Notice2024-11360
Order Granting a Temporary Conditional Exemption Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 608(e) of Regulation NMS Under the Exchange Act, Relating to the Reporting of Responses to Requests for Quotes and Other Solicitation Responses Provided in a Standard Electronic Format, as Required by Section 6.4(d) of the National Market System Plan Governing the Consolidated Audit Trail
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Published
May 23, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 101 (Thursday, May 23, 2024)</title>
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[Federal Register Volume 89, Number 101 (Thursday, May 23, 2024)]
[Notices]
[Pages 45715-45717]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-11360]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100181]
Order Granting a Temporary Conditional Exemption Pursuant to
Section 36(a)(1) of the Securities Exchange Act of 1934 (``Exchange
Act'') and Rule 608(e) of Regulation NMS Under the Exchange Act,
Relating to the Reporting of Responses to Requests for Quotes and Other
Solicitation Responses Provided in a Standard Electronic Format, as
Required by Section 6.4(d) of the National Market System Plan Governing
the Consolidated Audit Trail
May 20, 2024.
I. Introduction
By letter dated February 13, 2024,\1\ 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.; MEMX LLC; Miami International
Securities Exchange LLC, MIAX Emerald, LLC, and MIAX PEARL, LLC; NASDAQ
BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ
PHLX LLC, and 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'' or ``SROs'')
requested that the Securities and Exchange Commission (``Commission'')
grant temporary exemptive relief to the Participants from the National
Market System Plan Governing the Consolidated Audit Trail (``CAT NMS
Plan''),\2\ pursuant to its authority under Section 36(a)(1) of the
Exchange Act \3\
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and Rule 608(e) of Regulation NMS under the Exchange Act, from certain
reporting requirements in Section 6.4(d) of the CAT NMS Plan relating
to the reporting of bids and/or offers made in response to a request
for quote (``RFQ'') or other form of solicitation response provided in
standard electronic format (e.g., FIX) that is not ``immediately
actionable'' (i.e., further action is required by the responder
providing the quote in order to execute or cause a trade to be
executed) (``NIA Electronic RFQ Responses'').\4\
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\1\ See letter from the Participants to Vanessa Countryman,
Secretary, Commission, dated Feb. 13, 2024 (the ``Exemption
Request''). Unless otherwise noted, capitalized terms are used as
defined in the CAT NMS Plan.
\2\ The CAT NMS Plan was approved by the Commission, as
modified, on Nov. 15, 2016. See Securities Exchange Act Release No.
79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (``CAT NMS Plan
Approval Order'').
\3\ 15 U.S.C. 78mm(a)(1).
\4\ For example, a trading system could offer functionality
allowing a broker-dealer to send a firm bid and/or offer in response
to an RFQ, but require the sender of the RFQ to subsequently send a
follow-up message to the responder in order to consummate the trade.
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Section 36(a)(1) of the Exchange Act grants the Commission the
authority, with certain limitations, to ``conditionally or
unconditionally exempt any person, security, or transaction . . . from
any provision or provisions of [the Exchange Act] or of any rule or
regulation thereunder, to the extent that such exemption is necessary
or appropriate in the public interest, and is consistent with the
protection of investors.'' \5\ Under Rule 608(e) of Regulation NMS, the
Commission may ``exempt from [Rule 608], either unconditionally or on
specified terms and conditions, any self-regulatory organization,
member thereof, or specified security, if the Commission determines
that such exemption is consistent with the public interest, the
protection of investors, the maintenance of fair and orderly markets
and the removal of impediments to, and perfection of the mechanism of,
a national market system.'' \6\
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\5\ 15 U.S.C. 78mm(a)(1).
\6\ 17 CFR 242.608(e).
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For the reasons set forth below, the Commission is granting
temporary conditional exemptive relief relating to the reporting of NIA
Electronic RFQ Reponses until July 31, 2026, subject to certain
conditions, as discussed further below.
II. Background and Request for Relief
In the Exemption Request, the Participants request that the
Commission temporarily exempt Participants from the requirement in
Section 6.4(d) of the CAT NMS Plan for each Participant, through its
Compliance Rule, to require its Industry Members to record and
electronically report to the Central Repository NIA Electronic RFQ
Responses until July 31, 2026. In support of their request, the
Participants state that the deadline would align the expiration of
exemptive relief with the expiration date of exemptive relief
previously granted for certain floor and unstructured electronic
upstairs activity (the ``Verbal and Manual Quotes Exemptive
Relief'').\7\ In addition, the Participants state that this date would
provide the Participants and the Plan Processor the time to develop and
implement any necessary reporting guidance, specifications, and
technical changes to the CAT and also provide CAT Reporters the time to
fully consider and implement the necessary technological and process
changes required to report and capture NIA Electronic RFQ Responses.\8\
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\7\ Exemption Request, at 3-4. In Nov. 2020, the Commission
granted the Verbal and Manual Quotes Exemptive Relief, until July
31, 2023. See Securities Exchange Release No. 90405 (Nov. 12, 2020),
85 FR 73544 (Nov. 18, 2020). This conditional exemptive relief was
later extended until July 31, 2026. See Securities Exchange Release
No. 98023 (July 28, 2023), 88 FR 51369 (Aug. 3, 2023).
\8\ Exemption Request, at 3-4. As noted by the Participants,
firm indications of a willingness to buy or sell a security are
``orders,'' ``bids'' or ``offers'' and have reportable events
associated with them pursuant to the CAT NMS Plan. Id. at 3.
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The Participants represent that the NIA Electronic RFQ Responses
that are subject to the Exemption Request: (1) are those that satisfy
the definition of an ``order'' as defined in Rule 613(j)(8) and the CAT
NMS Plan; (2) do not include RFQ responses that were required to be
reported commencing in Phase 2c and Phase 2d; \9\ and (3) do not
include activity that is subject to the Commission's Verbal and Manual
Quotes Exemptive Relief.\10\
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\9\ Exemption Request, at 3-4. As explained by the Participants,
in April 2020 the Commission granted conditional exemptive relief to
allow for the implementation of phased Industry Member reporting to
the CAT across five phases, and this exemptive relief did not
specifically address NIA Electronic RFQ Responses. Id.; Securities
Exchange Release No. 88702 (Apr. 20, 2020), 85 FR 23075 (Apr. 24,
2020) (``Phased Reporting Exemption''). Pursuant to the Phased
Reporting Exemption, any bid or offer in response to a request for
quote or other form of solicitation response provided in standard
electronic format (e.g., FIX) that required no further action by the
responder providing the quote in order to execute or cause a trade
to be executed was reportable in Phase 2c for equities and in Phase
2d for options. See Phased Reporting Exemption at 23079; see also
Exemption Request, at 3-4.
\10\ Exemption Request, at 4-5.
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III. Discussion of Participants' Exemption Request
The Commission has carefully considered the Exemption Request. The
Commission has determined that granting temporary conditional exemptive
relief, pursuant to Section 36(a)(1) of the Exchange Act, is
appropriate in the public interest and is consistent with the
protection of investors, and that pursuant to Rule 608(e), this
exemption is consistent with the public interest, the protection of
investors, the maintenance of fair and orderly markets and the removal
of impediments to, and the perfection of the mechanisms of a national
market system.
The Commission is granting temporary exemptive relief to provide
additional time to the Plan Processor, Participants, and Industry
Members to update and implement applicable reporting frameworks,
compliance guidance, FAQs, and any specifications for the reporting of
NIA Electronic RFQ Responses. This additional time would also provide
CAT Reporters time to fully consider and implement any technological
and process changes required to capture and report NIA Electronic RFQ
Responses, while minimizing potential business disruptions and impacts
to existing workflows.
Based on the foregoing, pursuant to Section 36(a)(1) of the
Exchange Act, it is appropriate in the public interest and is
consistent with the protection of investors, and pursuant to Rule
608(e), it is consistent with the public interest, the protection of
investors, the maintenance of fair and orderly markets and the removal
of impediments to, and the perfection of the mechanisms of a national
market system to grant temporary conditional exemptive relief until
July 31, 2026 from the requirement in Section 6.4(d) of the CAT NMS
Plan for the recording and reporting of NIA Electronic RFQ
Responses.\11\
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\11\ To the extent that the Participants are availing themselves
of exemptive relief from a CAT NMS Plan requirement, such
requirement shall not be included in the requirements for the
Financial Accountability Milestones, provided that any conditions of
the exemption are satisfied. See CAT NMS Plan, supra note 1, at
Section 1.1 (``Financial Accountability Milestone'' definition).
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IV. Conclusion
As discussed above, it is appropriate to grant temporary
conditional exemptive relief that exempts each Participant from the
requirement in Section 6.4(d) of the CAT NMS Plan for each Participant,
through its Compliance Rule, to require its Industry Members to record
and electronically report to the Central Repository NIA Electronic RFQ
Responses.
As a condition to this relief, the Participants must provide the
Commission a written implementation plan on the reporting of NIA
Electronic RFQ Responses by July 31, 2025 in order to facilitate the
timely completion of any necessary steps for the reporting of NIA
Electronic RFQ Responses upon the expiration of the temporary exemptive
relief on July 31, 2026. This
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implementation plan for the reporting of NIA Electronic RFQ Responses
must: (1) identify workflows to facilitate the reporting of NIA
Electronic RFQ Responses; and (2) provide or reference published
technical specifications to allow for the reporting of NIA Electronic
RFQ Responses by Industry Members. The purpose of these conditions is
to help ensure that the Participants establish a framework necessary to
permit the reporting of NIA Electronic RFQ Responses by Industry
Members before the expiration of the temporary conditional exemptive
relief, while providing Industry Members at least one year to implement
any necessary technological and systems changes to report NIA
Electronic RFQ Responses.
Accordingly, it is hereby ordered, pursuant to Section 36(a)(1) of
the Exchange Act,\12\ and Rule 608(e) of the Exchange Act \13\ that the
Participants are granted an exemption, until July 31, 2026, from the
requirement in Section 6.4(d) of the CAT NMS Plan that requires each
Participant, through its Compliance Rule, to require its Industry
Members to record and electronically report to the Central Repository
bids and/or offers made in response to a request for quote or other
form of solicitation response provided in standard electronic format
(e.g., FIX) that is not ``immediately actionable'' (i.e., further
action is required by the responder providing the quote in order to
execute or cause a trade to be executed), subject to the conditions
described above.
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\12\ 15 U.S.C. 78mm(a)(1).
\13\ 17 CFR 242.608(e).
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11360 Filed 5-22-24; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on May 23, 2024.
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