Notice2025-14130
Order Extending Temporary Conditional Exemptive Relief, Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934 and Rule 608(e) of Regulation NMS Thereunder, From Certain Requirements of Appendix D, Section 3 of the National Market System Plan Governing the Consolidated Audit Trail
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Published
July 28, 2025
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 90 Issue 142 (Monday, July 28, 2025)</title>
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[Federal Register Volume 90, Number 142 (Monday, July 28, 2025)]
[Notices]
[Pages 35561-35563]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14130]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103528]
Order Extending Temporary Conditional Exemptive Relief, Pursuant
to Section 36(a)(1) of the Securities Exchange Act of 1934 and Rule
608(e) of Regulation NMS Thereunder, From Certain Requirements of
Appendix D, Section 3 of the National Market System Plan Governing the
Consolidated Audit Trail
July 23, 2025.
I. Introduction
On May 29, 2025,\1\ Financial Information Forum (``FIF'') requested
that the Securities and Exchange Commission (the ``Commission'' or the
``SEC'') extend temporary conditional exemptive relief, pursuant to its
authority under section 36(a)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \2\ and Rule 608(e) of Regulation NMS under the
Exchange Act,\3\ related to the requirements set forth in Appendix D,
section 3 of the national market system plan governing the consolidated
audit trail (the ``CAT NMS Plan'') \4\ that the consolidated audit
trail (the ``CAT'') ``must be able to create the lifecycle between . .
. [c]ustomer orders to `representative' orders created in firm accounts
for the purpose of facilitating a customer order (e.g., linking a
customer order handled on a riskless principal basis to the street-side
proprietary order).'' \5\ For the reasons set forth below, the
Commission has determined to grant FIF's request for a six-month
extension of the temporary conditional exemptive relief previously
provided by the Commission with respect to the above-described
requirements set forth in Appendix D, section 3 of the CAT NMS Plan for
representative order scenarios in which Industry Members do not have a
systematic or direct link between their order management systems and
execution management systems.
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\1\ See Letter from Howard Meyerson, Managing Director,
Financial Information Forum, to Commission, dated May 29, 2025,
available at <a href="https://fif.com/index.php/working-groups/category/271-comment-letters?download=3276:fif-request-for-six-month-extension-of-the-current-exemptive-relief-relating-to-rep-order-linkage&view=category">https://fif.com/index.php/working-groups/category/271-comment-letters?download=3276:fif-request-for-six-month-extension-of-the-current-exemptive-relief-relating-to-rep-order-linkage&view=category</a> (the ``Request'').
\2\ 15 U.S.C. 78mm(a)(1).
\3\ 17 CFR 242.608(e).
\4\ See Securities Exchange Act Release No. 79318 (Nov. 15,
2016), 81 FR 84696 (Nov. 23, 2016) (``CAT NMS Plan Approval
Order''). The CAT NMS Plan is Exhibit A to the CAT NMS Plan Approval
Order. See id. at 84943-85034. The CAT NMS Plan functions as the
limited liability company agreement of the jointly owned limited
liability company formed under Delaware state law through which the
Participants conduct the activities of the CAT (the ``Company'').
Each Participant is a member of the Company and jointly owns the
Company on an equal basis. The Participants submitted to the
Commission a proposed amendment to the CAT NMS Plan on August 29,
2019, which they designated as effective on filing. Under the
amendment, the limited liability company agreement of a new limited
liability company named Consolidated Audit Trail, LLC serves as the
CAT NMS Plan, replacing in its entirety the CAT NMS Plan. See
Securities Exchange Act Release No. 87149 (Sept. 27, 2019), 84 FR
52905 (Oct. 3, 2019).
\5\ See id. at Appendix D, section 3. A representative order is
an order originated in a firm-owned or -controlled account,
including principal, agency average price and omnibus accounts, by
an industry member for the purpose of working one or more customer
or client orders. See, e.g., Securities Exchange Act Release No.
88702 (Apr. 20, 2020), 85 FR 23075, 23076 n.26 (Apr. 24, 2020).
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II. Background
On July 18, 2012, the Commission adopted Rule 613 of Regulation
NMS, which required national securities exchanges and national
securities associations (the ``Participants'') \6\ to jointly develop
and submit to the Commission a national market system plan to create,
implement, and maintain the CAT.\7\ The goal of Rule 613 was to create
a modernized audit trail system that would provide regulators with
timely access to a comprehensive set of trading data, thus enabling
regulators to more efficiently and effectively analyze and reconstruct
market events, monitor market behavior, conduct market analysis to
support regulatory decisions, and perform surveillance, investigation,
and enforcement activities. On November 15, 2016, the Commission
approved the national market system plan required by Rule 613--the CAT
NMS Plan.\8\
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\6\ The Participants include BOX Exchange LLC, Cboe BYX
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., 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, MIAX
PEARL, LLC, MIAX Sapphire, 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 National, Inc., and NYSE Texas, Inc.
\7\ See Securities Exchange Act Release No. 67457 (July 18,
2012), 77 FR 45722 (Aug. 1, 2012); 17 CFR 242.613.
\8\ See CAT NMS Plan Approval Order, supra note 4.
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On December 16, 2020, the Commission issued an exemptive relief
order regarding the implementation of the CAT NMS Plan (the ``First
Order'').\9\ This order granted temporary conditional exemptive relief
from several requirements set forth in the CAT NMS Plan, including the
requirements set forth in Appendix D, section 3 of the CAT NMS Plan
that the CAT ``must be able to create the lifecycle between . . .
[c]ustomer orders to `representative' orders created in firm accounts
for the purpose of facilitating a customer order (e.g., linking a
customer order handled on a riskless principal basis to the street-side
proprietary order).'' \10\ This relief was initially granted until July
31, 2023.\11\
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\9\ See Securities Exchange Act Release No. 90688 (Dec. 16,
2020), 85 FR 83634 (Dec. 22, 2020).
\10\ See id. at 83636. The Commission stated its understanding
that ``the Participants do not currently have the ability to create
lifecycles in certain representative order scenarios, particularly
because of the difficulty of linking representative orders for
Industry Members with separate order management systems and
execution management systems that do not currently have a systematic
or direct link between them.'' Id.
\11\ Id.
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On July 8, 2022, the Commission issued a new exemptive relief order
(the ``Second Order''),\12\ which superseded the First Order and
modified and/or clarified certain aspects of the First Order. The
Second Order granted temporary conditional exemptive relief
[[Page 35562]]
until July 31, 2024, from the above-described linkage requirements set
forth in Appendix D, section 3 for ``representative order scenarios in
which Industry Members do not have a systematic or direct link between
their order management systems and execution management systems.'' \13\
The Commission subsequently issued an order (the ``Third Order''), on
May 19, 2023, extending such exemptive relief until January 31,
2025.\14\ This relief was superseded by a new order issued by the
Commission on November 2, 2023 (the ``Fourth Order''),\15\ which was
intended to mirror the temporary conditional exemptive relief granted
by the Third Order (and the Second Order) with respect to the
requirements set forth in Appendix D, section 3 of the CAT NMS Plan
regarding lifecycle linkages between customer orders and representative
orders for scenarios in which Industry Members do not have a systematic
or direct link between their order management systems and execution
management systems.\16\ The Fourth Order maintained the January 31,
2025 deadline established by the Third Order.\17\ On January 17, 2025,
the Commission again extended this temporary conditional exemptive
relief until July 31, 2025 (the ``Fifth Order'').\18\
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\12\ See Securities Exchange Act Release No. 95234 (July 8,
2022), 87 FR 42247 (July 14, 2022).
\13\ Id. at 42256. The term ``Industry Member'' is defined as
``a member of a national securities exchange or a member of a
national securities association.'' See CAT NMS Plan, supra note 4,
at section 1.1.
\14\ See Securities Exchange Act Release No. 97530 (May 19,
2023), 88 FR 33655 (May 24, 2023).
\15\ See Securities Exchange Act Release No. 98848 (Nov. 2,
2023), 88 FR 77128 (Nov. 8, 2023).
\16\ Id. at 77132.
\17\ Id.
\18\ See Securities Exchange Act Release No. 102234 (Jan. 17,
2025), 90 FR 8078 (Jan. 23, 2025).
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III. Request for Relief
FIF requests that the Commission extend the previously granted
temporary conditional exemptive relief until January 31, 2026.\19\
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\19\ See Request, supra note 1, at 2.
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Without such relief, FIF states that it understands that Industry
Members would be required to report linkage to a specific
representative order.\20\ FIF states that it may be difficult or
impossible for Industry Members to comply with the requirements to
report linkages for certain scenarios. ``In some scenarios,'' FIF
states that ``no representative order exists, and thus it is not
possible for Industry Members to provide the linkage to a specific
representative order.'' \21\ In other scenarios, FIF states that
``Industry Members do not maintain this linkage in their books and
records.'' \22\ Finally, FIF states that there are scenarios in which
``the CAT system does not provide a method to provide linkage to a
specific representative order.'' \23\
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\20\ Id.; see also, e.g., FAQ F5, available at <a href="https://catnmsplan.com/faq?search_api_fulltext=&field_topics=76&sort_by=field_faq_number">https://catnmsplan.com/faq?search_api_fulltext=&field_topics=76&sort_by=field_faq_number</a>
(``All Industry Members will be required to provide representative
order linkages to unlinked OMS/EMS and position fill scenarios no
later than July 31, 2025 due to the expiry of the exemptive relief
granted by the SEC on January 17, 2025.'').
\21\ See Request, supra note 1, at 2.
\22\ Id.
\23\ Id. FIF states that these scenarios are more fully
described in a previous request for exemptive relief submitted to
the Commission. Id.; see also Letter from Howard Meyerson, Managing
Director, FIF, to Commission, dated July 2, 2024, available at
<a href="https://fif.com/index.php/working-groups/category/271-comment-letters?download=2962:fif-exemptive-request-letter-to-the-sec-on-representative-order-linkage&start=10&view=category">https://fif.com/index.php/working-groups/category/271-comment-letters?download=2962:fif-exemptive-request-letter-to-the-sec-on-representative-order-linkage&start=10&view=category</a>.
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FIF states that Industry Members would therefore be faced with
``one of the following choices: (i) submit large numbers of Order
Fulfillment events that the CAT system would reject and that would not
be repairable; (ii) abandon certain common existing trading workflows
that are fundamental to the current equity trading markets; or (iii)
refrain from reporting large numbers of Order Fulfillment events to
CAT.'' \24\ FIF further explained the potential harms that could flow
from the expiration of the existing exemptive relief:
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\24\ See Request, supra note 1, at 2-3 (footnote omitted).
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For example, it is a common workflow for Industry Members to trade
as principal against customer orders without the Industry Member
creating a firm order . . . . If Industry Members submit large numbers
of Order Fulfillments that the CAT system will reject, this will
present a significant processing and workflow challenge for the CAT
system, the regulators and Industry Members as large numbers of
rejected and unsubmitted CAT events pile-up. This will also generate
increased processing and operational costs for the CAT system and FINRA
CAT and increased operational costs for Industry Members. If Industry
Members were to refrain from reporting Order Fulfillments to CAT, this
would result in less data being reported to CAT as compared to
reporting these Order Fulfillment events without linkage.\25\
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\25\ See id. at 3.
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FIF states that its members have further identified for Commission
staff and other regulators the challenges with implementing certain CAT
linkage requirements relating to representative orders and order
fulfillments in presentations \26\ and previous exemptive relief
requests that were submitted to the Commission in March 2024 and July
2024.\27\
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\26\ Id.
\27\ See id. at 3-4 n.14-15 and associated text.
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IV. Discussion
Section 36(a)(1) of the Exchange Act grants the Commission the
authority 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.'' \28\ Rule 608(e)
of Regulation NMS similarly grants the Commission the authority to
``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 mechanisms of, a national market system.''
\29\
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\28\ 15 U.S.C. 78mm(a)(1).
\29\ 17 CFR 242.608(e).
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The Commission has determined that additional time is needed to
identify and evaluate appropriate long-term solutions for certain
trading scenarios.\30\ In developing those solutions, the Commission
emphasizes its willingness to consider alternative solutions that
achieve the regulatory goals of Rule 613 and the CAT NMS Plan. The
Commission therefore determines that the requested extension of the
existing temporary conditional exemptive relief is appropriate in the
public interest and consistent with the protection of investors under
section 36(a)(1) of the Exchange Act, as well as consistent with the
public interest, the protection of investors, the maintenance of fair
and orderly markets, and the perfection of the mechanisms of a national
market system under Rule 608(e) of Regulation NMS.
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\30\ Additionally, Commission staff have been instructed to
undertake a comprehensive review of the CAT. See Prepared Remarks
Before SEC Speaks, Chairman Paul S. Atkins, May 19, 2025, available
at <a href="https://www.sec.gov/newsroom/speeches-statements/atkins-prepared-remarks-sec-speaks-051925">https://www.sec.gov/newsroom/speeches-statements/atkins-prepared-remarks-sec-speaks-051925</a>.
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Specifically, the Commission extends the existing temporary
conditional exemptive relief granted by the Commission from the
requirements set forth in Appendix D, section 3 of the CAT NMS Plan
related to lifecycle linkages between customer orders and
representative orders \31\ for
[[Page 35563]]
representative order scenarios in which Industry Members do not have a
systematic or direct link between their order management systems and
execution management systems, until January 31, 2026. Such relief is
intended to mirror the exemptive relief provided by the Second Order,
the Third Order, the Fourth Order, and the Fifth Order.
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\31\ The requirements related to lifecycle linkages between
customer orders and representative orders set forth in Appendix D,
section 3 of the CAT NMS Plan are described in the Second Order. See
Second Order, supra note 12, at 42255-56.
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V. Conclusion
Accordingly, it is hereby ordered, pursuant to section 36(a)(1) of
the Exchange Act \32\ and Rule 608(e) under the Exchange Act,\33\ that
the above-described temporary conditional exemptive relief be extended.
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\32\ 15 U.S.C. 78mm(a)(1).
\33\ 17 CFR 242.608(e).
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-14130 Filed 7-25-25; 8:45 am]
BILLING CODE 8011-01-P
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