAT LLC''), on behalf of the following parties to
the National Market System Plan Governing the Consolidated Audit Trail
(the ``CAT NMS Plan'' or ``Plan''): \1\ 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, MEMX, 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; and New York Stock Exchange LLC, NYSE
American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National,
Inc. (collectively, the ``Participants,'' ``self-regulatory
organizations,'' or ``SROs'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') pursuant to Section 11A(a)(3) of
the Securities Exchange Act of 1934 (``Exchange Act''),\2\ and Rule 608
thereunder,\3\ a proposed amendment to the CAT NMS Plan that would
authorize CAT LLC to revise the Consolidated Audit Trail Reporter
Agreement (the ``Reporter Agreement'') and the Consolidated Audit Trail
Reporting Agent Agreement (the ``Reporting Agent Agreement'') as
contained in Appendix A, attached hereto by: (1) removing the
arbitration provision from each agreement and replacing it with a forum
selection provision (the ``Forum Selection Provision'') which would
require that any dispute regarding CAT reporting be filed in a United
States District Court for the Southern District of New York (the
``SDNY''), or, in the absence of federal subject matter jurisdiction, a
New York State Supreme Court within the First Judicial Department; and
(2) revising the existing choice of law clause to provide that any
dispute will be governed by federal law (in addition to New York
law).\4\ The Commission is publishing this notice to solicit comments
from interested persons on the amendment.\5\
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\1\ The CAT NMS Plan is a national market system plan approved
by the Commission pursuant to Section 11A of the Exchange Act and
the rules and regulations thereunder. See Securities Exchange Act
Release No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016)
(``Order Approving CAT NMS Plan'').
\2\ 15 U.S.C 78k-1(a)(3).
\3\ 17 CFR 242.608.
\4\ See Letter from Michael Simon, Chair, CAT NMS Plan Operating
Committee, to Vanessa Countryman, Secretary, Commission, dated
September 8, 2022.
\5\ 17 CFR 242.608.
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II. Description of the Plan
Set forth in this Section II is the statement of the purpose and
summary of the amendment, along with information required by Rule
608(a)(4) and (5) under the Exchange Act,\6\ substantially as prepared
and submitted by the Participants to the Commission.\7\
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\6\ See 17 CFR 242.608(a)(4) and (a)(5).
\7\ See supra note 4. Unless otherwise defined herein,
capitalized terms used herein are defined as set forth in the CAT
NMS Plan.
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A. Statement of Purpose of the Amendment to the CAT NMS Plan
The Proposed Amendment would ensure that a dispute arising out of
CAT reporting would be addressed by either the SDNY or the New York
State Supreme Court. Designating an Article III court and a
sophisticated state court as potential forums for dispute resolution is
plainly consistent with the Exchange Act.
Courts offer important substantive expertise and procedural
mechanisms that would facilitate the fair and efficient resolution of
claims in relation to CAT reporting. As an example, because a CAT
technical issue, system failure, or data breach may impact thousands of
potential parties, the ability of courts to consolidate and join claims
and certify class actions would minimize costs of litigation for all
potential parties (including Industry Members), which, in turn,
furthers the market efficiency and fair competition objectives of the
Exchange Act.
The importance of a court resolving claims regarding CAT reporting
is underscored by the regulatory nature of the CAT. The Participants
are implementing the requirements of Rule 613 and the CAT NMS Plan in
their regulatory capacities. While cyber litigation frequently presents
complex questions, the CAT's regulatory nature adds a further layer of
complexity to any potential dispute. Among other issues, a tribunal
would have to evaluate the relationships between the Commission, the
Participants, and Industry Members and determine the applicability of
any immunity claims. In connection with the Participants' limitation of
liability proposal, both the Commission and the Securities Industry and
Financial Markets Association (``SIFMA'') recognized that regulatory
immunity may be at issue in a dispute regarding CAT reporting.
Utilizing courts to resolve such disputes will ensure that bedrock
principles of the self-regulatory framework are adjudicated based on
decades of binding precedent (often developed through the Commission's
feedback via amicus briefs) and afford the parties critical appellate
rights.
Notwithstanding the benefits of litigation, an arbitration
provision was
[[Page 58877]]
included in the original Reporter Agreement because the agreement
initially disclaimed all direct and indirect damages and capped the
Participants' liability to $500 per Industry Member or Participant that
entered into the Reporter Agreement (``CAT Reporter''). But considering
the complex legal and factual issues likely implicated by a dispute
concerning CAT reporting, in the absence of a robust limitation on
liability, all parties should be able to rely on the protections
available in litigation.
The Participants' proposed federal forum and alternative state
forum are well equipped to handle any dispute relating to CAT
reporting. The United States Court of Appeals for the Second Circuit,
and the SDNY, have significant experience resolving securities matters
and cyber claims. Likewise, the New York State Supreme Court in the
First Judicial Department, and in particular its Commercial Division in
New York County (Manhattan), is comprised of experienced judges who
regularly preside over complex disputes. Both forums routinely
adjudicate matters involving the Participants, Industry Members, and
the Commission, and given the locations of potential parties to a CAT
Data breach, New York would constitute a convenient forum for dispute
resolution.
(1) Background
On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS
to enhance regulatory oversight of the U.S. securities markets. The
rule directed the Participants to create a ``Consolidated Audit Trail''
(also referred to herein as the ``CAT'') that would strengthen the
ability of regulators--including the Commission and the self-regulatory
organizations--to surveil the securities markets.\8\ Following the
adoption of Rule 613, the Participants prepared and proposed the CAT
NMS Plan and then implemented--and continue to implement--the Plan's
extensive requirements.
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\8\ See 17 CFR 242.613 (2012).
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In preparation for CAT reporting, the Operating Committee of CAT
LLC approved a Reporter Agreement and Reporting Agent Agreement by
unanimous written consent on August 29, 2019. Those agreements
contained industry standard limitation of liability provisions that
disclaimed all damages and capped the liability of CAT LLC, the
Participants, and FINRA CAT to any CAT Reporter at $500 per calendar
year. The agreements also contained a mandatory arbitration provision
with respect to any disputes in connection with CAT reporting and
authorized an arbitrator to grant remedies that ``the arbitrator deems
just and equitable within the scope of [the] Agreement.'' \9\
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\9\ See Consol. Audit Trail Rep. Agreement (``Reporter
Agreement'') and Consol. Audit Trail Reporting Agent Agreement
(``Reporting Agent Agreement''), Sec. 7.9, available at <a href="https://www.catnmsplan.com/sites/default/files/2020-02/Consolidated-Audit-Trail-Reporter-Agreement%2808-29-19%20FINAL%29.pdf">https://www.catnmsplan.com/sites/default/files/2020-02/Consolidated-Audit-Trail-Reporter-Agreement%2808-29-19%20FINAL%29.pdf</a> and <a href="https://www.catnmsplan.com/sites/default/files/2020-05/Consolidated-Audit-Trail-Reporting-Agent-Agreement-amended_0.pdf">https://www.catnmsplan.com/sites/default/files/2020-05/Consolidated-Audit-Trail-Reporting-Agent-Agreement-amended_0.pdf</a>.
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On April 22, 2020, SIFMA challenged the Reporter Agreement's
limitation of liability and indemnification provisions by filing an
application for review of actions taken by CAT LLC and the Participants
pursuant to Sections 19(d) and 19(f) of the Exchange Act (the
``Administrative Proceeding''). On May 13, 2020, SIFMA and the
Participants reached a settlement of the Administrative Proceeding that
permitted Industry Members to report data to the CAT pursuant to a
revised Reporter Agreement that did not contain a limitation of
liability provision, while the Participants prepared a filing with the
Commission to resolve the parties' underlying disagreement regarding
the proper allocation of liability.\10\
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\10\ As part of the settlement of the Administrative Proceeding,
SIFMA agreed to abandon its challenge to the industry standard
indemnification provisions that were included in the original
Reporter Agreement and Reporting Agent Agreement. See SIFMA
Statement on Settlement on CAT Reporter Agreement, available at
<a href="https://www.sifma.org/resources/news/sifma-statement-on-settlement-on-cat-reporter-agreement/">https://www.sifma.org/resources/news/sifma-statement-on-settlement-on-cat-reporter-agreement/</a>. All CAT Reporters and CAT Reporting
Agents eventually signed an agreement that contained those
indemnification provisions.
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On December 18, 2020, the Participants proposed to amend the CAT
NMS Plan to authorize CAT LLC to revise the Reporter Agreement and the
Reporting Agent Agreement to insert limitation of liability provisions
(the ``Limitation of Liability Proposal'').\11\ SIFMA and various
Industry Members submitted comment letters in response to the
Limitation of Liability Proposal and in response to the Commission's
April 6, 2021 Order Instituting Proceedings.\12\ Multiple comment
letters--including from SIFMA--discussed the applicability of
regulatory immunity to a CAT Data breach, and demonstrated an
assumption and understanding that assessments of immunity claims would
be conducted by courts.\13\
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\11\ See Letter from Michael Simon, CAT NMS Plan Operating Comm.
Chair to Vanessa Countryman, Sec'y, SEC (Dec. 18, 2020), available
at <a href="https://catnmsplan.com/sites/default/files/2020-12/12.18.2020-Proposed-Amendment-to-the-CAT-NMS-Plan.pdf">https://catnmsplan.com/sites/default/files/2020-12/12.18.2020-Proposed-Amendment-to-the-CAT-NMS-Plan.pdf</a>.
\12\ See SEC, Joint Indus. Plan; Order Instituting Proceedings
to Determine Whether to Approve or Disapprove an Amend. to the Nat'l
Mkt. Sys. Plan Governing the Consol. Audit Trail, Release No. 34-
391487; File No. 4-698 (Apr. 6, 2021), available at <a href="https://www.sec.gov/rules/sro/nms/2021/34-91487.pdf">https://www.sec.gov/rules/sro/nms/2021/34-91487.pdf</a>, 86 FR 19054 (Apr. 12,
2021), available at <a href="https://www.govinfo.gov/content/pkg/FR-2021-04-12/pdf/2021-07390.pdf">https://www.govinfo.gov/content/pkg/FR-2021-04-12/pdf/2021-07390.pdf</a>; 17 CFR 242.608(b)(2)(i).
\13\ See e.g., Letter from Ellen Greene, SIFMA to Vanessa
Countryman, Sec'y, SEC, at 7 (May 3, 2021) (the ``SIFMA Letter''),
available at <a href="https://www.sec.gov/comments/4-698/4698-8751243-237404.pdf">https://www.sec.gov/comments/4-698/4698-8751243-237404.pdf</a> (discussing an indication that ``courts are likely to
view any regulatory activity the SROs conduct through CAT LLC as
being subject to this judicial immunity''); Letter from Stephen John
Berger, Citadel Sec. to Vanessa Countryman, Sec'y, SEC, at 5 (Feb.
23, 2021) (the ``Citadel Letter''), available at <a href="https://www.sec.gov/comments/4-698/4698-8411798-229501.pdf">https://www.sec.gov/comments/4-698/4698-8411798-229501.pdf</a>) (``[C]ourts must
be `careful not to extend the scope of the protection further than
its purposes require.''') (citations omitted); Letter from Kelvin
To, Data Boiler Techs., LLC to Vanessa Countryman, Sec'y, SEC, at 4
(May 3, 2021) (the ``Data Boiler Letter''), available at <a href="https://www.sec.gov/comments/4-698/4698-8749987-237362.pdf">https://www.sec.gov/comments/4-698/4698-8749987-237362.pdf</a> (``How courts
apply a `functional test' to determine whether an SRO is entitled to
immunity from burdens of litigation or civil damages suits may be a
controversy here.'').
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On October 29, 2021, the Commission issued an order disapproving
the Limitation of Liability Proposal (the ``Disapproval Order'').\14\
The Commission noted that the Participants may have limited liability
through ``court-established'' regulatory immunity, and that the impact
of the Limitation of Liability Proposal depended on assumptions about
the applicability of regulatory immunity to a CAT Data breach.\15\
Throughout the Disapproval Order, the Commission indicated that the
applicability of regulatory immunity is appropriately decided by
courts.\16\
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\14\ SEC, Joint Industry Plan; Order Disapproving an Amend. to
the Nat'l Mkt. Sys. Plan Governing the Consol. Audit Trail, Release
No. 34-93484; File No. 4-698 (Oct. 29, 2021), available at <a href="https://www.sec.gov/rules/sro/nms/2021/34-93484.pdf">https://www.sec.gov/rules/sro/nms/2021/34-93484.pdf</a>, 86 FR 60933 (Nov. 4,
2021), available at <a href="https://www.govinfo.gov/content/pkg/FR-2021-11-04/pdf/2021-24015.pdf">https://www.govinfo.gov/content/pkg/FR-2021-11-04/pdf/2021-24015.pdf</a>.
\15\ See Disapproval Order at 29 (``Even in the absence of the
proposed Limitation of Liability Provisions, the Participants may
have limited liability to Industry Members through court-established
regulatory immunity.'') (citation omitted); see also id. at 42
(``The Commission believes that uncertainty regarding liability in
case of a CAT Data breach thus serves as an incentive for the
Participants to invest in data security to the extent that
Participants believe a court might not uphold their regulatory
immunity or it would be judged not to apply in a given case that was
before the courts.''); id. at 35 (``Participants can assert
regulatory immunity to the extent that the doctrine applies if there
is a security breach that exposes CAT Data and Industry Members seek
damages from the responsible Participants.'').
\16\ See, e.g., supra n.17.
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On May 20, 2022, the Participants filed with the Commission a
proposed amendment (the ``May 2022 Proposed Amendment'') to the CAT NMS
Plan to revise the Reporter Agreement and the Reporting Agent Agreement
by removing the arbitration provision from each agreement and replacing
it with a
[[Page 58878]]
forum selection provision.\17\ The May 2022 Proposed Amendment also
revised the existing choice of law clause to provide that any dispute
will be governed by federal law (in addition to New York law). SIFMA
did not oppose the May 2022 Proposed Amendment's forum selection and
choice of law provisions, both of which are substantively identical to
the Participants' current proposal.\18\
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\17\ Securities Exchange Act Rel. No. 34-95031 (June 3, 2022),
87 FR 35153 (June 9, 2022), available at <a href="https://www.govinfo.gov/content/pkg/FR-2022-06-09/pdf/2022-12398.pdf">https://www.govinfo.gov/content/pkg/FR-2022-06-09/pdf/2022-12398.pdf</a>. The May 2022 Proposed
Amendment also proposed to add to the Reporter Agreement and the
Reporting Agent Agreement a jury waiver provision and a disclaimer
of warranties provision. The Commission notes that the Participants
withdrew the May 22. 2022 Proposed Amendment on September 6, 2022.
See Letter from Michael Simon, CAT NMS Plan Operating Committee
Chair to Vanessa Countryman, Secretary, Securities and Exchange
Commission (Sept. 6, 2022).
\18\ Letter from Ellen Greene, SIFMA to Vanessa Countryman,
Sec'y, SEC (June 30, 2022) at 2, available at <a href="https://www.sec.gov/comments/4-698/4698-20133896-303830.pdf">https://www.sec.gov/comments/4-698/4698-20133896-303830.pdf</a>.
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(2) The Forum Selection Provision
The Forum Selection Provision is contained in Appendix A to this
Proposed Amendment. In sum, the Forum Selection Provision provides that
any dispute concerning CAT reporting must be filed in the SDNY if there
is any basis for federal subject matter jurisdiction.\19\ The clause
also provides that if federal courts lack jurisdiction over a dispute,
plaintiffs must file suit in the New York State Supreme Court in New
York County (Manhattan) within the First Judicial Department. The
Proposed Amendment would require that the parties to any action filed
in the New York State Supreme Court seek assignment to the court's
Commercial Division if permitted by the Uniform Civil Rules for the
Supreme and County Courts.\20\
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\19\ Section 11.5 of the CAT NMS Plan authorizes Industry
Members to ``seek redress from the SEC pursuant to SEC Rule 608 or
in any other appropriate forum'' with respect to any dispute
regarding CAT fees. The Forum Selection Provision would not impact
the ability of Industry Members to petition the Commission directly
with respect to such disputes. CAT NMS Plan, supra n.1, Sec. 11.5.
\20\ The Commercial Division has two jurisdictional
requirements: (1) a monetary threshold, which is $500,000 in
Manhattan, and, provided that the monetary threshold is met (or
equitable or declaratory relief is sought), (2) the principal claim
must fall within an enumerated list of types of claims, which
include, among others, claims for breach of contract. 22 N.Y.C.R.R.
Sec. Sec. 202.70(a), 202.70(b)(1)-(12). In addition, any party
seeking assignment of a case to the Commercial Division must file a
Commercial Division Request for Judicial Intervention Addendum
certifying that the case meets those two jurisdictional
requirements. 22 N.Y.C.R.R. Sec. 202.70(d)(1).
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The Forum Selection Provision also provides that the parties to any
litigation agree to accept service of a complaint by U.S. registered
mail and waive any objections based on venue. The Proposed Amendment
would apply to any litigation commenced by any signatory to the CAT
Reporter Agreement (or Reporting Agent Agreement).
(3) The Nature of Potential Claims
The Participants believe that a court is the proper forum to
resolve claims regarding CAT reporting, including claims in relation to
potential technical issues, system failures, and data breaches.
Although the specific claims asserted likely will depend on the nature
of the incident, in the aftermath of high-profile data breaches (i.e.,
one category of potential claims), plaintiffs have brought common law
claims of breach of contract and negligence as well as claims based on
various federal statutes including the Stored Communications Act, the
Federal Wiretap Act, and the Computer Fraud and Abuse Act.\21\ In those
matters, plaintiffs sought substantial monetary relief including
compensatory, punitive, and statutory damages.
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\21\ See, e.g., In re Google Assistant Privacy Litig., No. 19-
cv-04286-BLF, 2021 WL 2711747, at *2 (N.D. Cal. July 1, 2021); Cal-
Cleve, Ltd. v. Wrag-Time Air Freight, Inc., No. 04-cv-10543 SJO
(JTLx), 2005 WL 8157876, at *1 (C.D. Cal. June 1, 2005).
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In any dispute regarding CAT reporting, CAT LLC will likely have
defenses based on the CAT's robust--and SEC-approved--cybersecurity,
and the Participants' regulatory role in implementing the CAT NMS
Plan.\22\ Assessing these defenses will likely require a tribunal to
resolve complex issues that implicate the Participants' status as self-
regulatory organizations and the SEC's oversight of the CAT.
Additionally, such disputes are likely to present complex legal and
factual issues inherent in cyber litigation generally. As discussed
infra at Section A(4), the Participants believe that a court is well-
equipped to address and mitigate any challenges of adjudicating claims
resulting from CAT reporting.
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\22\ FINRA CAT has implemented robust controls to protect the
security and confidentiality of CAT Data and the Commission has
repeatedly concluded that the CAT NMS Plan incorporates ``robust
security requirements'' that ``provide appropriate, adequate
protection for the CAT Data.'' See Order Approving CAT NMS Plan,
supra n.1, at 715; see also SEC, Proposed Amends. to the Nat'l Mkt.
Sys. Plan Governing the Consol. Audit Trail to Enhance Data Sec.,
Release No. 34-89632; File No. S7-10-20, at 10 (Aug. 21, 2020) (the
``Data Security Proposal''), available at <a href="https://www.sec.gov/rules/proposed/2020/34-89632.pdf">https://www.sec.gov/rules/proposed/2020/34-89632.pdf</a>, 85 FR 65990 at 65991 (Oct. 16, 2020),
available at <a href="https://www.govinfo.gov/content/pkg/FR-2020-10-16/pdf/2020-18801.pdf">https://www.govinfo.gov/content/pkg/FR-2020-10-16/pdf/2020-18801.pdf</a> (``CAT Data reported to and retained in the Central
Repository is thus subject to what the Commission believes are
stringent security policies, procedures, standards, and
controls.'').
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(4) The Forum Selection Provision Would Promote the Fair, Expeditious,
and
Efficient Resolution of Any Claims Regarding CAT Reporting
The Proposed Amendment would lead to the fair and efficient
resolution of potential disputes, ensure that issues implicating
foundational principles of the self-regulatory framework are decided
based on longstanding precedent, and provide the parties with important
appellate rights. Litigating claims in an Article III court, or
sophisticated state court, is plainly consistent with the Exchange
Act.\23\
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\23\ The Participants recognize that certain individuals who
serve as arbitrators may have experience with cybersecurity and
securities matters. However, even if the parties to a CAT Data
breach were able to ensure that such arbitrators presided over a
potential dispute, litigation remains more suitable to resolve
claims regarding CAT reporting for the reasons discussed in this
submission, including (among other reasons) courts' mechanisms to
consolidate claims, the presence of meaningful appellate rights, the
role of legal precedent, the nature of the parties to a potential
dispute, and the relevance of regulatory immunity to resolving
claims.
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a. Consolidation, Joinder of Claims, and Class Actions
Because certain potential claims arising out of CAT reporting--
including technical issues, system failures, and data breaches--are
likely to impact multiple parties, one important consideration is the
extent to which a particular dispute resolution mechanism allows for
consolidation of claims. Indeed, consolidating such claims would reduce
costs of dispute resolution, enable CAT LLC to focus on its regulatory
mandate, and decrease the risk of disparate outcomes in similar cases,
all of which promote the efficiency and fair competition objectives of
the Exchange Act.
In court, litigants can rely on the applicability of the rules of
consolidation and joinder to increase the likelihood that all cases
arising out of one incident are heard together. Both federal and New
York State rules of civil procedure provide mechanisms to consolidate
cases and join parties to actions.\24\ Relatedly, both federal and New
York State rules of civil procedure permit the use of class actions for
certain disputes and both forums have substantial experience resolving
such disputes.\25\ Selection of these forums, in light of both their
experience and
[[Page 58879]]
procedural rules, would promote consistency of outcomes and the
efficient resolution of claims.
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\24\ See Fed. R. Civ. P. 19, 20, 42(a)(2); N.Y. C.P.L.R.
Sec. Sec. 602, 1001, 1002.
\25\ See Fed. R. Civ. P. 23; 28 U.S.C. 1332(d)(2); N.Y. C.P.L.R.
Sec. 901(a); see supra Sec. A(5).
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By contrast, under the AAA Commercial Arbitration Rules (the ``AAA
Rules''), which govern arbitration under the current Reporter Agreement
and Reporting Agent Agreement, consolidation is a ``suggest[ion] . . .
that the parties and the arbitrator should address at the preliminary
hearing,'' and the ultimate decision regarding whether consolidation is
appropriate is ``subject to the discretion of the arbitrator.'' \26\
The AAA Rules are also silent on joinder. While parties to an
arbitration agreement may agree that signatories will be required to
join claims,\27\ parties frequently face complications in joining non-
signatories to an arbitration. This is particularly significant in the
context of a potential claim arising out of CAT reporting because
certain types of incidents may impact both Industry Members and other
market participants (e.g., retail investors).
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\26\ See AAA Rules P-2(a)(vi)(c).
\27\ See, e.g., 9 U.S.C. 2 (``A written provision in . . . a
contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract or
transaction, or the refusal to perform the whole or any part
thereof, or an agreement in writing to submit to arbitration an
existing controversy arising out of such a contract, transaction, or
refusal, shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any
contract.''); see also AAA Rules R-1(a) (providing that the AAA
Rules are deemed a part of parties' agreement to arbitrate where the
parties provide for AAA commercial arbitration).
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For those reasons, if the arbitration provision remains in the
Reporter Agreement and Reporting Agent Agreement, actions involving the
same common questions of law or fact or arising out of the same
``transaction or occurrence'' may be brought piecemeal, with
signatories to the agreements arbitrating their claims or defenses and
non-signatories litigating those claims or defenses in court. This can
lead to illogical or unworkable outcomes; \28\ indeed, cases arising
out of the same facts or involving the same legal issues or even the
same parties may result in entirely different outcomes, creating
inconsistent rules, rendering inconsistent damages awards, or both.
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\28\ See Rick Fleming, Investor Advocate, SEC, Mandatory
Arbitration: An Illusory Remedy for Public Company Shareholders
(Feb. 24, 2018), <a href="https://www.sec.gov/news/speech/fleming-sec-speaks-mandatory-arbitration">https://www.sec.gov/news/speech/fleming-sec-speaks-mandatory-arbitration</a> (``[I]t seems terribly inefficient to require
multiple plaintiffs to prove up the same claims in separate
proceedings.'').
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b. Reliance on Precedent and the Expertise of Courts
A dispute regarding CAT reporting is likely to present complex
legal and factual issues inherent in cyber litigation generally as well
as in relation to the Participants' regulatory roles in overseeing the
CAT. Allowing the parties to litigate in court would ensure that the
forum charged with resolving disputes is bound by the substantial body
of precedent that has been developed to address these issues.
Relatedly, the doctrine of regulatory immunity may play an
important role in any dispute concerning CAT reporting. In connection
with the Limitation of Liability Proposal, multiple comment letters
discussed the applicability of regulatory immunity to a CAT Data breach
and demonstrated an assumption and understanding that such a
determination was the province of courts.\29\ The Commission, likewise,
recognized the importance of regulatory immunity claims and its
Disapproval Order also indicated an expectation that such claims would
be decided by courts.\30\ Indeed, courts have developed a robust body
of case law on the immunity doctrine, which provides parameters to
courts as they analyze the applicability of regulatory immunity to the
specific facts presented by a given case.
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\29\ See, e.g., supra n.15.
\30\ Disapproval Order, supra n.16, 17.
---------------------------------------------------------------------------
The ability to rely on binding precedent is even more critical in
the event of a claim arising out of CAT reporting. As discussed supra
at Section 3, certain incidents may lead to claims in which impacted
parties seek substantial damages from CAT LLC. In light of the
potential amount in controversy, coupled with the likely legal and
factual issues presented by a dispute--including the applicability of
immunity claims--all parties should be able to rely on the certainty of
knowing that their conduct will be evaluated by developed legal
standards. In addition to affording all parties the opportunity to rely
on precedent, litigating disputes in court will also promote the
development of precedent to guide the conduct of the Participants and
Industry Members.
c. Appellate Review
Adjudicating claims in relation to CAT reporting in court provides
all parties with critical appellate rights. While important for any
high stakes dispute, appellate rights are particularly important in the
event of a CAT system failure, technical issue, or data breach,
considering the complicated legal and factual issues, the nature of the
parties, and the potentially large amount in controversy. Regulatory
immunity claims, for example, are often the subject of appellate
review.\31\
---------------------------------------------------------------------------
\31\ See, e.g., D'Alessio v. N.Y. Stock Exchange, Inc., 258 F.3d
93 (2d Cir. 2001); In re NYSE Specialists Sec. Litig., 503 F.3d 89
(2d Cir. 2007).
---------------------------------------------------------------------------
Direct appellate review is largely absent in arbitration.\32\
Moreover, even if the parties to the Reporter Agreement or Reporting
Agent Agreement were able to avail themselves of appellate rights, an
appellate arbitration tribunal would be similarly unbound by precedent
as the lower arbitration forum that rendered a potentially erroneous
award.\33\ With respect to judicial review of an arbitration award, the
Federal Arbitration Act (the ``FAA'') provides limited grounds for
federal courts to vacate, modify, or correct final arbitration
decisions.\34\ In the absence of unusual circumstances, however,
meaningful appellate review is generally unavailable: none of the
grounds provided by the FAA would authorize a court to vacate an
arbitration award that was premised on an error of law.\35\
---------------------------------------------------------------------------
\32\ AAA Rules only authorize appellate review of arbitration
awards if the parties consent to appellate rights. See AAA Rules A-
1.
\33\ As the Supreme Court has explained, ``[t]he arbitrator's
construction holds, however good, bad, or ugly.'' Oxford Health
Plans LLC v. Sutter, 569 U.S. 564, 573 (2013).
\34\ See 9 U.S.C. 9 (providing that if the parties have
contractually agreed that a specific federal court will enter
judgment upon an arbitration award, then at any time within one year
after the award is made, any party may apply to that court for an
order confirming the award; if no court is specified, then the
application may be made to the U.S. district court for the district
within which the award was made); 9 U.S.C. 10 (providing that the
U.S. district court where the arbitration award was made may vacate
the award upon an application of any party to the arbitration, where
the award was ``procured by corruption, fraud, or undue means,''
where there ``was evident partiality or corruption in the
arbitrators,'' where the arbitrators ``were guilty of misconduct,''
or where the arbitrators ``exceeded their powers'' or ``so
imperfectly executed them that a mutual, final, and definite award''
was not made); 9 U.S.C. 11 (providing the following grounds for
which a U.S. district court may upon the application of any party to
an arbitration modify or correct an arbitration award: ``an evident
material miscalculation'' or mistake in the award; an award upon a
matter ``not submitted'' to the arbitrators; or ``where the award is
imperfect in matter of form not affecting the merits of the
controversy'').
\35\ See 9 U.S.C. 11.
---------------------------------------------------------------------------
d. Rules Governing Discovery and Evidence
Considering the magnitude of data transmitted to the CAT, a dispute
is likely to involve a substantial volume of documents and information.
Additionally, many documents that might be the subject of discovery
requests are likely to be either commercially sensitive for Industry
Members or involve nonpublic, sensitive information regarding the CAT's
security.
[[Page 58880]]
Parties to litigation are afforded the benefits of rules governing
the discovery process and admissibility of evidence. These rules
promote predictability of litigation, efficiency of resolutions, and
fairness of results,\36\ and provide mechanisms for facilitating
discovery as well as the admission of evidence.\37\ For example,
litigants in court must comply with clear discovery rules, which govern
the scope of discovery and the timing and content of disclosures, and
facilitate communication among the parties and the court regarding
these matters.\38\ Litigants in court also have the benefit of a
uniform set of rules governing the admissibility of evidence.\39\ These
protections do not exist under the AAA Rules,\40\ which provide a more
limited set of procedures pertaining to discovery and evidence.\41\
Given the breadth and depth of the discovery and evidence rules in
federal and state court, and the fact that courts are bound by
precedent and subject to appellate review, see supra Sec. A(4)(b)-(c),
courts are better suited to handle disputes regarding CAT reporting.
---------------------------------------------------------------------------
\36\ See, e.g., Fed. R. Civ. P. 1 (noting that the purpose of
the rules is to ``secure the just, speedy, and inexpensive
determination of every action and proceeding'').
\37\ See generally Fed. R. Civ. P. 26-28, 30-31, 33-34, 36; Fed.
R. Evid. 101-02; N.Y. C.P.L.R. Sec. Sec. 3101-02, 3122; 22
N.Y.C.R.R. Sec. Sec. 202.11-12; Guide to N.Y. Evid. rule 1.03.
Courts also have subpoena power over witnesses. See Fed. R. Civ. P.
30(a)(1), 45(a)(1)(B), 45(c)(1); N.Y. C.P.L.R. Sec. Sec. 2301,
3106(b); 22 N.Y.C.R.R. Sec. 202.20-d; see also 28 U.S.C. 1783;
Convention on the Taking of Evidence Abroad in Civil or Commercial
Matters (the Hague Convention); Uniform Interstate Depositions and
Discovery Act (the ``UIDDA'') (providing mechanism for New York
State courts to serve out-of-state subpoenas; in the absence of the
UIDDA, the provisions for service applicable in the out-of-state
jurisdiction apply).
\38\ See, e.g., Fed. R. Civ. P. 26; N.Y. C.P.L.R. Sec. 3101; 22
N.Y.C.R.R. Sec. Sec. 202.11-12.
\39\ See Fed. R. Evid. 101, 102. New York State does not have a
statutory code of evidence; instead, its rules of evidence reside in
judicial precedent, the State constitution, and State statutes. The
New York Unified Court System has compiled a guide setting forth
current practice in New York State courts regarding the application
of the rules of evidence. See generally Guide to N.Y. Evid. Rule
1.03, Note. New York evidence law is generally in accord with the
Federal Rules of Evidence, including rules on relevance, prejudice,
privilege, and hearsay. See, e.g., id. rules 4.01, 4.07, 5.01-09,
and 8.00-01.
\40\ AAA Rules P-1(b) (instructing parties to carefully ``avoid
importing procedures from court systems'').
\41\ See, e.g., id. (disclaiming procedures from court systems),
R-22 (providing for pre-hearing exchange and production of
information), L-3(f) (noting that depositions are available only in
``exceptional'' circumstances), R-34 (governing the admissibility of
evidence and noting conformity to the legal rules of evidence is not
necessary); see also 9 U.S.C. 7 (allowing arbitrator to subpoena
witnesses to testify, but only in hearings, as opposed to
depositions); CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 706,
708 (9th Cir. 2017) (holding that ``section 7 of the FAA does not
grant arbitrators the power to order third parties to produce
documents prior to an arbitration hearing''); Life Receivables Tr.
v. Syndicate 102 at Lloyd's of London, 549 F.3d 210, 217 (2d Cir.
2008); Hay Grp., Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407
(3d Cir. 2004) (Alito, J.).
---------------------------------------------------------------------------
(5) Designating the SDNY and New York State Courts in a Forum Selection
Provision is Consistent With the Exchange Act
The Proposed Amendment's Forum Selection Provision designates the
SDNY, or, in the absence of federal subject matter jurisdiction, a New
York State Supreme Court in New York County within the First Judicial
Department as the venue for any dispute concerning CAT reporting. Both
forums would provide the parties with a sophisticated tribunal that has
experience adjudicating matters involving the federal securities laws,
market structure, and cybersecurity.
As an initial mater, based on the potential parties to any lawsuit
arising out of CAT reporting, New York is likely to be a convenient
venue. As the reputed financial capital of the world, New York is home
to the two largest securities exchanges and several other Participants.
Additionally, many of the most prominent Industry Members by trading
volume are located in New York.\42\
---------------------------------------------------------------------------
\42\ Those Industry Members include, for example, Citigroup
Global Markets, Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co.
LLC, J.P. Morgan Securities, LLC, Deutsche Bank Securities, Inc.,
UBS Securities LLC, and Credit Suisse Securities USA, LLC.
---------------------------------------------------------------------------
The existing Reporter Agreement and Reporting Agent Agreement both
provide that any claim must be commenced in New York (i.e., in the
current arbitration provision) and that the Reporter Agreement and
Reporting Agent Agreement are governed by New York law.\43\ Relatedly,
all dates and times referenced in the agreements are set to New York
time.\44\
---------------------------------------------------------------------------
\43\ Reporter Agreement Sec. 7.11; Reporting Agent Agreement
Sec. 7.11.
\44\ Reporter Agreement Sec. 7.8; Reporting Agent Agreement
Sec. 7.8.
---------------------------------------------------------------------------
In addition to being a convenient venue for potential parties, the
Participants' proposed forum--and backup forum--have the requisite
subject matter expertise to resolve claims in relation to CAT reporting
fairly and efficiently. The Second Circuit has extensive experience
with securities and financial regulation matters.\45\ Moreover,
applying the precedent set by the Second Circuit, the SDNY routinely
handles complicated securities matters with broad implications for the
national financial markets.
---------------------------------------------------------------------------
\45\ The Supreme Court has referred to the Second Circuit as the
``Mother Court'' regarding securities matters. See, e.g., Morrison
v. Nat'l Austl. Bank, 561 U.S. 247, 275-76 (2010) (Stevens, J.,
concurring in judgment) (quoting Blue Chip Stamps v. Manor Drug
Stores, 421 U.S. 723, 737 (1975)).
---------------------------------------------------------------------------
The Second Circuit--and the SDNY in particular--also has
significant experience determining the rights and remedies of parties
following data breaches, including in relation to critical issues such
as standing and damages,\46\ and balancing the competing interests
involved in adjudicating sensitive and costly cybersecurity
incidents.\47\ In light of its extensive experience with securities,
financial regulation, market structure, and cyber matters, it is beyond
reasonable dispute that the Second Circuit and the SDNY have the
appropriate expertise to resolve a dispute regarding CAT reporting.
---------------------------------------------------------------------------
\46\ See, e.g., McMorris v. Carlos Lopez & Assocs., LLC, 995
F.3d 295, 300-03 (2d Cir. 2021) (standing); In re GE/CBPS Data
Breach Litig., No. 20-cv-2903 (KPF), 2021 WL 3406374, at *5-7
(S.D.N.Y. Aug. 4, 2021) (standing); Sackin v. TransPerfect Glob.,
Inc., 278 F. Supp. 3d 739, 745 (S.D.N.Y. 2017) (damages); Hammond v.
Bank of New York Mellon Corp., No. 08-cv-6060 (RMB) (RLE), 2010 WL
2643307, at *4 (S.D.N.Y. June 25, 2010) (damages); see also Smahaj
v. Retrieval-Masters Creditors Bureau, Inc., 69 Misc.3d 597, 599-
600, 604 (Sup. Ct. Westchester Cnty. 2020) (damages).
\47\ See, e.g., McMorris, 995 F.3d at 302 (weighing relative
sensitivity of certain types of data); Wallace v. Health Quest Sys.,
Inc., No. 20-cv-545 (VB), 2021 WL 1109727, at *1 n.1 (S.D.N.Y. Mar.
23, 2021) (addressing claims for negligence, breach of implied
contract, breach of contract, unjust enrichment, breach of
confidence, bailment, and violations of New York's General Business
Law); see also Pena v. British Airways, PLC (UK), No. 18-cv-6278
(LDH) (RML), 2020 WL 38989055, at *2 n.2, *3-4, *6 (E.D.N.Y. Mar.
30, 2020) (granting motion to dismiss for lack of standing,
preemption, and failure to state a claim); see also Keach v. BST &
Co. CPAs, LLP, 71 Misc.3d 1204(A), at *7 (Sup. Ct. Albany Cnty.
2021) (citations omitted).
---------------------------------------------------------------------------
As the Commission noted in its Disapproval Order, in the absence of
a limitation on liability, the Participants can assert regulatory
immunity in response to a claim for damages. The Second Circuit has
authored several seminal opinions regarding the scope of regulatory
immunity,\48\ and courts in other jurisdictions often cite to and rely
on the Second Circuit's analyses to
[[Page 58881]]
apply the regulatory immunity doctrine to cases pending before
them.\49\
---------------------------------------------------------------------------
\48\ See Standard Inv. Chartered, Inc. v. Nat'l Ass'n of Sec.
Dealers, Inc., 637 F.3d 112, 116 (2d Cir. 2011) (noting Second
Circuit decisions on regulatory immunity in the context of ``(1)
disciplinary proceedings against exchange members, [Barbara v. NYSE,
99 F.3d 49, 59 (2d Cir. 1996)]; (2) the enforcement of security
rules and regulations and general regulatory oversight over exchange
members, [D'Alessio, 258 F.3d at 106]; (3) the interpretation of the
securities laws and regulations as applied to the exchange or its
members, id.; (4) the referral of exchange members to the SEC and
other government agencies for civil enforcement or criminal
prosecution under the securities laws, id.; and (5) the public
announcement of regulatory decisions, [DL Cap. Grp., LLC v. Nasdaq
Stock Mkt., Inc., 409 F.3d 93, 98 (2d Cir. 2005)].'').
\49\ See, e.g., In re Series 7 Broker Qualification Exam Scoring
Litig., 548 F.3d 110, 113-15 (D.C. Cir. 2008) (citing Barbara, 99
F.3d 49; Desiderio v. NASD, 191 F.3d 198 (2d Cir. 1999); DL Cap.
Grp., 409 F.3d 93; Feins v. Am. Stock Exch., Inc., 81 F.3d 1215 (2d
Cir. 1996)).
---------------------------------------------------------------------------
New York State courts--particularly those within the Commercial
Division of the First Judicial Department--are likewise well suited to
address the complex issues that might arise during litigation regarding
a CAT Data breach. The court's judges focus primarily on complex cases
and have developed sophisticated procedural rules designed to foster
the efficient and fair resolution of disputes.\50\ Relying in part on
the Second Circuit's developed body of case law, the New York state
courts within the First Judicial Department are one of only a few state
courts that have addressed the scope of regulatory immunity.\51\
---------------------------------------------------------------------------
\50\ See generally 22 N.Y.C.R.R. Sec. 202.70 (Rules of the
Commercial Division of the Supreme Court). The Commercial Division
``is an efficient, sophisticated, up-to-date court dealing with
challenging commercial cases'' and ``its primary goal [is] the cost-
effective, predictable and fair adjudication of complex commercial
cases.'' 22 N.Y.C.R.R. Sec. 202.70(g) (Preamble to the Rules of
practice for the Commercial Division).
\51\ See Wey v. Nasdaq, Inc., 188 A.D.3d 587 (1st Dep't 2020).
---------------------------------------------------------------------------
(6) Governing Law Provision
The Proposed Amendment modifies the governing law provision
contained in the existing Reporter Agreement and Reporting Agent
Agreement to provide that the agreements, and any matters between CAT
LLC and either a CAT Reporter or a CAT Reporting Agent, will be
governed by federal law and the laws of the State of New York. The
existing governing law provision refers only to New York state law and,
because CAT LLC was created pursuant to federal law and is subject to a
federal regulatory regime, claims by or against CAT LLC could involve
issues of federal law. Therefore, the Proposed Amendment modifies the
existing governing law provision to clarify that any disputes arising
out of or related to the agreements will be governed by both federal
law and by New York state law.
B. Governing or Constituent Documents
Not applicable.
C. Implementation of Amendment
The Participants propose to implement the Proposed Amendment by
making the revised agreements effective upon Commission approval of
this Proposed Amendment, without requiring CAT Reporters and CAT
Reporting Agents to re-sign the agreements.
D. Development and Implementation Phases
The Participants propose the revised agreements be effective upon
Commission approval of this Proposed Amendment, without requiring CAT
Reporters and CAT Reporting Agents to re-sign the agreements.
E. Analysis of Impact on Competition
The Participants do not believe the Proposed Amendment will have
any impact on competition. The Proposed Amendment would mandate that
all CAT Reporters and CAT Reporting Agents are bound by revised
agreements that contain the amended provisions. Moreover, the Forum
Selection Provision would apply equally to all Industry Members, the
Participants, and CAT LLC, and would not impact the relative
competitive positions among different Industry Members. Additionally,
as discussed above, adjudication of disputes relating to CAT reporting
in courts promotes consistency of outcomes, which thereby promotes fair
competition. Conversely, arbitration could lead to disparate and
inconsistent outcomes of similar disputes, which would unfairly
advantage certain parties over others.
F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
G. Approval by Plan Sponsors in Accordance With Plan
Section 12.3 of the CAT NMS Plan states that, subject to certain
exceptions, the Plan may be amended from time to time only by a written
amendment, authorized by the affirmative vote of not less than two-
thirds of all of the Participants, that has been approved by the SEC
pursuant to Rule 608 or has otherwise become effective under Rule 608.
The Participants, by a vote of the Operating Committee obtained via
written consent on September 6, 2022, have authorized the filing of
this Proposed Amendment with the SEC in accordance with the Plan.
H. Description of Operation of Facility Contemplated by the Proposed
Amendment and Any Fees or Charges in Connection Thereto
Not applicable.
I. Terms and Conditions of Access
Not applicable.
J. Method and Frequency of Processor Evaluation
Not applicable.
K. Dispute Resolution
Not applicable.
III. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the amendment is
consistent with the Exchange Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#ff8d8a939ad29c9092929a918b8cbf8c9a9cd1989089"><span class="__cf_email__" data-cfemail="3f4d4a535a125c5052525a514b4c7f4c5a5c11585049">[email protected]</span></a>. Please include
File Number 4-698 on the subject line.
Paper Comments
<bullet> Send paper comments to Secretary, Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number 4-698. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan amendment that are filed
with the Commission, and all written communications relating to the
amendment between the Commission and any person, other than those that
may be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the Participants' offices. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number 4-698
and should be submitted on or before October 19, 2022.
[[Page 58882]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\52\
---------------------------------------------------------------------------
\52\ 17 CFR 200.30-3(a)(85).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
Appendix A
Limited Liability Company Agreement of Consolidated Audit Trail, LLC
* * * * *
Article XII
[proposed additions]
* * * * *
Section 12.15. Forum Selection; Governing Law. Each CAT Reporter
shall be bound by an amended Consolidated Audit Trail Reporter
Agreement containing, in substance, the forum selection provision
and governing law provision in Appendix E to this Agreement. Each
Person engaged by a CAT Reporter to report CAT Data to the Central
Repository on behalf of such CAT Reporter shall be bound by an
amended Consolidated Audit Trail Reporting Agent Agreement
containing, in substance, the forum selection provision and
governing law provision in Appendix F to this Agreement. The
Operating Committee shall have authority in its sole discretion to
make non-substantive amendments to the forum selection provision and
governing law provision in the Consolidated Audit Trail Reporter
Agreement and the Consolidated Audit Trail Reporting Agent
Agreement.
* * * * *
Appendix E
[proposed additions]
* * * * *
Forum Selection Provision in the CAT Reporter Agreement
7.9. Forum Selection. EXCEPT AS OTHERWISE PROHIBITED BY FEDERAL
LAW OR OTHERWISE PROVIDED BY SECTION 11.5 OF THE CAT NMS PLAN, FOR
ANY DISPUTE, CONTROVERSY, OR CLAIM IN CONNECTION WITH, RELATING TO,
OR ASSOCIATED IN ANY WAY WITH THIS AGREEMENT, CAT REPORTING, OR THE
CAT SYSTEM, THE PARTIES IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND THE NEW YORK STATE SUPREME COURT
FOR NEW YORK COUNTY IN THE BOROUGH OF MANHATTAN, INCLUDING THE
COMMERCIAL DIVISION. Each Party hereby agrees to commence any such
action, suit, or other proceeding in (i) the United States District
Court for the Southern District of New York, or (ii) if such action,
suit, or other proceeding cannot be brought in such court for
jurisdictional reasons, to commence such suit, action, or other
proceeding in the New York State Supreme Court for New York County,
borough of Manhattan, and seek assignment to the New York County
Commercial Division whenever the jurisdictional requirements for
Commercial Division assignment are met. Service of any process,
summons, notice, or document by U.S. registered mail to such Party's
respective address shall be effective service of process for any
action, suit, or other proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Agreement.
Each Party irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit, or other proceeding
connected to, related to, or associated in any way with this
Agreement, CAT Reporting, or the CAT System in the courts identified
in items (i)-(ii) above, and hereby and thereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit, or other proceeding brought
in any such court has been brought in an inconvenient forum. The
provisions of this paragraph shall apply to any action, suit, or
other proceeding commenced by any Party against any other Party to
this Agreement, including those in which one or more Participants or
the Plan Processor (or any Representatives of one or more
Participants or the Plan Processor) are named as parties, regardless
of whether CATLLC is also named as a party.
Governing Law Clause in the CAT Reporter Agreement
7.11. Governing Law. THIS AGREEMENT, AND ALL MATTERS BETWEEN
CATLLC AND CAT REPORTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT, SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO ANY LAWS, RULES OR PROVISIONS THAT
WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN
THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF
NEW YORK.
* * * * *
Appendix F
[proposed additions]
* * * * *
Forum Selection Provision in the CAT Reporting Agent Agreement
7.9. Forum Selection. EXCEPT AS OTHERWISE PROHIBITED BY FEDERAL
LAW OR OTHERWISE PROVIDED BY SECTION 11.5 OF THE CAT NMS PLAN, FOR
ANY DISPUTE, CONTROVERSY, OR CLAIM IN CONNECTION WITH, RELATING TO,
OR ASSOCIATED IN ANY WAY WITH THIS AGREEMENT, CAT REPORTING, OR THE
CAT SYSTEM, THE PARTIES IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND THE NEW YORK STATE SUPREME COURT
FOR NEW YORK COUNTY IN THE BOROUGH OF MANHATTAN, INCLUDING THE
COMMERCIAL DIVISION. Each Party hereby agrees to commence any such
action, suit, or other proceeding in (i) the United States District
Court for the Southern District of New York, or (ii) if such action,
suit, or other proceeding cannot be brought in such court for
jurisdictional reasons, to commence such suit, action, or other
proceeding in the New York State Supreme Court for New York County,
borough of Manhattan, and seek assignment to the New York County
Commercial Division whenever the jurisdictional requirements for
Commercial Division assignment are met. Service of any process,
summons, notice, or document by U.S. registered mail to such Party's
respective address shall be effective service of process for any
action, suit, or other proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Agreement.
Each Party irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit, or other proceeding
connected to, related to, or associated in any way with this
Agreement, CAT Reporting, or the CAT System in the courts identified
in items (i)-(ii) above, and hereby and thereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit, or other proceeding brought
in any such court has been brought in an inconvenient forum. The
provisions of this paragraph shall apply to any action, suit, or
other proceeding commenced by any Party against any other Party to
this Agreement, including those in which one or more Participants or
the Plan Processor (or any Representatives of one or more
Participants or the Plan Processor) are named as parties, regardless
of whether CATLLC is also named as a party.
Governing Law Clause in the CAT Reporting Agent Agreement
7.11. Governing Law. THIS AGREEMENT, AND ALL MATTERS BETWEEN
CATLLC AND CAT REPORTING AGENT ARISING OUT OF OR RELATING TO THIS
AGREEMENT, SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO ANY LAWS, RULES OR PROVISIONS THAT
WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN
THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF
NEW YORK.
* * * * *
[FR Doc. 2022-20950 Filed 9-27-22; 8:45 am]
BILLING CODE 8011-01-P
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