Notice2026-09344
Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the Fee Schedule To Establish Fees for Industry Members Related To Reasonably Budgeted CAT Costs of the National Market System Plan Governing the Consolidated Audit Trail for the Period From May 1, 2026 Through December 31, 2026
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
May 12, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 91 (Tuesday, May 12, 2026)</title>
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[Federal Register Volume 91, Number 91 (Tuesday, May 12, 2026)]
[Notices]
[Pages 26077-26100]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09344]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105391; File No. SR-MIAX-2026-17]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend the Fee Schedule To Establish Fees for
Industry Members Related To Reasonably Budgeted CAT Costs of the
National Market System Plan Governing the Consolidated Audit Trail for
the Period From May 1, 2026 Through December 31, 2026
May 7, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 23, 2026, Miami International Securities Exchange, LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Options
Exchange Fee Schedule (the ``Fee Schedule'') to establish fees for
Industry Members \3\ related to reasonably budgeted CAT costs of the
National Market System Plan Governing the Consolidated Audit Trail (the
``CAT NMS Plan'' or ``Plan'') for the period from May 1, 2026 through
December 31, 2026. These fees would be payable to Consolidated Audit
Trail, LLC (``CAT LLC'' or the ``Company'') and referred to as CAT Fee
2026-1, and would be described in a section of the Exchange's fee
schedule entitled ``Consolidated Audit Trail Funding Fees.'' The fee
rate for CAT Fee 2026-1 would be $0.000001 per executed equivalent
share. CAT Executing Brokers will receive their first monthly invoice
for CAT Fee 2026-1 in June 2026 calculated based on their transactions
as CAT Executing Brokers for the Buyer (``CEBB'') and/or CAT Executing
Brokers for the Seller (``CEBS'') in May 2026. As described further
below, CAT Fee 2026-1 is anticipated to be in place for eight months,
and is anticipated to recover approximately two-thirds of the costs set
forth in the reasonably budgeted CAT costs for 2026.
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\3\ An ``Industry Member'' is defined as ``a member of a
national securities exchange or a member of a national securities
association.'' See Exchange Rule 1701(u). See also Section 1.1 of
the CAT NMS Plan. Unless otherwise specified, capitalized terms used
in this rule filing are defined as set forth in the CAT NMS Plan
and/or the CAT Compliance Rule. See Exchange Rule 1701.
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The text of the proposed rule change is available on the Exchange's
website at <a href="https://www.miaxglobal.com/markets/us-options/all-options-exchanges/rule-filings">https://www.miaxglobal.com/markets/us-options/all-options-exchanges/rule-filings</a> and at MIAX's principal office.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On July 11, 2012, the Commission adopted Rule 613 of Regulation
NMS, which required the self-regulatory organizations (``SROs'') to
submit a national market system (``NMS'') plan to create, implement and
maintain a consolidated audit trail that would capture customer and
order event information for orders in NMS securities across all
markets, from the time of order inception through routing,
cancellation, modification or execution.\4\ On November 15, 2016, the
Commission approved the CAT NMS Plan.\5\ Under the CAT NMS Plan, the
Operating Committee has the discretion to establish funding for CAT LLC
to operate the CAT, including establishing fees for Industry Members to
be assessed by CAT LLC that would be implemented on behalf of CAT LLC
by the Participants.\6\ The Operating Committee adopted a revised
funding model to fund the CAT (``CAT Funding Model''). On March 16,
2026, the Commission approved the CAT Funding Model after concluding
that the model satisfied the requirements of Section 11A of the
Exchange Act and Rule 608 thereunder.\7\
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\4\ Securities Exchange Act Rel. No. 67457 (July 18, 2012), 77
FR 45722 (Aug. 1, 2012).
\5\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81
FR 84696 (Nov. 23, 2016) (``CAT NMS Plan Approval Order'').
\6\ Section 11.1(b) of the CAT NMS Plan.
\7\ Securities Exchange Act Rel. No. 105003 (Mar. 16, 2026), 91
FR 13410 (Mar. 19, 2026) (``CAT Funding Model Approval Order'').
This CAT Funding Model replaced the prior funding model that was
approved by the Commission on September 6, 2023. Securities Exchange
Act Rel. No. 98290 (Sept. 6, 2023), 88 FR 62628 (Sept. 12, 2023).
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The CAT Funding Model provides a framework for the recovery of the
costs to create, develop and maintain the CAT, including providing a
method for allocating costs to fund the CAT among Participants and
Industry Members. The CAT Funding Model establishes two categories of
fees: (1) CAT fees assessed by CAT LLC and payable by certain Industry
Members to recover a portion of historical CAT costs previously paid by
the Participants (``Historical CAT Assessment'' fees); and (2) CAT fees
assessed by CAT LLC and payable by Participants and Industry Members to
[[Page 26078]]
fund prospective CAT costs (``CAT Fees'').\8\
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\8\ Under the CAT Funding Model, the Operating Committee may
establish CAT Fees related to CAT costs going forward. Section
11.3(a) of the CAT NMS Plan. This filing only establishes CAT Fee
2026-1 related to reasonably budgeted CAT costs for the period from
May 1, 2026 through December 31, 2026 as described herein; it does
not address any other potential CAT Fees related to CAT costs. Any
such other CAT Fee will be subject to a separate fee filing. In
addition, under the CAT Funding Model, the Operating Committee may
establish one or more Historical CAT Assessments. Section 11.3(b) of
the CAT NMS Plan. This filing does not address any Historical CAT
Assessments.
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Under the CAT Funding Model, Participants, CEBBs and CEBSs are
subject to fees designed to cover the ongoing budgeted costs of the
CAT, as determined by the Operating Committee. ``The Operating
Committee will establish fees (`CAT Fees') to be payable by
Participants and Industry Members with regard to CAT costs not
previously paid by the Participants (`Prospective CAT Costs').'' \9\ In
establishing a CAT Fee, the Operating Committee will calculate a ``Fee
Rate'' for the relevant period. Then, for each month in which a CAT Fee
is in effect, each CEBB and CEBS would be required to pay the fee for
each transaction in Eligible Securities executed by the CEBB or CEBS
from the prior month as set forth in CAT Data, where the fee for each
transaction will be calculated by multiplying the number of executed
equivalent shares in the transaction by one-third and by the Fee Rate.
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\9\ Section 11.3(a) of the CAT NMS Plan.
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The CAT Fees to be paid by CEBBs and CEBSs are designed to
contribute toward the recovery of two-thirds of the budgeted CAT costs
for the relevant period.\10\ The CAT Funding Model is designed to
require that the Participants contribute to the recovery of the
remaining one-third of the budgeted CAT costs.\11\ Participants would
be subject to the same Fee Rate as CEBBs and CEBSs.\12\ While CAT Fees
charged to Industry Members become effective in accordance with the
requirements of Section 19(b) of the Exchange Act,\13\ CAT fees charged
to Participants are implemented via an approval of the CAT fees by the
Operating Committee in accordance with the requirements of the CAT NMS
Plan.\14\ Accordingly, this filing does not address Participant CAT
fees as they are described in the CAT NMS Plan.\15\
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\10\ Section 11.3(a)(iii)(A) of the CAT NMS Plan.
\11\ Section 11.3(a)(ii)(A) of the CAT NMS Plan.
\12\ Section 11.3(a)(ii) of the CAT NMS Plan.
\13\ Section 11.3(a)(i)(A)(I) of the CAT NMS Plan.
\14\ CAT Funding Model Approval Order at 13448.
\15\ See Section 11.3(a)(ii) and Appendix B of the CAT NMS Plan.
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CAT LLC proposes to charge CEBBs and CEBSs (as described in more
detail below) CAT Fee 2026-1 to recover the reasonably budgeted CAT
costs for the period from May 1, 2026 through December 31, 2026 in
accordance with the CAT Funding Model. To implement this fee on behalf
of CAT LLC, the CAT NMS Plan requires the Participants to ``file with
the SEC under Section 19(b) of the Exchange Act any such fees on
Industry Members that the Operating Committee approves, and such fees
shall be labeled as `Consolidated Audit Trail Funding Fees.''' \16\ The
Plan further states that ``[o]nce the Operating Committee has approved
such Fee Rate, the Participants shall be required to file with the SEC
pursuant to Section 19(b) of the Exchange Act CAT Fees to be charged to
Industry Members calculated using such Fee Rate.'' \17\ Accordingly,
the purpose of this filing is to implement a CAT Fee on behalf of CAT
LLC for Industry Members, referred to as CAT Fee 2026-1, in accordance
with the CAT NMS Plan.
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\16\ Section 11.1(b) of the CAT NMS Plan.
\17\ Section 11.3(a)(i)(A)(I) of the CAT NMS Plan.
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(1) CAT Executing Brokers
CAT Fee 2026-1 will be charged to each CEBB and CEBS for each
applicable transaction in Eligible Securities.\18\ The CAT NMS Plan
defines a ``CAT Executing Broker'' to mean:
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\18\ In its approval of the CAT Funding Model, the Commission
determined that charging CAT fees to CAT Executing Brokers was
appropriate. In reaching this conclusion, the Commission noted that
the use of CAT Executing Brokers is appropriate because the CAT
Funding Model is based upon the calculation of executed equivalent
shares, and, therefore, charging CAT Executing Brokers would reflect
their executing role in each transaction. Furthermore, the
Commission noted that, because CAT Executing Brokers are already
identified in transaction reports from the exchanges and FINRA's
equity trade reporting facilities recorded in CAT Data, charging CAT
Executing Brokers could streamline the billing process. CAT Funding
Model Approval Order at 13413.
(a) with respect to a transaction in an Eligible Security that is
executed on an exchange, the Industry Member identified as the Industry
Member responsible for the order on the buy-side of the transaction and
the Industry Member responsible for the sell-side of the transaction in
the equity order trade event and option trade event in the CAT Data
submitted to the CAT by the relevant exchange pursuant to the
Participant Technical Specifications; and (b) with respect to a
transaction in an Eligible Security that is executed otherwise than on
an exchange and required to be reported to an equity trade reporting
facility of a registered national securities association, the Industry
Member identified as the executing broker and the Industry Member
identified as the contra-side executing broker in the TRF/ORF/ADF
transaction data event in the CAT Data submitted to the CAT by FINRA
pursuant to the Participant Technical Specifications; provided,
however, in those circumstances where there is a non-Industry Member
identified as the contra-side executing broker in the TRF/ORF/ADF
transaction data event or no contra-side executing broker is identified
in the TRF/ORF/ADF transaction data event, then the Industry Member
identified as the executing broker in the TRF/ORF/ADF transaction data
event would be treated as CAT Executing Broker for the Buyer and for
the Seller.\19\
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\19\ Section 1.1 of the CAT NMS Plan. In its approval order for
the CAT Funding Model, the Commission ``recognize[d] that Industry
Members may pass-through CAT fees for customer executed volume.''
See CAT Funding Model Approval Order at 13424.
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The following fields of the Participant Technical Specifications
indicate the CAT Executing Brokers for the transactions executed on an
exchange:
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\20\ See Table 23, Section 4.7 (Order Trade Event) of the CAT
Reporting Technical Specifications for Plan Participants, Version
4.2.0-r2 (Feb. 24, 2026), <a href="https://www.catnmsplan.com/sites/default/files/2026-02/02.24.2026-CAT_Reporting_Technical_Specifications_for_Participants_4.2.0-r2.pdf">https://www.catnmsplan.com/sites/default/files/2026-02/02.24.2026-CAT_Reporting_Technical_Specifications_for_Participants_4.2.0-r2.pdf</a>
(``CAT Reporting Technical Specifications for Plan Participants'').
Equity Order Trade (EOT) \20\
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No. Field name Data type Description Include key
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12.n.8/13.n.8................... member............. Member Alias....... The identifier for C
the member firm
that is
responsible for
the order on this
side of the trade.
Not required if
there is no order
for the side as
indicated by the
NOBUYID/NOSELLID
instruction.
[[Page 26079]]
This must be
provided if
orderID is
provided.
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Equity Order Trade (EOT) \21\
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No. Field name Data type Description Include key
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16.n.13/17.n.13................. member............. Member Alias....... The identifier for R
the member firm
that is
responsible for
the order.
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In addition, the following fields of the Participant Technical
Specifications would indicate the CAT Executing Brokers for the
transactions executed otherwise than on an exchange:
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\21\ See Table 52, Section 5.2.5.1 (Simple Option Trade Event)
of the CAT Reporting Technical Specifications for Plan Participants.
\22\ See Table 62, Section 6.1 (TRF/ORF/ADF Transaction Data
Event) of the CAT Reporting Technical Specifications for Plan
Participants.
TRF/ORF/ADF Transaction Data Event (TRF) \22\
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No. Field name Data type Description Include key
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26.............................. reportingExecutingM Member Alias....... MPID of the R
pid. executing party.
28.............................. contraExecutingMpid Member Alias....... MPID of the contra- C
side executing
party..
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(2) Calculation of Fee Rate 2026-1
The Operating Committee determined the Fee Rate to be used in
calculating CAT Fee 2026-1 (``Fee Rate 2026-1'') by dividing the
reasonably budgeted CAT costs (``Budgeted CAT Costs 2026-1'') for the
period from May 1, 2026 through December 31, 2026 (``CAT Fee 2026-1
Period'') by the reasonably projected total executed share volume of
all transactions in Eligible Securities for the eight-month recovery
period, as discussed in detail below.\23\ Based on this calculation,
the Operating Committee has determined that Fee Rate 2026-1 would be
$0.000003799483243631228 per executed equivalent share. This rate is
then divided by three and rounded to determine the fee rate of
$0.000001 per executed equivalent share that will be assessed to CEBBs
and CEBSs, as also discussed in detail below.
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\23\ Section 11.3(a)(i) of the CAT NMS Plan.
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(A) CAT Fee 2026-1 Period
CAT LLC proposes to implement CAT Fee 2026-1. CAT LLC proposes to
commence CAT Fee 2026-1 during the year, rather than at the beginning
of the year. Accordingly, CAT Fee 2026-1 ``would be calculated as
described in paragraph (II)'' of Section 11.3(a)(i)(A) of the CAT NMS
Plan,\24\ which states that ``[d]uring each year, the Operating
Committee will calculate a new Fee Rate by dividing the reasonably
budgeted CAT costs for the remainder of the year by the reasonably
projected total executed equivalent share volume of all transactions in
Eligible Securities for the remainder of the year.'' \25\ For CAT Fee
2026-1, the reasonably budgeted CAT costs for ``the remainder of the
year'' are the reasonably budgeted CAT costs from May 1, 2026 through
December 31, 2026 as set forth in the updated annual budget for 2026
for CAT LLC approved by the Operating Committee on March 31, 2026
(``Updated 2026 CAT Budget'').\26\
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\24\ Section 11.3(a)(i)(A)(IV) of the CAT NMS Plan.
\25\ Section 11.3(a)(i)(A)(II) of the CAT NMS Plan.
\26\ The Updated 2026 CAT Budget is available on the CAT website
(<a href="https://www.catnmsplan.com/sites/default/files/2026-04/03.31.26-CAT-2026-Budget.pdf">https://www.catnmsplan.com/sites/default/files/2026-04/03.31.26-CAT-2026-Budget.pdf</a>).
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(B) Executed Equivalent Shares for Transactions in Eligible
Securities
Under the CAT NMS Plan, for purposes of calculating CAT Fees,
executed equivalent shares in a transaction in Eligible Securities will
be reasonably counted as follows: (1) each executed share for a
transaction in NMS Stocks will be counted as one executed equivalent
share; (2) each executed contract for a transaction in Listed Options
will be counted based on the multiplier applicable to the specific
Listed Options (i.e., 100 executed equivalent shares or such other
applicable multiplier); and (3) each executed share for a transaction
in OTC Equity Securities will be counted as 0.01 executed equivalent
share.\27\
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\27\ Section 11.3(a)(i)(B) of the CAT NMS Plan. In approving the
CAT Funding Model, the Commission concluded that ``the use of
executed equivalent share volume provides an appropriate basis for
the calculation of CAT fees.'' CAT Funding Model Approval Order at
13413.
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(C) Budgeted CAT Costs 2026-1
The CAT NMS Plan states that ``[t]he budgeted CAT costs for the
year shall be comprised of all reasonable fees, costs and expenses
reasonably budgeted to be incurred by or for the Company in connection
with the development, implementation and operation of the CAT as set
forth in the annual operating budget approved by the Operating
Committee pursuant to Section 11.1(a) of the CAT NMS Plan, or as
adjusted during the year by the Operating Committee.'' \28\ Section
11.1(a) of the CAT NMS Plan describes the requirement for the
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\28\ Section 11.3(a)(i)(C) of the CAT NMS Plan.
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Operating Committee to approve an operating budget for CAT LLC on
an annual basis. It requires the budget to ``include the projected
costs of the Company, including the costs of developing and operating
the CAT for the upcoming year, and the sources of all revenues to cover
such costs, as well as the funding of any reserve that the Operating
Committee reasonably deems
[[Page 26080]]
appropriate for the prudent operation of the Company.'' Section
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11.1(a)(i) of the CAT NMS Plan further states that:
[w]ithout limiting the foregoing, the reasonably budgeted CAT costs
shall include technology (including cloud hosting services, operating
fees, CAIS operating fees, change request fees and capitalized
developed technology costs), legal, consulting, insurance, professional
and administration, and public relations costs, a reserve and such
other cost categories as reasonably determined by the Operating
Committee to be included in the budget.
In accordance with the requirements under the CAT NMS Plan, the
Operating Committee approved an annual budget for 2026 for CAT LLC
(``Original 2026 CAT Budget'') on December 11, 2025.\29\ On March 31,
2026, the Operating Committee approved an updated budget for 2026,
referred to as the Updated 2026 CAT Budget. The Updated 2026 CAT Budget
includes actual costs for each category for January and February 2026,
with updated estimated costs for the remainder of the year. The updated
costs for May through December as included in the Updated 2026 CAT
Budget (i.e., Budgeted CAT Costs 2026-1) are the costs used in
calculating CAT Fee 2026-1.\30\ The 2026 CAT budgets, both the Original
2026 CAT Budget and the Updated 2026 CAT Budget, were prepared on the
accrual basis of accounting.\31\
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\29\ The Original 2026 CAT Budget is available on the CAT
website (<a href="https://www.catnmsplan.com/sites/default/files/2025-12/12.08.25-CAT-LLC-2026-Financial_and_Operating_Budget.pdf">https://www.catnmsplan.com/sites/default/files/2025-12/12.08.25-CAT-LLC-2026-Financial_and_Operating_Budget.pdf</a>).
\30\ The version of the Updated 2026 CAT Budget set forth on the
CAT website is presented on a quarterly basis, but is prepared based
on more granular detail. The costs for May and June are estimated
based on two-thirds of costs for Q2 where the budgeted monthly
amounts are consistent. For those cases in which the costs for a
category vary from month to month in Q2, the specific budgeted
amounts for May and June are noted.
\31\ CAT budgets for periods prior to 2025 were prepared on the
cash basis of accounting, as such budgets were primarily used to
determine the dollar amount of promissory notes from the
Participants that were required to fund the ongoing operations of
the CAT. Commencing in 2025, with the contemplated recovery of costs
from Industry Members and the Participants via CAT Fees, the
Original 2025 CAT Budget was prepared on the accrual basis of
accounting to properly match projected revenues with estimated
expenses incurred. A cash basis budget reflects expenditures when
paid, while an accrual basis budget reflects expenditures when
incurred. In moving from a cash basis budget to an accrual basis
budget, there is no double counting of expenses.
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As described in detail below, the Budgeted CAT Costs 2026-1 would
be $15,149,648. CEBBs collectively will be responsible for one-third of
the Budgeted CAT Costs 2026-1 (which is $5,049,882.67), and CEBSs
collectively will be responsible for one-third of the Budgeted CAT
Costs 2026-1 (which is $5,049,882.67).
The following describes in detail the Budgeted CAT Costs 2026-1 for
CAT Fee 2026-1. The following cost details are provided in accordance
with the requirement in the CAT NMS Plan to provide in the fee filing
the following:
the budget for the upcoming year (or remainder of the year, as
applicable), including a brief description of each line item in the
budget, including (1) technology line items of cloud hosting services,
operating fees, CAIS operating fees, change request fees and
capitalized developed technology costs, (2) legal, (3) consulting, (4)
insurance, (5) professional and administration, and (6) public
relations costs, a reserve and/or such other categories as reasonably
determined by the Operating Committee to be included in the budget, and
the reason for changes in each such line item from the prior CAT fee
filing.\32\
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\32\ Section 11.3(a)(iii)(B) of the CAT NMS Plan.
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Each of the costs described below is reasonable, appropriate and
necessary for the creation, implementation and maintenance of CAT.
The following table breaks down the Budgeted CAT Costs 2026-1 into
the categories set forth in Section 11.3(a)(iii)(B) of the CAT NMS
Plan.\33\ The Budgeted CAT Costs 2026-1 reflect the costs for May
through December as included in the Updated 2026 CAT Budget. The
Budgeted CAT Costs 2026-1 are the costs used in calculating CAT Fee
2026-1.
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\33\ Note that costs and related cost calculations provided in
this filing may reflect minor variations from the budgeted costs due
to rounding.
Budgeted CAT Costs 2026-1
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Budgeted CAT costs 2026-1 \b\ (i.e.,
Budget category costs for May-December 2026)
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Capitalized Developed \c\ $3,450,000
Technology Costs \a\..........
Technology Costs............... 83,737,680
Cloud Hosting Services..... \d\ 49,866,667
Operating Fees............. \e\ 19,691,953
CAIS Operating Fees........ \f\ 14,179,060
Change Request Fees........ \g\ 0
Legal.......................... \h\ 5,670,452
Consulting..................... \i\ 1,025,957
Insurance...................... \j\ 852,768
Professional and administration \k\ 749,151
Public relations............... \l\ 0
Interest Income................ \m\ ($1,453,382)
----------------------------------------
Total Costs................ 94,032,626
Reserve (25% of Total Costs)... 23,508,157
----------------------------------------
Total Costs and Reserve........ 117,540,783
Use of Existing Reserve........ \n\ (102,391,135)
Total Budgeted CAT Costs 2026-1 15,149,648
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\a\ The non-cash amortization of these capitalized developed technology
costs to be incurred during the CAT Fee 2026-1 Period have been
appropriately excluded from the above table.\34\
\b\ Budgeted CAT Costs 2026-1 described in this table of costs were
determined based on an analysis of a variety of factors, including
historical costs/invoices, estimated costs from respective vendors/
service providers, contractual terms with vendors/service providers,
anticipated service levels and needs, and discussions with vendors and
Participants.
\c\ This cost number for capitalized developed technology costs reflects
(1) capitalized developed technology costs of $3,450,000 for May, $0
for June and $0 for the third and fourth quarters of 2026 as included
in the Updated 2026 CAT Budget; and (2) $0 for the Software License
Fee 2026 for the second, third, and fourth quarters of 2026 as
included in the Updated 2026 CAT Budget: ($3,450,000 + $0 + $0 + $0) +
($0 + $0 + $0) = $3,450,000.
[[Page 26081]]
\d\ This cost number for cloud hosting services reflects two-thirds of
the cloud hosting services costs for the second quarter and the cloud
hosting services for the third and fourth quarters of 2026 as included
in the Updated 2026 CAT Budget: (\2/3\ x $18,700,000) + $18,700,000 +
$18,700,000 = $49,866,667.
\e\ This cost number for operating fees reflects (1) two-thirds of the
Non-CAIS fixed operating fees for the second quarter and the Non-CAIS
fixed operating fees for the third and fourth quarters of 2026 as
included in the Updated 2026 CAT Budget and (2) two-thirds of the
market data vendor fees for the second quarter and the market data
vendor fees for the third and fourth quarter of 2026 as included in
the Updated 2026 CAT Budget: ((\2/3\ x $7,191,853) + $7,191,853 +
$7,191,853) + ((\2/3\ x $192,630) + $192,630 + $192,630) =
$19,691,953.
\f\ This cost number for CAIS operating fees reflects two-thirds of the
CAIS fixed operating fees for the second quarter and the CAIS fixed
operating fees for the third and fourth quarters of 2026 as included
in the Updated 2026 CAT Budget: (\2/3\ x $5,317,147) + $5,317,147 +
$5,317,147 = $14,179,060.
\g\ This $0 cost number for change requests reflects the fact that there
were no change request fees set forth in the Updated 2026 CAT Budget.
\h\ This cost number for legal services reflects two-thirds of the legal
costs for the second quarter and the legal costs for the third and
fourth quarters of 2026 as included in the Updated 2026 CAT Budget:
(\2/3\ x $2,145,170) + $2,125,170 + $2,115,170 = $5,670,452.
\i\ This cost number for consulting services reflects two-thirds of the
consulting costs for the second quarter and the consulting costs for
the third and fourth quarters of 2026 as included in the Updated 2026
CAT Budget: (\2/3\ x $384,734) + $384,734 + $384,734 = $1,025,957.
\j\ This cost number for insurance reflects two-thirds of the insurance
costs for the second quarter and the insurance costs for the third and
fourth quarters of 2026 as included in the Updated 2026 CAT Budget:
(\2/3\ x $300,977) + $321,042 + $331,074 = $852,768.
\k\ This cost number for professional and administration services
reflects two-thirds of the professional and administration costs for
the second quarter and the professional and administration costs for
the third and fourth quarters of 2026 as included in the Updated 2026
CAT Budget: (\2/3\ x $280,932) + $280,932 + $280,932 = $749,151.
\l\ This $0 cost number of change requests reflects the fact that there
were no change request fees set forth in the Updated 2026 CAT Budget.
\m\ This interest income reflects interest income (net of bank fees) of
$517,208 for May and June and interest income (net of bank fees) for
the third and fourth quarters of 2026 as included in the Updated 2026
CAT Budget: $517,208 + $571,010 + $365,164 = $1,453,382. Note that
interest income for May and June 2026 of $517,208 is slightly less
than two-thirds of $809,598 (which is $539,732) for the second quarter
as the amount of interest income varies from month to month.
\n\ This amount for the use of the existing reserve is calculated by
subtracting from the Accrued Liquidity Reserve Balance as of the
Beginning of the Year in the Updated 2026 CAT Budget the 25%
Incremental Liquidity Reserve Accrued during 2026 for the first
quarter and for April of 2026 as included in the Updated 2026 CAT
Budget: $155,403,378--($41,800,153 + $11,212,091) = $102,391,135. Note
that the 25% Incremental Liquidity Reserved Accrued during 2026 for
April 2026 of $11,212,091 is slightly more than one-third of
$33,366,432 (which is $11,122,144) for the second quarter as the
amount of the 25% Incremental Liquidity Reserved Accrued during 2026
varies from month to month.
To the extent that CAT LLC enters into notes with Participants or
others to pay costs incurred during the period in which CAT Fee 2026-1
is in effect, CAT LLC will use the proceeds from CAT Fee 2026-1 and the
related Participant CAT fees to repay such notes.
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\34\ With respect to certain costs that were ``appropriately
excluded,'' such excluded costs relate to the amortization of
capitalized technology costs, which are amortized over the life of
the Plan Processor Agreement. As such costs have already been
otherwise reflected in the filing, their inclusion would double
count the capitalized technology costs. In addition, amortization is
a non-cash expense.
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The following table compares the annual budgeted CAT costs as set
forth in the updated annual CAT budget for 2025 approved by the
Operating Committee in May 2025 (``May Updated 2025 CAT Budget''),\35\
the updated annual CAT budget for 2025 approved by the Operating
Committee in November 2025 (``November Updated 2025 CAT Budget''),\36\
the Original 2026 CAT Budget and the Updated 2026 CAT Budget, and is
provided for informational purposes. In each case, the costs provided
reflect the costs for the entire year for each of the budgets; this
differs from the above chart which focuses on budgeted costs for the
period from May 1, 2026 through December 31, 2026, which, as noted, are
the costs that are used in the calculation of the fee rate in this fee
filing.
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\35\ The May Updated 2025 CAT Budget is available on the CAT
website (<a href="https://www.catnmsplan.com/sites/default/files/2025-05/05.19.25-CAT-LLC-2025-Financial_and_Operating-Budget.pdf">https://www.catnmsplan.com/sites/default/files/2025-05/05.19.25-CAT-LLC-2025-Financial_and_Operating-Budget.pdf</a>).
\36\ The November Updated 2025 CAT Budget is available on the
CAT website (<a href="https://www.catnmsplan.com/sites/default/files/2025-12/12.22.25_CAT-LLC-2025-Finacial_and_Operating-Budget.pdf">https://www.catnmsplan.com/sites/default/files/2025-12/12.22.25_CAT-LLC-2025-Finacial_and_Operating-Budget.pdf</a>).
Comparison of Full Year Budgeted Costs
----------------------------------------------------------------------------------------------------------------
Full year of
Full year of 2025 2025 budgeted Full year of Full year of
budgeted CAT CAT costs from 2026 budgeted 2026 budgeted
Budget Category costs from updated 2025 CAT costs from CAT costs from
updated 2025 CAT budget (Nov. original 2026 updated 2026
budget (May 2025) 2025) CAT budget CAT budget
----------------------------------------------------------------------------------------------------------------
Capitalized Developed Technology Costs $4,871,962 $5,163,991 $8,228,827 $8,378,964
\a\.....................................
Technology Costs......................... 211,548,472 173,091,660 137,514,003 128,643,476
Cloud Hosting Services............... 159,230,937 122,084,811 81,900,006 77,529,362
Operating Fees \b\................... 30,817,686 29,932,001 34,345,413 29,845,524
CAIS Operating Fees.................. 20,749,848 20,749,848 21,268,584 21,268,590
Change Request Fees.................. 750,000 325,000 0 0
Legal.................................... 7,370,002 7,312,547 8,485,000 8,939,184
Consulting............................... 1,749,998 1,750,000 1,550,000 1,550,000
Insurance................................ 1,594,452 1,368,750 1,505,625 1,254,070
Professional and administration.......... 1,193,090 1,392,679 1,145,500 1,085,500
Public relations......................... 6,575 6,575 0 0
Interest Income.......................... 0 (2,510,223) (1,995,958) (2,806,325)
----------------------------------------------------------------------
Total Annual CAT Costs\c\............ 228,334,551 187,575,979 156,432,998 147,044,869
----------------------------------------------------------------------------------------------------------------
\a\ This cost number is calculated by adding together the Capitalized Developed Technology Costs and the
Software License Fee for each budget.
\b\ This cost number is calculated by adding together the Operating fees, the Cyber Insurance Premium Adjustment
(if any) and market data vendor fees (if any separate fees) for each budget.
\c\ This total cost number does not include an amount for a reserve.
[[Page 26082]]
In addition, the following table compares the budgeted costs for
January and February 2026 that were used in drafting the Original 2026
CAT Budget with the actual costs for January and February 2026 that
were used in drafting the Updated 2026 CAT Budget. The Original 2026
CAT Budget includes budgeted costs for January and February 2026,
whereas the Updated 2026 CAT Budget includes actual costs for January
and February 2026. The variance from the budgeted costs for January and
February 2026 to the actual costs for January and February 2026 are
used in this filing in supporting the reasonableness of the estimates
for each category of costs.
Comparison of Budgeted and Actual Costs for January & February 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actual costs for
Budgeted costs for January January & February
Budget category & February 2026 (as used in 2026 (as used in Variance from budgeted costs for January & February
drafting the original 2026 drafting the updated 2026 to actual costs for January & February of 2026
CAT budget) 2026 CAT budget)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Capitalized Developed Technology Costs \a\. $671,472 $4,145,430 Increase by $3,473,958. \b\
Technology Costs........................... 25,894,000 21,501,183
Cloud Hosting Services................. 17,200,000 12,829,362 Decrease by $4,370,638. \c\
Operating Fees......................... 5,149,236 5,127,057 Decrease by $22,179.
CAIS Operating Fees.................... 3,544,764 3,544,764 No change.
Change Request Fees.................... 0 0 No change.
Legal...................................... 1,424,166 1,838,617 Increase by $414,451.\d\
Consulting................................. 258,334 267,554 Increase by $9,220.
Insurance.................................. 250,938 200,652 Decrease by $50,286.
Professional and administration............ 190,916 149,061 Decrease by $41,855.
Public relations........................... 0 0 No change.
Interest Income............................ (758,343) (757,527) Decrease by $816.
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Total.................................. 27,931,483 27,344,970 Decrease by $586,513
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ This cost number for capitalized developed technology costs is calculated by adding together the capitalized developed technology costs and the
software license fee for each budget.
\b\ The variance for capitalized developed technology costs is the result of costs related to the software license fee in accordance with the Plan
Processor Agreement with FCAT.
\c\ This variance is attributable to lower than forecasted market volumes and the impact of lower processing costs due to shutting down certain
functionalities.
\d\ The variance in legal costs is attributable to unanticipated issues that required additional legal efforts on behalf of CAT LLC that developed after
the budget was created.
(i) Technology Costs--Cloud Hosting Services
(a) Description of Cloud Hosting Services Costs
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
cloud hosting services costs set forth in the budget. The Operating
Committee approved an operating budget for the CAT pursuant to Section
11.1(a) of the CAT NMS Plan that included $49,866,667 in technology
costs for cloud hosting services for the CAT Fee 2026-1 Period. The
technology costs for cloud hosting services represent costs reasonably
budgeted to be incurred for services provided by the cloud services
provider for the CAT, Amazon Web Services, Inc. (``AWS'') during the
CAT Fee 2026-1 Period.
In the agreement between CAT LLC and the Plan Processor for the CAT
(``Plan Processor Agreement''), FINRA CAT, LLC (``FCAT''), AWS was
named as the subcontractor to provide cloud hosting services. Under the
Plan Processor Agreement, CAT LLC is required to pay FCAT the fees
incurred by the Plan Processor for cloud hosting services provided by
AWS as FCAT's subcontractor on a monthly basis for the cloud hosting
services, and FCAT, in turn, pays such fees to AWS. The fees for cloud
hosting services were negotiated by FCAT on an arm's length basis with
the goals of managing costs and receiving services required to comply
with the CAT NMS Plan and Rule 613, taking into consideration a variety
of factors, including the expected volume of data, the breadth of
services provided and market rates for similar services. Services
provided by AWS include storage services, databases, compute services
and other services (such as networking, management tools and DevOps
tools), as well as various environments for CAT, such as development,
performance testing, test, and production environments. FCAT utilizes
such cloud hosting services for a broad array of services for the CAT,
such as data ingestion, data management, and analytic tools for the
CAT. AWS performs cloud hosting services for both the CAT transaction
database as well as the Reference Database (previously referred to as
the Customer and Account Information System, or ``CAIS'').\37\ It is
anticipated that such cloud hosting services will continue during the
CAT Fee 2026-1 Period.
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\37\ On January 13, 2026, the SEC approved an amendment to the
CAT NMS Plan relating to the Customer and Account Information System
(referred to as ``CAIS''). Effective with this amendment, CAIS has
been renamed as the ``Reference Database.'' Securities Exchange Act
Rel. No. 104586 (Jan. 13, 2026), 91 FR 2164 (Jan. 16, 2026) (``CAIS
Amendment''). The SEC subsequently approved another amendment to the
CAT NMS Plan to implement various cost savings measures that made
further changes to the Reference Database. Securities Exchange Act
Rel. No. 105107 (Mar. 27, 2026), 91 FR 16284 (Mar. 27, 2026) (``Cost
Savings Amendment'').
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The cost for AWS cloud services for the CAT is a function of the
volume of CAT Data, largely as a result of the processing and storage
of the CAT Data.\38\ The greater the amount of CAT Data, the greater
the cost of AWS services to CAT LLC. During the CAT Fee 2026-1 Period,
it is expected that AWS would provide cloud hosting services for
volumes of CAT Data far in excess of the volume predictions set
[[Page 26083]]
forth in the CAT NMS Plan. The CAT NMS Plan states, when all CAT
Reporters are submitting their data to the CAT, it ``must be sized to
receive[,] process and load more than 58 billion records per day,''
\39\ and that ``[i]t is expected that the Central Repository will grow
to more than 29 petabytes of raw, uncompressed data.'' \40\ In contrast
with those estimates, the Q3 2025 data volumes averaged 792 billion
events per day. The highest peak data volume to date of 1.45 trillion
events was recorded on April 7, 2025. The top five peak days were
recorded in April 2025.
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\38\ In addition to the effect of the data volume on the cloud
hosting costs, the processing timelines set forth in the Plan
contribute to the cloud hosting costs. For further discussion of the
effect of processing timelines on cloud hosting costs, see Section
3(b)(2)(A)(i) below.
\39\ Section 1.3 of Appendix D of the CAT NMS Plan, n.262.
\40\ Section 1.3 of Appendix D of the CAT NMS Plan.
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CAT LLC estimates that the budget for cloud hosting services costs
during the CAT Fee 2026-1 Period will be approximately $49,866,667.\41\
The budget for cloud hosting services costs during the CAT Fee 2026-1
Period is calculated based on the Updated 2026 CAT Budget.
Specifically, this estimate was calculated by adding two-thirds of the
cloud hosting services costs for the second quarter and the cloud
hosting services for the third and fourth quarters of 2026 as included
in the Updated 2026 CAT Budget.\42\
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\41\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
\42\ This calculation is (\2/3\ x $18,700,000) + $18,700,000 +
$18,700,000 = $49,866,667.
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CAT LLC estimated the budget for the cost for cloud hosting
services for the CAT Fee 2026-1 Period based on an assumption of 35%
annual year-over-year volume growth for the transaction database and an
assumption of 5% annual year-over-year volume growth for the Reference
Database. CAT LLC determined these growth assumptions in coordination
with FCAT.\43\
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\43\ Note that these growth rates are based on events processed
and stored in the CAT. Executed transactions are a small subset of
such events. As a result, the number of transactions in the CAT,
and, hence, the number of executed equivalent shares, is not
directly correlated with the number of events processed in the CAT
or the costs of cloud hosting services for the CAT. Accordingly, the
number of executed equivalent shares may stay relatively constant
from year to year while the number of events processed and stored in
the CAT may grow significantly.
---------------------------------------------------------------------------
This process for estimating the budget for cloud hosting services
costs for the CAT Fee 2026-1 Period is the same process by which CAT
LLC estimated the cloud hosting services costs for the Original 2026
CAT Budget.
The Original 2026 CAT Budget estimated a budget for cloud hosting
services of $17,200,000 for January and February 2026. The actual costs
for cloud hosting services for January and February 2026, which are set
forth in the Updated 2026 CAT Budget, were $12,829,362. Therefore, the
variance between budgeted and actual cloud hosting services costs for
January and February 2026 was an approximate decrease of $4,370,638 as
a result of lower volumes and a change in functionality.\44\
Accordingly, CAT LLC believes that the process for estimating the
budgeted cloud hosting services costs for the CAT Fee 2026-1 Period is
reasonable.
---------------------------------------------------------------------------
\44\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for cloud hosting services costs from the prior CAT Fee
filing. As this is the first Prospective CAT Fee filing under this CAT
Funding Model, this filing describes the changes in the cloud hosting
services costs from the Original 2026 Budget.\45\ Specifically, the
following describes the differences in the costs for cloud hosting
services included in the Original 2026 CAT Budget versus the Updated
2026 CAT Budget, and the reasons for any changes.
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\45\ The last Prospective CAT Fee, CAT Fee 2025-2, was
implemented pursuant to the prior CAT funding model. Moreover, the
final invoice for CAT Fee 2025-2 was sent in December 2025, and,
therefore, there is a six-month gap between the final invoice for
CAT Fee 2025-2 and the first invoice for CAT Fee 2026-1, which would
be in June 2026. Accordingly, this filing describes the changes in
the cloud hosting services costs from the Original 2026 Budget.
---------------------------------------------------------------------------
The annual 2026 budgeted costs for cloud hosting services included
in the Original 2026 CAT Budget were $81,900,006, and the annual 2026
budgeted costs for cloud hosting services included in the Updated 2026
CAT Budget are $77,529,362. Accordingly, budgeted annual costs for
cloud hosting services decreased by $4,370,644 from the Original 2026
CAT Budget to the Updated 2026 CAT Budget, which is an approximate 5%
reduction in cloud hosting services costs for the full year of
2026.\46\ The budgeted decrease in costs for cloud hosting services
reflects lower costs for January and February 2026 due to lower than
forecasted market volumes in January and the impact of lower processing
costs due to shutting down certain functionalities.
---------------------------------------------------------------------------
\46\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
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(ii) Technology Costs--Operating Fees
(a) Description of Operating Fees
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
operating fees set forth in the budget. The Operating Committee
approved an operating budget for the CAT pursuant to Section 11.1(a) of
the CAT NMS Plan that included $19,691,953 in technology costs for
operating fees for the CAT Fee 2026-1 Period. Operating fees are those
fees paid by CAT LLC to FCAT as the Plan Processor to operate and
maintain the CAT and to perform business operations related to the
system, including compliance, security, testing, training,
communications with the industry (e.g., management of the FINRA CAT
Helpdesk, FAQs, website and webinars) and program management as
required by the CAT NMS Plan. Operating fees also include market data
provider costs, as discussed below.
Plan Processor: FCAT. Under the Plan Processor Agreement with FCAT,
CAT LLC is required to pay FCAT a negotiated monthly fixed price for
the operation of the CAT. This fixed price contract was negotiated on
an arm's length basis with the goals of managing costs and receiving
services required to comply with the CAT NMS Plan and Rule 613, taking
into consideration a variety of factors, including the breadth of
services provided and market rates for similar types of activity. It is
anticipated that FCAT will provide a variety of services to the CAT
during the CAT Fee 2026-1 Period, including the following:
<bullet> Provide the CAT-related functions and services as the Plan
Processor as required by SEC Rule 613 and the CAT NMS Plan in
connection with the operation and maintenance of the CAT;
<bullet> Address compliance items, including drafting CAT policies
and procedures, and addressing Regulation SCI requirements;
<bullet> Provide support to the Operating Committee, the Compliance
Subcommittee and CAT working groups;
<bullet> Assist with interpretive efforts, exemptive requests and
amendments regarding the CAT NMS Plan;
<bullet> Oversee the security of the CAT;
<bullet> Monitor the operation of the CAT, including with regard to
Participant and Industry Member reporting;
<bullet> Provide support to subcontractors under the Plan Processor
Agreement;
<bullet> Provide support in discussions with the Participants and
the SEC and its staff;
[[Page 26084]]
<bullet> Operate the FINRA CAT Helpdesk;
<bullet> Facilitate communications with the industry, including via
FAQs, CAT Alerts, meetings, presentations and webinars;
<bullet> Administer the CAT website and all of its content;
<bullet> Maintain cyber security insurance related to the CAT;
<bullet> Assist with billing, collection and other CAT fee-related
activity; and
<bullet> Provide technical support and assistance with
connectivity, data access, and user support, including the use of CAT
Data and query tools, for Participants and the SEC staff.
CAT LLC calculated the budget for the FCAT technology costs for
operating fees for the CAT Fee 2026-1 Period based on the recurring
monthly operating fees under the Plan Processor Agreement.
Market Data Provider: Algoseek. It is anticipated that the
operating fees costs for the CAT Fee 2026-1 Period will include costs
related to the receipt of certain market data for the CAT pursuant to
an agreement between FCAT and Algoseek, LLC (``Algoseek''). CAT LLC
determined that Algoseek would provide market data that included data
elements set forth in Section 6.5(a)(ii) of the CAT NMS Plan, and that
the fees were reasonable and in line with market rates for the market
data received. All costs under the contract would be treated as a
direct pass through cost to CAT LLC. CAT LLC estimated the budget for
the costs for Algoseek for the CAT Fee 2026-1 Period based on the
monthly rate set forth in the agreement between Algoseek and FCAT.
Operating Fee Estimates. CAT LLC estimates that the budget for
operating fees during the CAT Fee 2026-1 Period will be approximately
$19,691,953.\47\ The budget for operating fees during the CAT Fee 2026-
1 Period is calculated based on the Updated 2026 CAT Budget.
Specifically, this estimate was calculated by adding (1) two-thirds of
the Non-CAIS fixed operating fees for the second quarter and the Non-
CAIS fixed operating fees for the third and fourth quarters of 2026
included in the Updated 2026 CAT Budget and (2) two-thirds of the
market data vendor fees for the second quarter and the market data
vendor fees for the third and fourth quarter of 2026 included in the
Updated 2026 CAT Budget.\48\
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\47\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
\48\ This calculation is ((\2/3\ x $7,191,853) + $7,191,853 +
$7,191,853) + ((\2/3\ x $192,630) + $192,630 + $192,630) =
$19,691,953.
---------------------------------------------------------------------------
As discussed above, CAT LLC estimated the budget for the operating
fees during the CAT Fee 2026-1 Period based on monthly rates set forth
in the Plan Processor Agreement and the agreement with Algoseek. CAT
LLC also recognized that the operating fees are generally consistent
throughout the year. This process for estimating the budget for the
operating fees for the CAT Fee 2026-1 Period is the same process by
which CAT LLC estimated the operating fees for the Original 2026 CAT
Budget. The Original 2026 CAT Budget estimated a budget for operating
fees of $5,149,236 for January and February 2026, and the actual costs
for operating fees for January and February 2026 were $5,127,057.
Therefore, the variance between budgeted and actual operating fees for
this period was small--$22,179.\49\ Accordingly, CAT LLC believes that
the process for estimating the budgeted operating fees for the CAT Fee
2026-1 Period is reasonable.
---------------------------------------------------------------------------
\49\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for operating fees from the prior CAT Fee filing. As this
is the first Prospective CAT Fee filing under this CAT Funding Model,
this filing describes the changes in the operating fees from the
Original 2026 Budget. Specifically, the following describes the
differences in the costs for operating fees included in the Original
2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for
any changes.
The annual 2026 budgeted costs for operating fees included in the
Original 2026 CAT Budget were $34,345,413, and the annual 2026 budgeted
costs for operating fees included in the Updated 2026 CAT Budget are
$29,845,524. Accordingly, budgeted annual costs for operating fees
decreased by $4,499,889 from the Original 2026 CAT Budget to the
Updated 2026 CAT Budget, which is an approximate 13% reduction in
operating fees for the full year of 2026.\50\ The budgeted decrease in
costs for operating fees reflects the proposed amendments to the Plan
Processor Agreement related to the recent cost savings amendments to
the CAT NMS Plan.\51\
---------------------------------------------------------------------------
\50\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
\51\ See CAIS Amendment and Cost Savings Amendment.
---------------------------------------------------------------------------
(iii) Technology Costs--CAIS Operating Fees
(a) Description of CAIS Operating Fees
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
CAIS operating fees set forth in the budget. The Operating Committee
approved an operating budget for the CAT pursuant to Section 11.1(a) of
the CAT NMS Plan that included $14,179,060 in technology costs for CAIS
operating fees for the CAT Fee 2026-1 Period. CAIS operating fees
represent the fees paid to FCAT for services provided with regard to
the operation and maintenance of the Reference Database (previously
referred to as CAIS), and to perform the business operations related to
the system, including compliance, security, testing, training,
communications with the industry (e.g., management of the FINRA CAT
Helpdesk, FAQs, website and webinars) and program management. The CAT
is required under the CAT NMS Plan to capture and store Reference Data
in the Reference Database and to create a CAT-Customer-ID for each
Customer.\52\
---------------------------------------------------------------------------
\52\ See Section 9 of Appendix D of the CAT NMS Plan.
---------------------------------------------------------------------------
During the CAT Fee 2026-1 Period, it is anticipated that FCAT will
provide services related to the Reference Database. Under the Plan
Processor Agreement with FCAT, CAT LLC is required to pay FCAT for
services related to the Reference Database provided by FCAT on a
monthly basis. CAT LLC negotiated the fees for FCAT's services related
to the Reference Database on an arm's length basis with the goals of
managing costs and receiving services required to comply with the CAT
NMS Plan, taking into consideration a variety of factors, including the
services to be provided and market rates for similar types of activity.
During the CAT Fee 2026-1 Period, it is anticipated that FCAT will
continue to provide services relating to the ongoing operation,
maintenance and support of the Reference Database.
CAT LLC estimates that the budget for CAIS operating fees during
the CAT Fee 2026-1 Period will be approximately $14,179,060.\53\ The
budget for CAIS operating fees during the CAT Fee 2026-1 Period is
calculated based on the Updated 2026 CAT Budget. Specifically, this
estimate was calculated by adding two-thirds of the CAIS fixed
operating fees for the second quarter and the CAIS fixed operating
[[Page 26085]]
fees for the third and fourth quarters of 2026 included in the Updated
2026 CAT Budget.\54\
---------------------------------------------------------------------------
\53\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
\54\ This calculation is (\2/3\ x $5,317,147) + $5,317,147 +
$5,317,147 = $14,179,060.
---------------------------------------------------------------------------
CAT LLC calculated the budget for FCAT's services related to the
Reference Database for the CAT Fee 2026-1 Period based on the recurring
monthly CAIS operating fees under the Plan Processor Agreement. This
process for estimating the budget for the CAIS operating fees for the
CAT Fee 2026-1 Period is the same process by which CAT LLC estimated
the CAIS operating fees for the Original 2026 CAT Budget. The Original
2026 CAT Budget estimated a budget of $3,544,764 for CAIS operating
fees for January and February of 2026. The actual costs for CAIS
operating fees for January and February of 2026, which are included in
the Updated 2026 CAT Budget, were $3,544,764. There was no variance
between budgeted and actual CAIS operating fees for the first two
months of 2026.\55\ Accordingly, CAT LLC believes that the process for
estimating the budgeted CAIS operating fees for the CAT Fee 2026-1
Period is reasonable.
---------------------------------------------------------------------------
\55\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for CAIS operating fees from the prior CAT Fee filing. As
this is the first Prospective CAT Fee filing under this CAT Funding
Model, this filing describes the changes in the CAIS operating fees
from the Original 2026 Budget. Specifically, the following describes
the differences in the costs for CAIS operating fees included in the
Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the
reasons for any changes.
CAIS operating fees are based on a recurring monthly rate payable
to FCAT and are unchanged from the Original 2026 CAT Budget to the
Updated 2026 CAT Budget. The annual 2026 budgeted costs for CAIS
operating fees included in the Original 2026 CAT Budget were
$21,268,584, and the annual 2026 budgeted costs for CAIS operating fees
included in the Updated 2026 CAT Budget are $21,268,590.\56\
Accordingly, the budgeted annual costs for CAIS operating fees are the
same for both the Original 2026 CAT Budget and the Updated 2026 CAT
Budget.
---------------------------------------------------------------------------
\56\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
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(iv) Technology Costs--Change Request Fees
(a) Description of Change Request Fees
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
change request fees set forth in the budget. The Operating Committee
approved an operating budget for the CAT pursuant to Section 11.1(a) of
the CAT NMS Plan that included $0 in technology costs for change
request fees for the CAT Fee 2026-1 Period. The technology costs
related to change request fees include costs related to certain
modifications, upgrades or other changes to the CAT.
Change requests are standard practice and necessary to reflect
operational changes, including changes related to new market
developments, such as new market participants. In general, if CAT LLC
determines that a modification, upgrade or other changes to the
functionality or service is necessary and appropriate, CAT LLC will
submit a request for such a change to the Plan Processor. The Plan
Processor will then respond to the request with a proposal for
implementing the change, including the cost (if any) of such a change.
CAT LLC then determines whether to approve the proposed change.
The change request budget line is established to include expected
costs to be incurred in which the nature of the costs (i.e.,
capitalization versus expensing) have not yet been determined. Upon the
incurrence of such costs, the final determination of capitalization
versus expensing is determined and then such costs are reclassified
from the change request line to the appropriate technology cost line
item.
CAT LLC estimates that the budget for change requests during the
CAT Fee 2026-1 Period will be approximately $0.\57\ The budget for
change requests during the CAT Fee 2026-1 Period is calculated based on
the Updated 2026 CAT Budget. This $0 cost number for change request
fees reflects the fact that there were no change request fees set forth
in the Updated 2026 CAT Budget.
---------------------------------------------------------------------------
\57\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
---------------------------------------------------------------------------
CAT LLC estimated the budget for the potential change requests for
the CAT Fee 2026-1 Period based on, among other things, a review of
past change requests and potential future change request needs, as well
as discussions with FCAT. This process for estimating the budget for
the change requests for the CAT Fee 2026-1 Period is the same process
by which CAT LLC estimated the change requests cost for the Original
2026 CAT Budget. The Original 2026 CAT Budget estimated a change
request budget of $0 for January and February of 2026. The actual costs
for change requests for January and February of 2026, which are set
forth in the Updated 2026 CAT Budget, were $0. There was no variance
between budgeted and actual change request costs for January and
February of 2026.\58\ Accordingly, CAT LLC believes that the process
for estimating the budgeted change request costs for the CAT Fee 2026-1
Period is reasonable.
---------------------------------------------------------------------------
\58\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for change request fees from the prior CAT Fee filing. As
this is the first Prospective CAT Fee filing under this CAT Funding
Model, this filing describes the changes in the change request fees
from the Original 2026 Budget. Specifically, the following describes
the differences (if any) in the costs for change request fees included
in the Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and
the reasons for any changes.
The annual 2026 budgeted costs for change requests included in the
Original 2026 CAT Budget were $0, and the annual 2026 budgeted costs
for change requests included in the Updated 2026 CAT Budget are $0.\59\
Accordingly, budgeted annual costs for change requests are the same for
both the Original 2026 CAT Budget and the Updated 2026 CAT Budget.
---------------------------------------------------------------------------
\59\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(v) Technology Costs--Capitalized Developed Technology Costs
(a) Description of Capitalized Developed Technology Costs
Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
capitalized developed technology costs set forth in the budget. The
Operating Committee approved an operating budget for the CAT pursuant
to Section 11.1(a) of the CAT NMS Plan that includes $3,450,000 in
technology costs for capitalized developed technology costs for the CAT
Fee 2026-1 Period. This category of costs includes the budget for
capitalizable application development costs incurred in the development
of the CAT. It is anticipated that such costs will include
[[Page 26086]]
certain costs related to the software license fee for the Reference
Database in accordance with the Plan Processor Agreement with FCAT, as
well as costs related to a set of technology changes to be implemented
by FCAT related to the cost savings amendments \60\ and the move to
23x5 trading.
---------------------------------------------------------------------------
\60\ See CAIS Amendment and Cost Savings Amendment.
---------------------------------------------------------------------------
CAT LLC estimates that the budget for capitalized developed
technology costs during the CAT Fee 2026-1 Period will be approximately
$3,450,000.\61\ The budget for capitalized developed technology costs
during the CAT Fee 2026-1 Period is calculated based on the Updated
2026 CAT Budget. Specifically, this estimate was calculated by adding
(1) capitalized developed technology costs of $3,450,000 for May, $0
for June and $0 for the third and fourth quarters of 2026 included in
the Updated 2026 CAT Budget; and (2) $0 for the Software License Fee
2026 for the second, third, and fourth quarters of 2026 included in the
Updated 2026 CAT Budget.\62\
---------------------------------------------------------------------------
\61\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
\62\ This calculation is ($3,450,000 + $0 + $0 + $0) + ($0 + $0
+ $0) = $3,450,000. Note that the $4,178,964 cost for the software
license fee was not included in the CAT Fee 2026-1 Period.
---------------------------------------------------------------------------
CAT LLC estimated the budget for capitalized developed technology
costs for the CAT Fee 2026-1 Period based on an analysis of a variety
of factors, including information related to potential technology costs
and related contractual and Plan requirements, and discussions with
FCAT regarding such potential technology costs. This process for
estimating the budget for capitalized developed technology costs for
the CAT Fee 2026-1 Period is the same process by which CAT LLC
estimated the capitalized developed technology costs for the Original
2026 CAT Budget. The Original 2026 CAT Budget estimated a budget for
capitalized developed technology costs of $671,472 for January and
February 2026, and the actual costs for capitalized developed
technology costs for January and February 2026 were $4,145,430.\63\ The
variance of $3,473,958 for January and February 2026 is the result of
costs related to the software license fee for the Reference Database in
accordance with the Plan Processor Agreement with FCAT. Accordingly,
CAT LLC believes that the process for estimating the budgeted
capitalized developed technology costs for the CAT Fee 2026-1 Period is
reasonable.
---------------------------------------------------------------------------
\63\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for capitalized developed technology costs from the prior
CAT Fee filing. As this is the first Prospective CAT Fee filing under
this CAT Funding Model, this filing describes the changes in the
capitalized developed technology costs from the Original 2026 Budget.
Specifically, the following describes the differences in the costs for
capitalized developed technology costs as included in the Original 2026
CAT Budget versus the Updated 2026 CAT Budget, and the reasons for any
changes.
The annual 2026 budget for capitalized developed technology costs
included in the Original 2026 CAT Budget was $8,228,827, and the annual
2026 budget for capitalized developed technology costs included in the
Updated 2026 CAT Budget are $8,378,964.\64\ Accordingly, the annual
budget for capitalized developed technology costs increased by $150,137
from the Original 2026 CAT Budget to the Updated 2026 CAT Budget, which
is an approximate 2% increase in the capitalized developed technology
costs for the full year of 2026. This budgeted increase in the annual
budget for capitalized developed technology costs was the result of
costs related to the software license fee for the Reference Database in
accordance with the Plan Processor Agreement with FCAT.
---------------------------------------------------------------------------
\64\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(vi) Legal Costs
(a) Description of Legal Costs
Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
legal costs set forth in the budget. The Operating Committee approved
an operating budget for the CAT pursuant to Section 11.1(a) of the CAT
NMS Plan that includes $5,670,452 in legal costs for the CAT Fee 2026-1
Period. This category of costs represents budgeted costs for legal
services for this period. CAT LLC anticipates that it will receive
legal services from two law firms, Wilmer Cutler Pickering Hale and
Dorr LLP (``WilmerHale'') and Jenner & Block LLP (``Jenner''), during
the CAT Fee 2026-1 Period.
Law Firm: WilmerHale. It is anticipated that legal costs during the
CAT Fee 2026-1 Period will include costs related to the legal services
performed by WilmerHale. CAT LLC anticipates that it will continue to
employ WilmerHale during the CAT Fee 2026-1 Period based on, among
other things, their expertise, long history with the project and
recognition that the hourly fee rates for this law firm are anticipated
to be in line with market rates for specialized legal expertise.
WilmerHale's billing rates are negotiated on an annual basis and are
determined with reference to the rates charged by other leading law
firms for similar work. The Participants assess WilmerHale's
performance and review prospective budgets and staffing plans submitted
by WilmerHale on an annual basis. The legal fees will be paid by CAT
LLC to WilmerHale.
During the CAT Fee 2026-1 Period, it is anticipated that WilmerHale
will provide legal services related to the following:
<bullet> Assist with CAT fee filings and related funding issues;
<bullet> Draft exemptive requests from CAT NMS Plan requirements
and/or proposed amendments to the CAT NMS Plan;
<bullet> Provide legal guidance with respect to interpretations of
CAT NMS Plan requirements;
<bullet> Provide legal support for the Operating Committee,
Compliance Subcommittee, working groups and Leadership Team;
<bullet> Draft SRO rule filings related to the CAT Compliance Rule;
<bullet> Manage corporate governance matters, including supporting
Operating Committee meetings and preparing resolutions and consents;
<bullet> Assist with communications with the industry, including
CAT Alerts and presentations;
<bullet> Provide guidance regarding the confidentiality of CAT
Data;
<bullet> Assist with cost management analyses and proposals;
<bullet> Assist with commercial contract-related matters, including
change orders and amendments, Plan Processor Agreement items, and
subcontract matters;
<bullet> Provide support with regard to discussions with the SEC
and its staff, including with respect to addressing interpretive and
implementation issues;
<bullet> Provide legal guidance with respect to the CAT budgets;
<bullet> Provide background assistance to other counsel for CAT
matters;
<bullet> Assist with legal responses related to third-party data
requests; and
<bullet> Provide legal support regarding CAT policies and
procedures.
CAT LLC estimated the budget for the legal costs for WilmerHale for
the CAT Fee 2026-1 Period through an analysis of a variety of factors,
including WilmerHale fee rates, historical legal
[[Page 26087]]
fees, and information related to pending legal issues and potential
future legal issues.
Law Firm: Jenner. It is anticipated that legal costs during the CAT
Fee 2026-1 Period will include costs related to the legal services
performed by Jenner. CAT LLC anticipates that it will continue to
employ Jenner during the CAT Fee 2026-1 Period based on, among other
things, their expertise, history with the project and recognition that
their hourly fee rates are in line with market rates for specialized
legal expertise. The legal fees will be paid by CAT LLC to Jenner.
During the CAT Fee 2026-1 Period, it is anticipated that Jenner
will continue to provide legal assistance to CAT LLC regarding certain
litigation matters, including: (1) CAT LLC's defense against a lawsuit
filed in the Western District of Texas against the SEC Chair, the SEC
and CAT LLC challenging the validity of Rule 613 and the CAT and
alleging various constitutional, statutory, and common law claims; \65\
(2) CAT LLC's intervention in a lawsuit in the Eleventh Circuit filed
by various parties against the SEC challenging the SEC's approval of
the CAT Funding Model; \66\ and (3) a lawsuit in the Eleventh Circuit
filed by Citadel Securities LLC seeking review of the SEC's May 20,
2024 order \67\ granting the Participants temporary conditional
exemptive relief related to the reporting of bids and/or offers made in
response to a request for quote or other form of solicitation response
provided in standard electronic format that is not immediately
actionable.\68\ Litigation involving CAT LLC is an expense of operating
the CAT, and, therefore, is appropriately an obligation of both
Participants and Industry Members under the CAT Funding Model. Jenner
also will continue to provide legal counseling to CAT LLC related to
the above-listed litigation and other litigation risk.
---------------------------------------------------------------------------
\65\ Davidson et al. v. Atkins et al., Case No. 6:24-cv-197
(W.D. Tex.).
\66\ Am. Sec. Ass'n v. SEC, Case No. 26-10936 (11th Cir.).
\67\ Securities Exchange Act Rel. No. 100181 (May 20, 2024), 89
FR 45715 (May 23, 2024).
\68\ Citadel Securities v. SEC, Case No. 24-12300 (11th Cir.).
---------------------------------------------------------------------------
CAT LLC estimated the budget for the legal costs for Jenner for the
CAT Fee 2026-1 Period through an analysis of a variety of factors,
including Jenner's fee rates, historical legal fees, and information
related to pending legal issues and potential future legal issues.
Legal Cost Estimates. CAT LLC estimates that the budget for legal
services during the CAT Fee 2026-1 Period will be approximately
$5,670,452.\69\ The budget for legal services during the CAT Fee 2026-1
Period is calculated based on the Updated 2026 CAT Budget.
Specifically, this estimate was calculated by adding budgeted costs for
two-thirds of the legal costs for the second quarter and the legal
costs for the third and fourth quarters of 2026 included in the Updated
2026 CAT Budget.\70\
---------------------------------------------------------------------------
\69\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
\70\ This calculation is (\2/3\ x $2,145,170) + $2,125,170 +
$2,115,170 = $5,670,452.
---------------------------------------------------------------------------
CAT LLC estimated the budget for the legal services for the CAT Fee
2026-1 Period based on an analysis of a variety of factors, including
law firm fee rates, historical legal fees, and information related to
pending legal issues and potential future legal issues. This process
for estimating the budget for the legal services for CAT Fee 2026-1
Period is the same process by which CAT LLC estimated the legal cost
for the Original 2026 CAT Budget. The Original 2026 CAT Budget
estimated a budget for legal costs of $1,424,166 for January and
February of 2026. The actual costs for legal services for January and
February 2026, which are included in the Updated 2026 Budget, were
$1,838,617.\71\ The increase of $414,451 was due to unanticipated
issues that required additional legal efforts on behalf of CAT LLC that
developed after the budget was created. Such additional costs were
primarily due to additional legal work related to litigation matters as
well as regulatory and corporate legal matters. Accordingly, CAT LLC
believes that the process for estimating the budgeted legal costs for
the CAT Fee 2026-1 Period is reasonable.
---------------------------------------------------------------------------
\71\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for legal costs from the prior CAT Fee filing. As this is
the first Prospective CAT Fee filing under this CAT Funding Model, this
filing describes the changes in the legal costs from the Original 2026
Budget. Specifically, the following describes the differences in the
legal costs included in the Original 2026 CAT Budget versus the Updated
2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted legal costs included in the Original 2026
CAT Budget were $8,485,000, and the annual 2026 budgeted legal costs
included in the Updated 2026 CAT Budget are $8,939,184.\72\
Accordingly, the annual budget for legal costs increased by $454,184
from the Original 2026 CAT Budget to the Updated 2026 CAT Budget for
the full year of 2026, which is an approximate 5% increase in the legal
costs for the full year of 2026. This budgeted increase in the legal
costs in the Updated 2026 CAT Budget from the Original 2026 Budget was
primarily due to an anticipated increase in legal costs related to
litigation matters as well as regulatory and corporate legal matters.
---------------------------------------------------------------------------
\72\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(vii) Consulting Costs
(a) Description of Consulting Costs
Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
consulting costs set forth in the budget. The Operating Committee
approved an operating budget for the CAT pursuant to Section 11.1(a) of
the CAT NMS Plan that included $1,025,957 in consulting costs for the
CAT Fee 2026-1 Period. The consulting costs represent the fees
estimated to be paid to the consulting firm Deloitte & Touche LLP
(``Deloitte'') as project manager during the CAT Fee 2026-1 Period. The
services provided by Deloitte to the CAT include advisory services
related to the operation of the CAT, and meeting facilitation and
communications coordination, vendor support and financial analyses. In
addition, the consulting costs include the compensation for the Chair
of the CAT Operating Committee.
It is anticipated that the costs for CAT during the CAT Fee 2026-1
Period will include costs related to consulting services performed by
Deloitte. CAT LLC anticipates that it will continue to employ Deloitte
during the CAT Fee 2026-1 Period based on, among other things, their
expertise, long history with the project, and the recognition that it
is anticipated that the consulting fees will remain in line with market
rates for this type of specialized consulting work. Deloitte's fee
rates are negotiated on an annual basis. CAT LLC assesses Deloitte's
performance and reviews prospective budgets and staffing plans
submitted by Deloitte on an annual basis. The consulting fees will be
paid by CAT LLC to Deloitte.
It is anticipated that Deloitte will provide a variety of
consulting services to the CAT during the CAT Fee 2026-1 Period,
including the following:
<bullet> Implement program operations for the CAT project;
<bullet> Provide support to the Operating Committee, the Chair of
the Operating
[[Page 26088]]
Committee and the Leadership Team, including project management
support, coordination and planning for meetings and communications, and
interfacing with law firms and the SEC;
<bullet> Assist with cost and funding matters for the CAT,
including assistance with loans and the CAT bank account for CAT
funding;
<bullet> Provide support for updating the SEC on the progress of
the development of the CAT; and
<bullet> Provide support for third party vendors for the CAT,
including FCAT, Anchin and the law firms engaged by CAT LLC.
In addition, the consulting costs include the compensation for the
Chair of the CAT Operating Committee, which is paid by CAT LLC.
CAT LLC estimates that the budget for consulting costs during the
CAT Fee 2026-1 Period will be approximately $1,025,957.\73\ The budget
for consulting costs during the CAT Fee 2026-1 Period is calculated
based on the Updated 2026 CAT Budget. Specifically, this estimate was
calculated by adding two-thirds of the consulting costs for the second
quarter and the consulting costs for the third and fourth quarters of
2026 included in the Updated 2026 CAT Budget.\74\
---------------------------------------------------------------------------
\73\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
\74\ This calculation is (\2/3\ x $2,145,170) + $2,125,170 +
$2,115,170 = $5,670,452.
---------------------------------------------------------------------------
CAT LLC estimates the budget for the consulting costs for Deloitte
for the CAT Fee 2026-1 Period based on the current statement of work
with Deloitte, which took into consideration past consulting costs,
potential future consulting needs, the proposed rates and other
contractual issues, and discussions with Deloitte, as well as the
compensation arrangement for the Chair. This process for estimating the
budget for consulting costs for the CAT Fee 2026-1 Period is the same
process by which CAT LLC estimated the consulting costs for the
Original 2026 CAT Budget. The Original 2026 CAT Budget estimated a
budget for consulting services of $258,334 for January and February
2026, and the actual costs for consulting services for January and
February 2026, which are included in the Updated 2026 CAT Budget, were
$267,554.\75\ Therefore, the variance between budgeted and actual
consulting costs for January and February was approximately 4%.
Accordingly, CAT LLC believes that the process for estimating the
budgeted consulting costs for the CAT Fee 2026-1 Period is reasonable.
---------------------------------------------------------------------------
\75\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for consulting costs from the prior CAT Fee filing. As
this is the first Prospective CAT Fee filing under this CAT Funding
Model, this filing describes the changes in the consulting costs from
the Original 2026 Budget. Specifically, the following describes the
differences (if any) in the consulting costs included in the Original
2026 CAT Budget versus the Updated 2026 CAT Budget, and the reasons for
any changes.
The annual 2026 budget for consulting costs included in the
Original 2026 CAT Budget was $1,550,000, and the annual 2026 budget for
consulting costs included in the Updated 2026 CAT Budget is
$1,550,000.\76\ Accordingly, the annual budget for consulting costs has
not changed from the Original 2026 CAT Budget to the Updated 2026 CAT
Budget for the full year of 2026.
---------------------------------------------------------------------------
\76\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(viii) Insurance Costs
(a) Description of Insurance Costs
Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
insurance costs set forth in the budget. The Operating Committee
approved an operating budget for the CAT pursuant to Section 11.1(a) of
the CAT NMS Plan that included $852,768 in insurance costs for the CAT
Fee 2026-1 Period.\77\ The insurance costs represent the costs to be
incurred for insurance for the CAT during the CAT Fee 2026-1 Period.
---------------------------------------------------------------------------
\77\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
---------------------------------------------------------------------------
It is anticipated that the insurance costs for CAT during the CAT
Fee 2026-1 Period will include costs related to cyber security
liability insurance, directors' and officers' liability insurance, and
errors and omissions liability insurance brokered by USI Insurance
Services LLC (``USI''). Such policies are standard for corporate
entities, and cyber security liability insurance is important for the
CAT System. CAT LLC anticipates that it will continue to maintain this
insurance during the CAT Fee 2026-1 Period, and notes that the annual
premiums for these policies were competitive for the coverage provided.
CAT LLC estimated the budget for the insurance costs for the CAT Fee
2026-1 Period based on the insurance estimate from USI for 2026. The
annual premiums would be paid by CAT LLC to USI.
The budgeted insurance costs for the CAT Fee 2026-1 Period are
based on an insurance cost estimate from USI for 2026. Accordingly, CAT
LLC believes that the process for estimating the budgeted insurance
costs for the CAT Fee 2026-1 Period is reasonable.
(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for insurance costs from the prior CAT Fee filing. As
this is the first Prospective CAT Fee filing under this CAT Funding
Model, this filing describes the changes in the insurance costs from
the Original 2026 Budget. Specifically, the following describes the
differences in the insurance costs included in the Original 2026 CAT
Budget versus the Updated 2026 CAT Budget, and the reasons for any
changes.
The annual 2026 budgeted insurance costs included in the Original
2026 CAT Budget were $1,505,625, and the annual 2026 budgeted insurance
costs included in the Updated 2026 CAT Budget are $1,254,070.\78\
Accordingly, the annual budget for insurance costs decreased by
$251,555 from the Original 2026 CAT Budget to the Updated 2026 CAT
Budget for the full year of 2026, which is an approximate 16% decrease
in the insurance costs for the full year of 2026. This budgeted
decrease in the insurance costs in the Updated 2026 CAT Budget from the
Original 2026 Budget was primarily due to an anticipated decrease in
insurance premiums.
---------------------------------------------------------------------------
\78\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(ix) Professional and Administration Costs
(a) Description of Professional and Administration Costs
Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
professional and administration costs set forth in the budget. The
Operating Committee approved an operating budget for the CAT pursuant
to Section 11.1(a) of the CAT NMS Plan that included $749,151 in
professional and administration costs for the CAT Fee 2026-1 Period. In
adopting the CAT NMS Plan, the Commission amended the Plan to add a
requirement that CAT LLC's financial statements be prepared in
compliance with GAAP, audited by an independent
[[Page 26089]]
public accounting firm, and made publicly available.\79\ The
professional and administration costs would include costs related to
accounting and accounting advisory services to support the operating
and financial functions of CAT, financial statement audit services by
an independent accounting firm, preparation of tax returns, and various
cash management and treasury functions. The professional and
administration costs represent the fees to be paid to Anchin, Block &
Anchin (``Anchin'') and Grant Thornton LLP (``Grant Thornton'') for
financial services during the CAT Fee 2026-1 Period.
---------------------------------------------------------------------------
\79\ Section 9.2 of the CAT NMS Plan.
---------------------------------------------------------------------------
Financial Advisory Firm: Anchin. It is anticipated that the
professional and administration costs for the CAT Fee 2026-1 Period
will include costs related to financial advisory services performed by
Anchin. CAT LLC anticipates that it will continue to employ Anchin
during the CAT Fee 2026-1 Period based on, among other things, the
firm's relevant expertise and fees, which are anticipated to remain in
line with market rates for these financial advisory services. The fees
for these services will be paid by CAT LLC to Anchin.
It is anticipated that Anchin will provide a variety of services to
the CAT during the CAT Fee 2026-1 Period, including the following:
<bullet> Update and maintain internal controls;
<bullet> Provide cash management and treasury functions;
<bullet> Facilitate bill payments to vendors;
<bullet> Facilitate repayments of promissory notes to Participants;
<bullet> Provide monthly bookkeeping;
<bullet> Review vendor invoices and documentation in support of
cash disbursements;
<bullet> Review documentation to ensure that repayments of
promissory notes to Participants are in accordance with established
policies and procedures;
<bullet> Provide accounting research and consultations on various
accounting, financial reporting and tax matters;
<bullet> Address not-for-profit tax and accounting considerations;
<bullet> Prepare tax returns;
<bullet> Address various accounting, financial reporting and
operating inquiries from Participants;
<bullet> Develop and maintain annual and interim operating and
financial budgets, including budget to actual and budget to budget
fluctuation analyses;
<bullet> Support compliance with the CAT NMS Plan;
<bullet> Work with and provide support to the Operating Committee,
Leadership Team and various CAT working groups;
<bullet> Prepare monthly, quarterly and annual financial
statements;
<bullet> Review and reconcile the monthly FINRA CAT reports/
analyses related to billings, collections, outstanding accounts
receivable and cash account;
<bullet> Perform certain verification, completeness, and validation
testing related to the monthly FINRA CAT reports/analyses related to
billings;
<bullet> Support the annual financial statement audits by an
independent auditor;
<bullet> Review historical costs from inception;
<bullet> Provide accounting and financial information in support of
SEC filings; and
<bullet> Perform additional ad hoc accounting and financial
advisory services, as requested by CAT LLC.
CAT LLC estimated the annual budget for the costs for Anchin based
on historical costs adjusted for cost of living rate increases, and
projected incremental advisory and support services.
Accounting Firm: Grant Thornton. It is anticipated that the
professional and administration costs for the CAT Fee 2026-1 Period
will include costs related to accounting services performed by Grant
Thornton. CAT LLC anticipates that it will continue to employ Grant
Thornton during the CAT Fee 2026-1 Period based on, among other things,
the firm's relevant expertise and fees, which are anticipated to remain
in line with market rates for these financial advisory services. It is
anticipated that Grant Thornton will continue to be engaged as an
independent accounting firm to complete the audit of CAT LLC's
financial statements, in accordance with the requirements of the CAT
NMS Plan. The fees for these services will be paid by CAT LLC to Grant
Thornton. CAT LLC estimated the budget for the accounting costs for
Grant Thornton for the CAT Fee 2026-1 Period based on the anticipated
hourly rates and the anticipated services plus an administrative fee.
Professional and Administration Cost Estimates. CAT LLC estimates
that the budget for professional and administration services during the
CAT Fee 2026-1 Period will be approximately $749,151.\80\ The budget
for professional and administration services during the CAT Fee 2026-1
Period is based on the Updated 2026 CAT Budget. CAT LLC estimated the
budget for the professional and administration costs for the CAT Fee
2026-1 Period based on a review of past professional and administration
costs, potential future professional and administration needs, the
proposed rates and other contractual issues, as well as discussions
with Anchin and Grant Thornton. This process for estimating the budget
for the professional and administration costs for the CAT Fee 2026-1
Period is the same process by which CAT LLC estimated the professional
and administration costs for the Original 2026 CAT Budget. The Original
2026 CAT Budget estimated a budget for professional and administration
costs of $190,916 for January and February 2026, and the actual costs
for professional and administration services for January and February
2026, which are set forth in the Updated 2026 Budget, were
$149,061.\81\ The decrease of $41,855 was due to a lower than expected
profressional and administration services costs and to the movement of
bank fees from the professional and administration category to the
interest income category. Accordingly, CAT LLC believes that the
process for estimating the budgeted professional and administration
costs for the CAT Fee 2026-1 Period is reasonable.
---------------------------------------------------------------------------
\80\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
\81\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
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(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for professional and administration costs from the prior
CAT Fee filing. As this is the first Prospective CAT Fee filing under
this CAT Funding Model, this filing describes the changes in the
professional and administration costs from the Original 2026 Budget.
Specifically, the following describes the differences in the
professional and administration costs included in the Original 2026 CAT
Budget versus the Updated 2026 CAT Budget, and the reasons for any
changes.
The annual 2026 budgeted professional and administration costs as
included in the Original 2026 CAT Budget were $1,145,500, and the
annual 2026 budgeted professional and administration costs included in
the Updated 2026 CAT Budget are $1,085,500.\82\ Accordingly, the
budgeted annual costs for professional and administration services
decreased by $60,000 from the Original 2026 CAT Budget to the Updated
2026 CAT Budget for the full year of 2026. This budgeted decrease in
the professional
[[Page 26090]]
and administration costs in the Updated 2026 CAT Budget from the
Original 2026 Budget was due to the movement of bank fees from the
professional and administration category to the interest income
category, and not a change in costs related to Anchin and Grant
Thornton services.
---------------------------------------------------------------------------
\82\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(x) Public Relations Costs
(a) Description of Public Relations Costs
Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
public relations costs set forth in the budget. The Operating Committee
approved an operating budget for the CAT pursuant to Section 11.1(a) of
the CAT NMS Plan that included $0 in public relations costs for the CAT
Fee 2026-1 Period. The public relations costs would represent the fees
paid to a public relations firm for professional communications
services to CAT, including media relations consulting, strategy and
execution. Because CAT LLC anticipates that it will not engage a public
relations firm for the CAT Fee Period 2026-1, the budget for public
relations costs for this period is $0.\83\
---------------------------------------------------------------------------
\83\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
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(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for public relations costs from the prior CAT Fee filing.
As this is the first Prospective CAT Fee filing under this CAT Funding
Model, this filing describes the changes in the public relations costs
from the Original 2026 Budget. Specifically, the following describes
the differences (if any) in public relations costs included in the
Original 2026 CAT Budget versus the Updated 2026 CAT Budget, and the
reasons for any changes.
The annual budgeted public relations costs for 2026 included in the
Original 2026 CAT Budget were $0, and the annual budgeted public
relations costs for 2026 included in the Updated 2026 CAT Budget are
$0.\84\ Accordingly, the annual budgeted public relations costs for
2026 are the same for both the Original 2026 CAT Budget and the Updated
2026 CAT Budget.
---------------------------------------------------------------------------
\84\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(xi) Interest Income
(a) Description of Interest Income
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to
include ``the sources of all revenues to cover costs.'' Accordingly,
the Updated 2026 CAT Budget includes a line item for interest income.
Specifically, the Operating Committee approved an operating budget for
the CAT pursuant to Section 11.1(a) of the CAT NMS Plan that included
$1,453,382 in interest income for the CAT Fee 2026-1 Period.\85\
Interest income represents the interest earned on the surplus reserve
and other funds held by CAT LLC. Such income would be used to reduce
the amount to be collected to fund the CAT.
---------------------------------------------------------------------------
\85\ See chart entitled ``Budgeted CAT Costs 2026-1'' in Section
3(a)(2)(C) above.
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CAT LLC estimates the budget for the interest income for the CAT
Fee 2026-1 Period based on the estimate of the funds held by CAT LLC
and the expected interest rates on such funds. The Original 2026 CAT
Budget estimated interest income of $758,343 for January and February
2026, and the actual interest income for January and February 2026,
which are included in the Updated 2026 CAT Budget, were $757,527.\86\
As mentioned above, bank fees were moved from the professional and
administration category in the Original 2026 CAT Budget to the interest
income category in the Updated 2026 CAT Budget. Accordingly, the
interest income amount for the Updated 2026 CAT Budget was net of
$10,000 in bank fees. Therefore, the variance between budgeted and
actual interest income (aside from bank fees) for January and February
2026 was approximately $10,000. Accordingly, CAT LLC believes that the
process for estimating the budgeted interest income for the CAT Fee
2026-1 Period is reasonable.
---------------------------------------------------------------------------
\86\ See chart entitled ``Comparison of Budgeted and Actual
Costs for January & February 2026'' in Section 3(a)(2)(C) above.
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(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
each line item from the prior CAT Fee filing. As this is the first
Prospective CAT Fee filing under this CAT Funding Model, this filing
describes the changes in interest income from the Original 2026 CAT
Budget. Specifically, the following describes the differences in the
interest income included in the Original 2026 CAT Budget versus the
Updated 2026 CAT Budget, and the reasons for any changes.
The annual 2026 budgeted interest income as included in the
Original 2026 CAT Budget was $1,995,958, and the annual 2026 budgeted
interest income included in the Updated 2026 CAT Budget is
$2,806,325.\87\ Accordingly, the budgeted interest income (not
including bank fees) increased by $810,367 from the Original 2026 CAT
Budget to the Updated 2026 CAT Budget for the full year of 2026, which
is an approximate 40% increase in the interest income for the full year
of 2026. This budgeted increase in the interest income in the Updated
2026 CAT Budget from the Original 2026 Budget was primarily due to
higher than expected cash balances being maintained after the approval
of the Original 2026 Budget.
---------------------------------------------------------------------------
\87\ See chart entitled ``Comparison of Full Year Budgeted
Costs'' in Section 3(a)(2)(C) above.
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(xii) Reserve
(a) Description of Reserve
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to provide a brief description of the
reserve costs set forth in the budget. The Operating Committee approved
an operating budget for the CAT pursuant to Section 11.1(a) of the CAT
NMS Plan that includes a reserve amount for 2026. Section 11.1(a)(i) of
the CAT NMS Plan states that the budget shall include a reserve.
Section 11.1(a)(ii) of the CAT NMS Plan further describes the reserve
as follows:
For the reserve referenced in paragraph (a)(i) of this Section, the
budget will include an amount reasonably necessary to allow the Company
to maintain a reserve of not more than 25% of the annual budget. To the
extent collected CAT fees exceed CAT costs, including the reserve of
25% of the annual budget, such surplus shall be used to offset future
fees. For the avoidance of doubt, the Company will only include an
amount for the reserve in the annual budget if the Company does not
have a sufficient reserve (which shall be up to but not more than 25%
of the annual budget). For the avoidance of doubt, the calculation of
the amount of the reserve would exclude the amount of the reserve from
the budget.
CAT LLC determined to maintain a reserve in the amount of 25% of
the total expenses set forth in the Updated 2026 CAT Budget (which does
not include the reserve amount). Accordingly, the total 25% reserve of
$23,508,157 was calculated by multiplying the total expenses set forth
in the Updated 2026 CAT Budget (other than the reserve) by 25%.\88\
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\88\ The reserve was calculated by multiplying $94,032,626 by
25%, which equals approximately $23,508,157.
---------------------------------------------------------------------------
The Updated 2026 CAT Budget estimates that CAT LLC will have
$102,391,135 in reserve as of the
[[Page 26091]]
beginning of the CAT Fee Period 2026-1. Such reserve is related, in
part, to (i) the collection of CAT fees in excess of the budgeted CAT
costs in light of the greater actual executed equivalent share volume
than the projected executed equivalent share volume for prior CAT Fees,
and (ii) a reduction in anticipated budgeted costs associated with the
implementation of certain cost savings measures. This reserve balance
of $102,391,135 would be used to offset a portion of CAT costs for CAT
Fee Period 2026-1, thereby reducing the fee rate to be paid for CAT Fee
2026-1. Specifically, the total costs (including the 25% reserve) for
CAT Fee 2026-1 of $117,540,783 would be reduced by the $102,391,135 in
reserve. Therefore, the Total Budgeted CAT Costs 2026-1 would be
$15,149,648.
Accordingly, the fee rate for CAT Fee 2026-1 is calculated based on
this reduced amount of $15,149,648, resulting in a fee rate of
$0.000001 per executed equivalent share. If the fee rate for CAT Fee
2026-1 were calculated solely based on the reasonably budgeted costs
for CAT for May-December 2026, excluding the reduction in that amount
due to the surplus reserve offset, the fee rate would be the higher
rate of $0.000010.\89\
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\89\ See CAT Fee Alert 2026-1 (Apr. 1, 2026).
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(b) Changes From Prior Fee Filing
Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan requires the fee
filing for a Prospective CAT Fee to describe the reason for changes in
the line item for a reserve from the prior CAT Fee filing. As this is
the first Prospective CAT Fee filing under this CAT Funding Model, this
filing describes the changes in reserve from the Original 2026 CAT
Budget. Specifically, the following describes the differences in the
reserve included in the Original 2026 CAT Budget versus the Updated
2026 CAT Budget, and the reasons for any changes.
The accrued liquidity reserve balance at the beginning of the year
included in the Original 2026 CAT Budget was $119,128,336. The Original
2026 CAT Budget contemplated using the reserve to pay CAT bills
throughout the year as no CAT fee was in effect. The accrued liquidity
reserve balance at the beginning of the year included in the Updated
2026 CAT Budget was $155,403,378. The increase in the accrued liquidity
reserve balance at the beginning of the year from the Original 2026 CAT
Budget to the Updated 2026 CAT Budget reflected the additional CAT Fees
that had been received after the approval of the Original 2026 CAT
Budget. In addition, the Updated 2026 CAT Budget not only reflected the
use of the surplus reserve to pay CAT bills but also the accrual of
additional reserve to establish a 25% reserve through CAT Fee 2026-1.
Accordingly, the estimated liquidity reserve balance increased from a
deficit of $37,304,661 included in the Original 2026 CAT Budget to a
reserve balance of $23,508,157 included in the Updated 2026 CAT Budget
for the full year of 2026.
(D) Projected Total Executed Equivalent Share Volume
The calculation of Fee Rate 2026-1 also requires the determination
of the projected total executed equivalent share volume of transactions
in Eligible Securities for the CAT Fee 2026-1 Period. Under the CAT NMS
Plan, the Operating Committee is required to ``reasonably determine the
projected total executed equivalent share volume of all transactions in
Eligible Securities for each relevant period based on the executed
equivalent share volume of all transactions in Eligible Securities for
the prior twelve months.'' \90\ The Operating Committee is required to
base its projection on the prior twelve months, but it may use its
discretion to analyze the likely volume for the upcoming year. Such
discretion would allow the Operating Committee to use its judgment when
estimating projected total executed equivalent share volume if the
volume over the prior twelve months was unusual or otherwise unfit to
serve as the basis of a future volume estimate.\91\
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\90\ Section 11.3(a)(i)(D) of the CAT NMS Plan.
\91\ CAT Funding Model Approval Order at 13452.
---------------------------------------------------------------------------
The total executed equivalent share volume of transactions in
Eligible Securities for the 12-month period from March 2025 through
February 2026 was 5,980,937,549,360.49 executed equivalent shares. The
Operating Committee has determined to calculate the projected total
executed equivalent share volume for the eight-month recovery period
for CAT Fee 2026-1 by multiplying by 8/12ths the executed equivalent
share volume for the 12-month period from March 2025 through February
2026. The Operating Committee determined that such an approach was
reasonable as the CAT's annual executed equivalent share volume has
increased from prior years (e.g., the executed equivalent share volume
for 2024 was 4,295,884,600,069.41), and the Operating Committee
believes that it is reasonable to conclude that the annual executed
equivalent share volume will remain at the higher level. Accordingly,
the projected total executed equivalent share volume for the eight-
month period for CAT Fee 2026-1 is projected to be 3,987,291,699,573.66
executed equivalent shares.\92\
---------------------------------------------------------------------------
\92\ This projection was calculated by multiplying
5,980,937,549,360.49 executed equivalent shares by 8/12ths.
---------------------------------------------------------------------------
The projected total executed equivalent share volume of all
transactions in Eligible Securities for the eight-month recovery period
for CAT Fee 2026-1 and a description of the calculation of the
projection is provided in this filing in accordance with the
requirement in the CAT NMS Plan to provide such information in a fee
filing for a CAT Fee.\93\
---------------------------------------------------------------------------
\93\ Section 11.3(a)(iii)(B) of the CAT NMS Plan.
---------------------------------------------------------------------------
(E) Fee Rate 2026-1
Fee Rate 2026-1 would be calculated by dividing the Budgeted CAT
Costs 2026-1 by the reasonably projected total executed equivalent
share volume of all transactions in Eligible Securities for the eight-
month recovery period for CAT Fee 2026-1, as described in detail
above.\94\ Specifically, Fee Rate 2026-1 would be calculated by
dividing $15,149,648 by 3,987,291,699,573.66 executed equivalent
shares. As a result, Fee Rate 2026-1 would be $0.000003799483243631228
per executed equivalent share. Fee Rate 2026-1 is provided in this
filing in accordance with the requirement in the CAT NMS Plan to
provide the Fee Rate in a fee filing for a CAT Fee.\95\
---------------------------------------------------------------------------
\94\ In approving the CAT Funding Model, the Commission stated
that ``[t]he manner in which the Fee Rate for Prospective CAT Costs
will be calculated (i.e., by dividing the CAT costs reasonably
budgeted for the upcoming year by the reasonably projected total
executed equivalent share volume of all transactions in Eligible
Securities for the year) is appropriate.'' CAT Funding Model
Approval Order at 13435.
\95\ See Section 11.3(a)(iii)(B)(A) of the CAT NMS Plan.
---------------------------------------------------------------------------
Fee Rate 2026-1 would be used to calculate the fee rate to be paid
by CEBSs and CEBBs for CAT Fee 2026-1. Such fee rate is calculated by
multiplying Fee Rate 2026-1 of $0.000003799483243631228 by one-third,
and rounding the result to six decimal places.\96\ Accordingly, the fee
rate to be paid by CEBSs and CEBBs for CAT Fee 2026-1 would be
$0.000001 per executed equivalent share.
---------------------------------------------------------------------------
\96\ This fee rate of $0.000001 is calculated by multiplying the
Fee Rate of $0.000003799483243631228 by one-third and rounding this
result (which equals $0.000001266494414543743) to 6 decimal places.
---------------------------------------------------------------------------
(3) Monthly Fees
CEBBs and CEBSs would be required to pay fees for CAT Fee 2026-1 on
a monthly basis for eight months, from July 2026 until January 2027. A
CEBB's
[[Page 26092]]
or CEBS's fee for each month would be calculated based on the
transactions in Eligible Securities executed by the CEBB or CEBS from
the prior month.\97\ Proposed paragraph (a)(vi)(A) of the fee schedule
would state that each CAT Executing Broker would receive its first
invoice for CAT Fee 2026-1 in June 2026, and would receive an invoice
for CAT Fee 2026-1 each month thereafter until January 2027. Proposed
paragraph (a)(vi)(B) of the fee schedule would state that
``Consolidated Audit Trail, LLC shall provide each CAT Executing Broker
with an invoice for CAT Fee 2026-1 on a monthly basis.'' In addition,
paragraph (b)(1) of the fee schedule states that each CEBB and CEBS is
required to pay its CAT fees ``each month.''
---------------------------------------------------------------------------
\97\ See proposed paragraph (a)(vi)(B) of the fee schedule.
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(4) Consolidated Audit Trail Funding Fees
To implement CAT Fee 2026-1, the Exchange proposes to add a new
paragraph to the ``Consolidated Audit Trail Funding Fees'' section of
the Exchange's fee schedule, to include the proposed paragraphs
described below.
(A) Fee Schedule for CAT Fee 2026-1
The CAT NMS Plan states that:
Each Industry Member that is the CAT Executing Broker for the buyer
in a transaction in Eligible Securities (``CAT Executing Broker for the
Buyer'' or ``CEBB'') and each Industry Member that is the CAT Executing
Broker for the seller in a transaction in Eligible Securities (``CAT
Executing Broker for the Seller'' or ``CEBS'') will be required to pay
a CAT Fee for each such transaction in Eligible Securities in the prior
month based on CAT Data. The CEBB's CAT Fee or CEBS's CAT Fee (as
applicable) for each transaction in Eligible Securities will be
calculated by multiplying the number of executed equivalent shares in
the transaction by one-third and by the Fee Rate reasonably determined
pursuant to paragraph (a)(i) of this Section 11.3.\98\
---------------------------------------------------------------------------
\98\ Section 11.3(a)(iii)(A) of the CAT NMS Plan.
---------------------------------------------------------------------------
Accordingly, based on the factors discussed above, the Exchange
proposes to add paragraph (a)(vi) to the Consolidated Audit Trail
Funding Fees section of its fee schedule. Proposed paragraph (a)(vi)
would state the following:
(A) Each CAT Executing Broker shall receive its first invoice for
CAT Fee 2026-1 in June 2026, which shall set forth the CAT Fee 2026-1
fees calculated based on transactions in May 2026, and shall receive an
invoice for CAT Fee 2026-1 for each month thereafter until January
2027.
(B) Consolidated Audit Trail, LLC shall provide each CAT Executing
Broker with an invoice for CAT Fee 2026-1 on a monthly basis. Each
month, such invoices shall set forth a fee for each transaction in
Eligible Securities executed by the CAT Executing Broker in its
capacity as a CAT Executing Broker for the Buyer (``CEBB'') and/or the
CAT Executing Broker for the Seller (``CEBS'') (as applicable) from the
prior month as set forth in CAT Data. The fee for each such transaction
will be calculated by multiplying the number of executed equivalent
shares in the transaction by the fee rate of $0.000001 per executed
equivalent share.
(C) Notwithstanding the last invoice date of January 2027 for CAT
Fee 2026-1 in paragraph (vi)(A), CAT Fee 2026-1 shall continue in
effect after January 2027, with each CAT Executing Broker receiving an
invoice for CAT Fee 2026-1 each month, until a new subsequent CAT Fee
is in effect with regard to Industry Members in accordance with Section
19(b) of the Exchange Act. Consolidated Audit Trail, LLC will provide
notice when CAT Fee 2026-1 will no longer be in effect.
(D) Each CAT Executing Broker shall be required to pay each invoice
for CAT Fee 2026-1 in accordance with paragraph (b).
As noted in the Plan amendment for the CAT Funding Model, ``[a]s a
practical matter, the fee filing would provide the exact fee per
executed equivalent share to be paid for the CAT Fees, by multiplying
the Fee Rate by one-third and describing the relevant number of decimal
places for the fee.'' \99\ Accordingly, proposed paragraph (a)(vi)(B)
of the fee schedule would set forth a fee rate of $0.000001 per
executed equivalent share. This fee rate is calculated by multiplying
Fee Rate 2026-1 of $0.000003799483243631228 by one-third, and rounding
the result to six decimal places.\100\ The Operating Committee
determined to use six decimal places to balance the accuracy of the
calculation with the potential systems and other impracticalities of
using additional decimal places in the calculation.
---------------------------------------------------------------------------
\99\ CAT Funding Model Approval Order at 13445, n.677.
\100\ This fee rate of $0.000001 is calculated by multiplying
the Fee Rate of $0.000003799483243631228 by one-third, and rounding
this result (which equals $0.000001266494414543743) to 6 decimal
places.
---------------------------------------------------------------------------
The proposed language in paragraph (a)(vi)(A) of the fee schedule
would describe when CAT Executing Brokers would receive their first
monthly invoice for CAT Fee 2026-1. Specifically, CAT Executing Brokers
would receive their first monthly invoice for CAT Fee 2026-1 in June
2026 and the fees set forth in that invoice would be calculated based
on transactions executed in May 2026. The payment for the first invoice
would be required within 30 days after the receipt of the first invoice
(unless a longer period is indicated), as described in paragraph (b)(2)
of the fee schedule.
Proposed paragraph (a)(vi)(A) of the fee schedule also would
describe the monthly cadence of the invoices for CAT Fee 2026-1.
Specifically, after the first invoices are provided to CAT Executing
Brokers in June 2026, invoices will be sent to CAT Executing Brokers
each month thereafter until January 2027.
Proposed paragraph (a)(vi)(B) of the fee schedule would describe
the invoices for CAT Fee 2026-1. Proposed paragraph (a)(vi)(B) of the
fee schedule would state that ``Consolidated Audit Trail, LLC shall
provide each CAT Executing Broker with an invoice for CAT Fee 2026-1 on
a monthly basis.'' Proposed paragraph (a)(vi)(B) of the fee schedule
also would describe the fees to be set forth in the invoices for CAT
Fee 2026-1. Specifically, it would state that ``[e]ach month, such
invoices shall set forth a fee for each transaction in Eligible
Securities executed by the CAT Executing Broker in its capacity as a
CAT Executing Broker for the Buyer (`CEBB') and/or the CAT Executing
Broker for the Seller (`CEBS') (as applicable) from the prior month as
set forth in CAT Data. The fee for each such transaction will be
calculated by multiplying the number of executed equivalent shares in
the transaction by the fee rate of $0.000001 per executed equivalent
share.''
Since CAT Fee 2026-1 is a monthly fee based on actual transaction
volume from the prior month, CAT Fee 2026-1 may collect more or less
than two-thirds of the Budgeted CAT Costs 2026-1. To the extent that
CAT Fee 2026-1 collects more than two-thirds of the Budgeted CAT Costs
2026-1, any excess money collected will be used to offset future fees
and/or to fund the reserve for the CAT. To the extent that CAT Fee
2026-1 collects less than two-thirds of the Budgeted CAT Costs 2026-1,
the budget for the CAT in the ensuing months will reflect such
shortfall.
Furthermore, proposed paragraph (a)(vi)(C) of the fee schedule
would describe how long CAT Fee 2026-1 would remain in effect. It would
state that ``[n]otwithstanding the last invoice date of January 2027
for CAT Fee 2026-1 in paragraph (vi)(A), CAT Fee 2026-
[[Page 26093]]
1 shall continue in effect after January 2027, with each CAT Executing
Broker receiving an invoice for CAT Fee 2026-1 each month, until a new
subsequent CAT Fee is in effect with regard to Industry Members in
accordance with Section 19(b) of the Exchange Act. Consolidated Audit
Trail, LLC will provide notice when CAT Fee 2026-1 will no longer be in
effect.''
Finally, proposed paragraph (a)(vi)(D) of the fee schedule would
set forth the requirement for the CAT Executing Brokers to pay the
invoices for CAT Fee 2026-1. It would state that ``[e]ach CAT Executing
Broker shall be required to pay each invoice for CAT Fee 2026-1 in
accordance with paragraph (b).''
(B) Manner of Payment
Paragraph (b)(1) of the ``Consolidated Audit Trail Funding Fees''
section of the fee schedule describes the manner of payment of Industry
Member CAT fees. It states that ``[e]ach CAT Executing Broker shall pay
its CAT fees as required pursuant to paragraph (a) each month to the
Consolidated Audit Trail, LLC in the manner prescribed by the
Consolidated Audit Trail, LLC.'' The CAT NMS Plan requires the
Operating Committee to establish a system for the collection of CAT
fees.\101\ The Plan Processor has established a billing system for CAT
fees.\102\ Accordingly, CAT Executing Brokers would be required to pay
CAT Fee 2026-1 in accordance with such system.
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\101\ Section 11.4 of the CAT NMS Plan.
\102\ The billing process and system are described in CAT Alert
2023-02 as well as in the CAT FAQs related to the billing of CAT
fees, the Industry Member CAT Reporter Portal User Guide, the FCAT
Industry Member Onboarding Guide, the FCAT Connectivity Supplement
for Industry Members and the CAT Billing Webinars (dated Sept. 28,
2023 and Nov. 7, 2023), each available on the CAT website.
---------------------------------------------------------------------------
(C) Failure To Pay CAT Fees
The CAT NMS Plan further states that:
Participants shall require each Industry Member to pay all
applicable fees authorized under this Article XI within thirty (30)
days after receipt of an invoice or other notice indicating payment is
due (unless a longer payment period is otherwise indicated). If an
Industry Member fails to pay any such fee when due (as determined in
accordance with the preceding sentence), such Industry Member shall pay
interest on the outstanding balance from such due date until such fee
is paid at a per annum rate equal to the lesser of: (a) the Prime Rate
plus 300 basis points; or (b) the maximum rate permitted by applicable
law.\103\
---------------------------------------------------------------------------
\103\ Section 11.4 of the CAT NMS Plan.
---------------------------------------------------------------------------
Paragraph (b)(2) of the fee schedule states that:
Each CAT Executing Broker shall pay the CAT fees required pursuant
to paragraph (a) within thirty days after receipt of an invoice or
other notice indicating payment is due (unless a longer payment period
is otherwise indicated). If a CAT Executing Broker fails to pay any
such CAT fee when due, such CAT Executing Broker shall pay interest on
the outstanding balance from such due date until such fee is paid at a
per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis
points, or (ii) the maximum rate permitted by applicable law.
The requirements of paragraph (b)(2) would apply to CAT Fee 2026-1.
(5) CAT Fee Details
The CAT NMS Plan states that:
Details regarding the calculation of a Participant or CAT Executing
Broker's CAT Fees will be provided upon request to such Participant or
CAT Executing Broker. At a minimum, such details would include each
Participant or CAT Executing Broker's executed equivalent share volume
and corresponding fee by (1) Listed Options, NMS Stocks and OTC Equity
Securities, (2) by transactions executed on each exchange and
transactions executed otherwise than on an exchange, and (3) by buy-
side transactions and sell-side transactions.\104\
---------------------------------------------------------------------------
\104\ Section 11.3(a)(iv)(A) of the CAT NMS Plan.
---------------------------------------------------------------------------
Such information would provide CEBBs and CEBSs with the ability to
understand the details regarding the calculation of their CAT Fee.\105\
CAT LLC will provide CAT Executing Brokers with these details regarding
the calculation of their CAT Fees on their monthly invoice for the CAT
Fees.
---------------------------------------------------------------------------
\105\ In approving the CAT Funding Model, the Commission stated
that, ``[i]n the Commission's view, providing CAT Execut[ing]
Brokers information regarding the calculation of their CAT Fees will
aid in transparency and permit CAT Execut[ing] Brokers to confirm
the accuracy of their invoices for CAT Fees.'' CAT Funding Model
Approval Order at 13454.
---------------------------------------------------------------------------
In addition, CAT LLC will make certain aggregate statistics
regarding CAT Fees publicly available. Specifically, the CAT NMS Plan
states that, ``[f]or each CAT Fee, at a minimum, CAT LLC will make
publicly available the aggregate executed equivalent share volume and
corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC
Equity Securities, (2) by transactions executed on each exchange and
transactions executed otherwise than on an exchange, and (3) by buy-
side transactions and sell-side transactions.'' \106\ Such aggregate
statistics will be available on the CAT website.
---------------------------------------------------------------------------
\106\ Section 11.3(a)(iv)(B) of the CAT NMS Plan. In approving
the CAT Funding Model, the Commission stated that ``[t]he
publication of the aggregate executed equivalent share volume and
aggregate fee is appropriate because it would allow Participants and
CAT Executing Brokers a high-level validation of executed volume and
fees.'' CAT Funding Model Approval Order at 13454.
---------------------------------------------------------------------------
Furthermore, CAT LLC will make publicly available on the CAT
website the total amount invoiced each month that CAT Fee 2026-1 is in
effect as well as the total amount invoiced for CAT Fee 2026-1 for all
months since its commencement. CAT LLC also will make publicly
available on the CAT website the total costs to be collected from
Industry Members for CAT Fee 2026-1.
(6) Financial Accountability Milestones
The CAT NMS Plan states that ``[n]o Participant will make a filing
with the SEC pursuant to Section 19(b) of the Exchange Act regarding
any CAT Fee related to Prospective CAT Costs until the Financial
Accountability Milestone related to Period 4 described in Section 11.6
has been satisfied.'' \107\ Under Section 1.1 of the CAT NMS Plan, a
Financial Accountability Milestone is considered complete as of the
date identified in the Participants' Quarterly Progress Reports. As
indicated by the Participants' Quarterly Progress Report for the second
and third quarter of 2024,\108\ the Financial Accountability Milestone
related to Period 4 was satisfied on July 15, 2024. In addition, the
satisfaction of the Financial Accountability Milestone related to
Period 4 was described in detail in the fee filing for the first
Prospective CAT Fee, CAT Fee 2024-1.\109\
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\107\ Section 11.3(a)(iii)(C) of the CAT NMS Plan.
\108\ Q2 & Q3 2024 Quarterly Progress Report (July 29, 2024).
\109\ See Securities Exchange Act Rel. No.100827 (August 27,
2024), 89 FR 71472 (September 3, 2024) (SR-MIAX-2024-33) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To
Establish Fees for Industry Members Related to Reasonably Budgeted
Costs of the National Market System Plan Governing the Consolidated
Audit Trail for the Period From July 16, 2024 Through December 31,
2024).
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(7) Participant Invoices
While CAT Fees charged to Industry Members become effective in
accordance with the requirements of Section 19(b) of the Exchange
Act,\110\ CAT fees charged to Participants are implemented via an
approval of the CAT fees by the Operating Committee in accordance with
the requirements of the
[[Page 26094]]
CAT NMS Plan.\111\ On March 31, 2026, the Operating Committee approved
the Participant fee related to CAT Fee 2026-1. Specifically, pursuant
to the requirements of CAT NMS Plan,\112\ each Participant would be
required to pay a CAT fee calculated using the fee rate of $0.000001
per executed equivalent share, which is the same fee rate that applies
to CEBBs and CEBSs. Like CEBBs and CEBSs, each Participant would be
invoiced such CAT fees on a monthly basis for eight months, from June
2026 until January 2027, and each Participant's fee for each month
would be calculated based on the transactions in Eligible Securities
executed on the applicable exchange (for the Participant exchanges) or
otherwise than on an exchange (for FINRA) in the prior month.
Accordingly, each Participant will receive its first invoice in June
2026, and would receive an invoice each month thereafter until January
2027. Like with the CAT Fee 2026-1 applicable to CEBBs and CEBSs as
described in proposed paragraph (a)(vi)(C) of the fee schedule,
notwithstanding the last invoice date of January 2027, Participants
will continue to receive invoices for this fee each month until a new
subsequent CAT Fee is in effect with regard to Industry Members.
Furthermore, Section 11.4 of the CAT NMS Plan states that each
Participant is required to pay such invoices as required by Section
3.7(b) of the CAT NMS Plan. Section 3.7(b) states, in part, that
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\110\ Section 11.3(a)(i)(A)(I) of the CAT NMS Plan.
\111\ CAT Funding Model Approval Order at 13448.
\112\ See Section 11.3(a)(ii) and Appendix B of the CAT NMS
Plan.
[e]ach Participant shall pay all fees or other amounts required to be
paid under this Agreement within thirty (30) days after receipt of an
invoice or other notice indicating payment is due (unless a longer
payment period is otherwise indicated) (the ``Payment Date''). The
Participant shall pay interest on the outstanding balance from the
Payment Date until such fee or amount is paid at a per annum rate equal
to the lesser of: (i) Prime Rate plus 300 basis points; or (ii) the
maximum rate permitted by applicable law.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of the Exchange Act. The Exchange believes that the
proposed rule change is consistent with Section 6(b)(5) of the
Act,\113\ which requires, among other things, that the Exchange's rules
must be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest, and not designed
to permit unfair discrimination between customers, issuers, brokers and
dealers. The Exchange also believes that the proposed rule change is
consistent with the provisions of Section 6(b)(4) of the Act,\114\
because it provides for the equitable allocation of reasonable dues,
fees and other charges among members and issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers. The Exchange further believes
that the proposed rule change is consistent with Section 6(b)(8) of the
Act, which requires that the Exchange's rules not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purpose of the Exchange Act. These provisions also require that the
Exchange be ``so organized and [have] the capacity to be able to carry
out the purposes'' of the Act and ``to comply, and . . . to enforce
compliance by its members and persons associated with its members,''
with the provisions of the Exchange Act.\115\ Accordingly, a reasonable
reading of the Act indicates that it intended that regulatory funding
be sufficient to permit an exchange to fulfill its statutory
responsibility under the Act, and contemplated that such funding would
be achieved through equitable assessments on the members, issuers, and
other users of an exchange's facilities.
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\113\ 15 U.S.C. 78f(b)(6).
\114\ 15 U.S.C. 78f(b)(4).
\115\ See 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------
The Exchange believes that this proposal is consistent with the Act
because it implements provisions of the Plan and is designed to assist
the Exchange in meeting regulatory obligations pursuant to the Plan. In
approving the Plan, the SEC noted that the Plan ``is necessary and
appropriate in the public interest, for the protection of investors and
the maintenance of fair and orderly markets, to remove impediments to,
and perfect the mechanism of a national market system, or is otherwise
in furtherance of the purposes of the Act.'' \116\ To the extent that
this proposal implements the Plan and applies specific requirements to
Industry Members, the Exchange believes that this proposal furthers the
objectives of the Plan, as identified by the SEC, and is therefore
consistent with the Act.
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\116\ CAT NMS Plan Approval Order at 84697.
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The Exchange believes that the proposed fees to be paid by the
CEBBs and CEBSs are reasonable, equitably allocated and not unfairly
discriminatory. First, the CAT Fee 2026-1 fees to be collected are
directly associated with the budgeted costs of establishing and
maintaining the CAT, where such costs include Plan Processor costs and
costs related to technology, legal, consulting, insurance, and
professional and administration costs.
The proposed CAT Fee 2026-1 fees would be charged to Industry
Members in support of the maintenance of a consolidated audit trail for
regulatory purposes. The proposed fees, therefore, are consistent with
the Commission's view that regulatory fees be used for regulatory
purposes and not to support the Exchange's business operations. The
proposed fees would not cover Exchange services unrelated to the CAT.
In addition, any surplus would be used as a reserve to offset future
fees. Given the direct relationship between CAT fees and CAT costs, the
Exchange believes that the proposed fees are reasonable, equitable and
not unfairly discriminatory.
As further discussed below, the SEC approved the CAT Funding Model,
finding it was reasonable and that it equitably allocates fees among
Participants and Industry Members. The Exchange believes that the
proposed fees adopted pursuant to the CAT Funding Model approved by the
SEC are reasonable, equitably allocated and not unfairly
discriminatory.
(1) Implementation of CAT Funding Model in CAT NMS Plan
Section 11.1(b) of the CAT NMS Plan states that ``[t]he
Participants shall file with the SEC under Section 19(b) of the
Exchange Act any such fees on Industry Members that the Operating
Committee approves.'' Per Section 11.1(b) of the CAT NMS Plan, the
Exchange has filed this fee filing to implement the Industry Member CAT
fees included in the CAT Funding Model. The Exchange believes that this
proposal is consistent with the Exchange Act because it is consistent
with, and implements, the CAT Funding Model in the CAT NMS Plan, and is
designed to assist the Exchange and its Industry Members in meeting
regulatory obligations pursuant to the CAT NMS Plan. In approving the
CAT NMS Plan, the SEC noted that the Plan ``is necessary and
appropriate in the public interest, for the protection of investors and
the maintenance of fair and orderly markets, to remove impediments to,
and perfect the mechanism of a national market system, or is otherwise
in furtherance of the purposes of the
[[Page 26095]]
Act.'' \117\ Similarly, in approving the CAT Funding Model, the SEC
concluded that the CAT Funding Model met this standard.\118\ As this
proposal implements the Plan and the CAT Funding Model described
therein, and applies specific requirements to Industry Members in
compliance with the Plan, the Exchange believes that this proposal
furthers the objectives of the Plan, as identified by the SEC, and is
therefore consistent with the Exchange Act.
---------------------------------------------------------------------------
\117\ Id.
\118\ CAT Funding Model Approval Order at 13481.
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(2) Calculation of Fee Rate for CAT Fee 2026-1 Is Reasonable
The SEC has determined that the CAT Funding Model satisfies the
requirements of the Exchange Act. Specifically, the SEC has concluded
that the method for determining CAT Fees as set forth in Section 11.3
of the CAT NMS Plan, including the formula for calculating the Fee
Rate, the identification of the parties responsible for payment and the
transactions subject to the fee rate for CAT Fees, satisfies the
Exchange Act.\119\ In each respect, as discussed above, CAT Fee 2026-1
is calculated, and would be applied, in accordance with the
requirements applicable to CAT Fees as set forth in the CAT NMS Plan.
Furthermore, as discussed below, the Exchange believes that each of the
figures for the variables in the SEC-approved formula for calculating
the fee rate for CAT Fee 2026-1 is reasonable and consistent with the
Exchange Act. The calculation of Fee Rate 2026-1 for CAT Fee 2026-1
requires the figures for Budgeted CAT Costs 2026-1, the executed
equivalent share volume for the prior twelve months, the determination
of the CAT Fee 2026-1 Period, and the projection of the executed
equivalent share volume for the CAT Fee 2026-1 Period. Each of these
variables is reasonable and satisfies the Exchange Act, as discussed
throughout this filing.
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\119\ Id.
---------------------------------------------------------------------------
(A) Budgeted CAT Costs 2026-1
The formula for calculating a Fee Rate requires the amount of
Budgeted CAT Costs to be recovered. Specifically, Section
11.3(a)(iii)(B) of the CAT NMS Plan requires a fee filing to provide:
the budget for the upcoming year (or remainder of the year, as
applicable), including a brief description of each line item in the
budget, including (1) the technology line items of cloud hosting
services, operating fees, CAIS operating fees, change request fees, and
capitalized developed technology costs, (2) legal, (3) consulting, (4)
insurance, (5) professional and administration, and (6) public
relations costs, a reserve and/or such other categories as reasonably
determined by the Operating Committee to be included in the budget, and
the reason for changes in each such line item from the prior CAT fee
filing.
In accordance with this requirement, the Exchange has set forth the
amount and type of Budgeted CAT Costs 2026-1 for each of these
categories above.
Section 11.3(a)(iii)(B) of the CAT NMS Plan also requires that the
fee filing provide ``sufficient detail to demonstrate that the budget
for the upcoming year, or part of year, as applicable, is reasonable
and appropriate.'' As discussed below, the Exchange believes that the
budget for the CAT Fee 2026-1 Period is ``reasonable and appropriate.''
Each of the costs included in CAT Fee 2026-1 is reasonable and
appropriate because the costs are consistent with standard industry
practice, based on the need to comply with the requirements of the CAT
NMS Plan, incurred subject to negotiations performed on an arm's length
basis, and/or is consistent with the needs of any legal entity,
particularly one with no employees.
(i) Technology: Cloud Hosting Services
In approving the CAT Funding Model, the Commission recognized that
it is appropriate to recover budgeted costs related to cloud hosting
services as a part of CAT Fees.\120\ CAT LLC determined that the
budgeted costs related to cloud hosting services described in this
filing are reasonable and should be included as a part of Budgeted CAT
Costs 2026-1. As described above, the cloud hosting services costs
reflect, among other things, the breadth of the CAT cloud activities,
data volumes far in excess of the original volume estimates, the need
for specialized cloud services given the volume and unique nature of
the CAT, the processing time requirements of the Plan, and regular
efforts to seek to minimize costs where permissible under the Plan. CAT
LLC determined that use of cloud hosting services is necessary for
implementation of the CAT, particularly given the substantial data
volumes associated with the CAT, and that the fees for cloud hosting
services negotiated by FCAT were reasonable, taking into consideration
a variety of factors, including the expected volume of data and the
breadth of services provided and market rates for similar
services.\121\ Indeed, the actual costs of the CAT are far in excess of
the original estimated costs of the CAT due to various factors,
including the higher volumes and greater complexity of the CAT than
anticipated when Rule 613 was originally adopted.
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\120\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\121\ For a discussion of the amount and type of cloud hosting
services fees, see Section 3(a)(2)(C)(i) above.
---------------------------------------------------------------------------
To comply with the requirements of the Plan, the breadth of the
cloud activities related to the CAT is substantial. The cloud services
not only include the production environment for the CAT, but they also
include two industry testing environments, support environments for
quality assurance and stress testing and disaster recovery
capabilities. Moreover, the cloud storage costs are driven by the
requirements of the Plan, which requires the storage of multiple
versions of the data, from the original submitted version of the data
through various processing steps, to the final version of the data.
Data volume is a significant driver of costs for cloud hosting
services. When the Commission adopted the CAT NMS Plan in 2016, it
estimated that the CAT would need to receive 58 billion records per day
\122\ and that annual operating costs for the CAT would range from
$36.5 million to $55 million.\123\ In contrast to the 2016 projections,
the actual daily Q3 2025 data volumes averaged 792 billion events per
day.
---------------------------------------------------------------------------
\122\ Section 1.3 of Appendix D of the CAT NMS Plan at n.262.
\123\ CAT NMS Plan Approval Order at 84801.
---------------------------------------------------------------------------
In addition to the effect of the data volume on the cloud hosting
costs, the processing timelines set forth in the Plan contribute to the
cloud hosting costs. Although CAT LLC has proactively sought to manage
cloud hosting costs while complying with the Plan, including through
requests to the Commission for exemptive relief and amendments to the
CAT NMS Plan to reduce costs, stringent CAT NMS Plan requirements do
not allow for any material flexibility in cloud architecture design
choices, processing timelines (e.g., the use of non-peak processing
windows), or lower-cost storage tiers. As a result, the required CAT
processing timelines contribute to the cloud hosting costs of the CAT.
The costs for cloud hosting services also reflect the need for
specialized cloud hosting services given the data volume and unique
processing needs of the CAT. The data volume as well as the data
processing needs of the CAT necessitate the use of cloud hosting
services. The equipment, power and services required for an on-premises
data model, the alternative to cloud
[[Page 26096]]
hosting services, would be cost prohibitive. Moreover, as CAT was being
developed, there were limited cloud hosting providers that could
satisfy all the necessary CAT requirements, including the operational
and security criteria. Over time, more providers offering cloud hosting
services that would satisfy these criteria have entered the market. CAT
LLC will continue to evaluate alternative cloud hosting services,
recognizing that the time and cost to move to an alternative cloud
provider would be substantial.
The reasonableness of the cloud hosting services costs is further
supported by key cost discipline mechanisms for the CAT--a cost-based
funding structure, cost transparency, cost management efforts
(including regular efforts to lower compute and storage costs where
permitted by the Plan) and oversight. Together, these mechanisms help
ensure the ongoing reasonableness of the CAT's costs and the level of
fees assessed to support those costs.\124\
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\124\ See Securities Exchange Act Rel. No. 97151 (Mar. 15,
2023), 88 FR 17086, 17117 (Mar. 21, 2023) (describing key cost
discipline mechanisms for the CAT).
---------------------------------------------------------------------------
(ii) Technology: Operating Fees
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted costs related to operating fees as a
part of CAT Fees.\125\ CAT LLC determined that the budgeted costs
related to operating fees described in this filing are reasonable and
should be included as a part of Budgeted CAT Costs 2026-1.
---------------------------------------------------------------------------
\125\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
---------------------------------------------------------------------------
The operating fees would include the negotiated fees paid by CAT
LLC to the Plan Processor to operate and maintain the system for order-
related information and to perform business operations related to the
system, including compliance, security, testing, training,
communications with the industry (e.g., management of the FINRA CAT
Helpdesk, FAQs, website and webinars) and program management. CAT LLC
determined that the selection of FCAT as the Plan Processor was
reasonable and appropriate given its expertise with securities
regulatory reporting, after a process of considering other potential
candidates.\126\ CAT LLC also determined that the fixed price contract,
negotiated on an arm's length basis with the goals of managing costs
and receiving services required to comply with the CAT NMS Plan and
Rule 613, was reasonable and appropriate, taking into consideration a
variety of factors, including the breadth of services provided and
market rates for similar types of activity.\127\ The services to be
performed by FCAT for CAT Fee 2026-1 Period and the budgeted costs
related to such services are described above.\128\
---------------------------------------------------------------------------
\126\ See Section 3(a)(2)(C)(ii) above.
\127\ Id.
\128\ Id.
---------------------------------------------------------------------------
The operating costs also include costs related to the receipt of
market data. CAT LLC anticipates receiving certain market data from
Algoseek during the CAT Fee 2026-1 Period. CAT LLC anticipates that
Algoseek will provide data as set forth in the SIP Data requirements of
the CAT NMS Plan and that the fees are reasonable and in line with
market rates for market data received.\129\
---------------------------------------------------------------------------
\129\ Id.
---------------------------------------------------------------------------
(iii) Technology: CAIS Operating Fees
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted costs related to CAIS operating fees as
a part of CAT Fees.\130\ CAT LLC determined that the budgeted costs
related to CAIS operating fees described in this filing are reasonable
and should be included as a part of the Budgeted CAT Costs 2026-1. The
CAIS operating fees would include the fees paid to the Plan Processor
to operate and maintain the Reference Database and to perform the
business operations related to the system, including compliance,
security, testing, training, communications with the industry (e.g.,
management of the FINRA CAT Helpdesk, FAQs, website and webinars) and
program management. CAT LLC determined that the fees for FCAT's
services related to the Reference Database, negotiated on an arm's
length basis with the goals of managing costs and receiving services
required to comply with the CAT NMS Plan, taking into consideration a
variety of factors, including the services to be provided and market
rates for similar types of activity, are reasonable and
appropriate.\131\ The services to be performed by FCAT for the CAT Fee
2026-1 Period and the budgeted costs for such services are described
above.\132\
---------------------------------------------------------------------------
\130\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\131\ See Section 3(a)(2)(C)(iii) above.
\132\ Id.
---------------------------------------------------------------------------
(iv) Technology: Change Request Fees
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted costs related to change request fees as
a part of CAT Fees.\133\ CAT LLC determined that the budgeted costs
related to change request fees described in this filing are reasonable
and should be included as a part of the Budgeted CAT Costs 2026-1. It
is common practice to utilize a change request process to address
evolving needs in technology projects. This is particularly true for a
project like CAT that is the first of its kind, both in substance and
in scale. The substance and costs of each of the change requests are
evaluated by the Operating Committee and approved in accordance with
the requirements for Operating Committee meetings. In each case, CAT
LLC forecasts that the change requests will be necessary to implement
the CAT. As described above,\134\ CAT LLC determined that it was
reasonable not to include any change request fees in the Budgeted CAT
Costs 2026-1.
---------------------------------------------------------------------------
\133\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\134\ See Section 3(a)(2)(C)(iv) above.
---------------------------------------------------------------------------
(v) Capitalized Developed Technology Costs
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted costs related to capitalized developed
technology costs as a part of CAT Fees.\135\ In general, capitalized
developed technology costs would include costs related to, for example,
certain development costs, costs related to certain modifications,
upgrades and other changes to the CAT and license fees. The amount and
type of budgeted capitalized developed technology costs for the CAT Fee
2026-1 Period, which relate to the software license fee and technology
changes to be implemented by FCAT, are described in more detail
above.\136\
---------------------------------------------------------------------------
\135\ Section 11.3(a)(iii)(B)(B)(1) of the CAT NMS Plan.
\136\ See Section 3(a)(2)(C)(v) above.
---------------------------------------------------------------------------
(vi) Legal
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted costs related to legal fees as a part
of CAT Fees.\137\ CAT LLC determined that the budgeted legal costs
described in this filing are reasonable and should be included as a
part of the Budgeted CAT Costs 2026-1. Given the unique nature of the
CAT, the number of parties involved with the CAT (including, for
example, the SEC, Participants, Industry Members, and vendors) and the
many regulatory, contractual and other issues associated with the CAT,
the scope of the necessary legal services is substantial. CAT LLC
determined that the scope of the proposed legal services is necessary
to implement and maintain the CAT and that the legal rates reflect the
specialized services necessary for such
[[Page 26097]]
a project. CAT LLC determined to hire and continue to use each law firm
based on a variety of factors, including their relevant expertise and
fees. In each case, CAT LLC determined that the fee rates were in line
with market rates for specialized legal expertise. In addition, CAT LLC
determined that the budgeted costs for the legal projects were
appropriate given the breadth of the services provided. The services to
be performed by each law firm for the CAT Fee 2026-1 Period and the
budgeted costs related to such services are described above.\138\
---------------------------------------------------------------------------
\137\ Section 11.3(a)(iii)(B)(B)(2) of the CAT NMS Plan.
\138\ See Section 3(a)(2)(C)(vi) above.
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(vii) Consulting
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted consulting costs as a part of CAT
Fees.\139\ CAT LLC determined that the budgeted consulting costs
described in this filing are reasonable and should be included as a
part of Budgeted CAT Costs 2026-1. Because there are no CAT employees
\140\ and because of the significant number of issues associated with
the CAT, the consultants are budgeted to provide assistance in the
management of various CAT matters and the processes related to such
matters.\141\ CAT LLC determined the budgeted consulting costs were
appropriate, as the consulting services were to be provided at
reasonable market rates that were comparable to the rates charged by
other consulting firms for similar work. Moreover, the total budgeted
costs for such consulting services were appropriate in light of the
breadth of services provided by Deloitte. The services budgeted to be
performed by Deloitte and the budgeted costs related to such services
are described above.\142\
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\139\ Section 11.3(a)(iii)(B)(B)(3) of the CAT NMS Plan.
\140\ As stated in the filing of the proposed CAT NMS Plan,
``[i]t is the intent of the Participants that the Company have no
employees.'' Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016),
81 FR 30614, 30621 (May 17, 2016).
\141\ CAT LLC uses certain third parties to perform tasks that
may be performed by administrators for other NMS Plans. See, e.g.,
CTA Plan and CQ Plan.
\142\ Section 3(a)(2)(C)(vii) above.
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(viii) Insurance
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted insurance costs as a part of CAT
Fees.\143\ CAT LLC determined that the budgeted insurance costs
described in this filing are reasonable and should be included as a
part of the Budgeted CAT Costs 2026-1. CAT LLC determined that it is
common practice to have directors' and officers' liability insurance,
and errors and omissions liability insurance. CAT LLC further
determined that it was important to have cyber security insurance given
the nature of the CAT, and such a decision is consistent with the CAT
NMS Plan, which states that the cyber incident response plan may
include ``[i]nsurance against security breaches.'' \144\ As discussed
above,\145\ CAT LLC determined that the budgeted insurance costs were
appropriate given its prior experience with this market and an analysis
of the alternative insurance offerings. Based on this analysis, CAT LLC
determined that the selected insurance policies provided appropriate
coverage at reasonable market rates.\146\
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\143\ Section 11.3(a)(iii)(B)(B)(4) of the CAT NMS Plan.
\144\ Section 4.1.5 of Appendix D of the CAT NMS Plan.
\145\ See Section 3(a)(2)(C)(viii) above.
\146\ Id.
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(ix) Professional and Administration
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted professional and administration costs
as a part of CAT Fees.\147\ CAT LLC determined that the budgeted
professional and administration costs described in this filing are
reasonable and should be included as a part of Budgeted CAT Costs 2026-
1. Because there are no CAT employees, all required accounting,
financial, tax, cash management and treasury functions for CAT LLC have
been outsourced at market rates. In addition, the required annual
financial statement audit of CAT LLC is included in professional and
administration costs, which costs are also at market rates. The
services performed by Anchin and Grant Thornton and the costs related
to such services are described above.\148\
---------------------------------------------------------------------------
\147\ Section 11.3(a)(iii)(B)(B)(5) of the CAT NMS Plan.
\148\ See Section 3(a)(2)(C)(ix) above.
---------------------------------------------------------------------------
CAT LLC anticipates continuing to make use of Anchin, a financial
advisory firm, to assist with financial matters for the CAT. CAT LLC
determined that the budgeted costs for Anchin were appropriate, as the
financial advisory services were to be provided at reasonable market
rates that were comparable to the rates charged by other such firms for
similar work. Moreover, the total budgeted costs for such financial
advisory services were appropriate in light of the breadth of services
provided by Anchin. The services budgeted to be performed by Anchin and
the budgeted costs related to such services are described above.\149\
---------------------------------------------------------------------------
\149\ Id.
---------------------------------------------------------------------------
CAT LLC anticipates continuing to make use of Grant Thornton, an
independent accounting firm, to complete the audit of CAT LLC's
financial statements, in accordance with the requirements of the CAT
NMS Plan. CAT LLC determined that the budgeted costs for Grant Thornton
were appropriate, as the accounting services were to be provided at
reasonable market rates that were comparable to the rates charged by
other such firms for similar work. Moreover, the total budgeted costs
for such accounting services were appropriate in light of the breadth
of services provided by Grant Thornton. The services budgeted to be
performed by Grant Thornton and the budgeted costs related to such
services are described above.\150\
---------------------------------------------------------------------------
\150\ Id.
---------------------------------------------------------------------------
(x) Public Relations Costs
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted public relations costs as a part of CAT
Fees.\151\ However, as described above,\152\ CAT LLC determined not to
include any public relations costs in Budgeted CAT Costs 2026-1. CAT
LLC determined that it was reasonable not to include any public
relations costs in the Budgeted CAT Costs 2026-1.
---------------------------------------------------------------------------
\151\ Section 11.3(a)(iii)(B)(B)(6) of the CAT NMS Plan.
\152\ See Section 3(a)(2)(C)(x) above.
---------------------------------------------------------------------------
(xi) Interest Income
Section 11.1(a) of the CAT NMS Plan requires the CAT budget to
include ``the sources of all revenues to cover costs.'' Accordingly,
the Updated 2026 CAT Budget includes a line item for interest income.
Specifically, the Updated 2026 CAT Budget includes $1,453,382 in
interest income for the CAT Fee 2026-1 Period.\153\ CAT LLC determined
that using interest income to reduce the amount to be collected via CAT
Fees is reasonable and should be included as a part of the Budgeted CAT
Costs 2026-1.
---------------------------------------------------------------------------
\153\ See chart entitled ``Budgeted CAT Costs 2026-1'' in
Section 3(a)(2)(C) above.
---------------------------------------------------------------------------
(xii) Reserve
In approving the CAT Funding Model, the SEC recognized that it is
appropriate to recover budgeted reserve costs as a part of CAT
Fees.\154\ CAT LLC determined that the reserve in the amount of 25% of
the Updated 2026 CAT Budget (other than the reserve) complies with the
requirements of the CAT NMS Plan related to a reserve, is a reasonable
amount, and, therefore,
[[Page 26098]]
should be included as a part of the Updated 2026 CAT Budget.
---------------------------------------------------------------------------
\154\ Section 11.3(a)(iii)(B)(B) of the CAT NMS Plan.
---------------------------------------------------------------------------
In its approval order for the CAT Funding Model, the Commission
stated that it would be appropriate for the annual operating budget for
the CAT to ``include a reserve of not more than 25% of the annual
budget.'' \155\ In making this statement, the Commission noted the
following:
---------------------------------------------------------------------------
\155\ CAT Funding Model Approval Order at 13444.
---------------------------------------------------------------------------
Because the CAT is a critical regulatory tool/system, the CAT needs
to have a stable funding source to build financial stability to support
the Company as a going concern. Funding for the CAT, as noted in
Section 11.1(b), is the responsibility of the Participants and the
industry. Because CAT fees are charged based on the budget, which is
based on anticipated volume, it is appropriate to have a reserve on
hand to prevent a shortfall in the event there is an unexpectedly high
volume in a given year. A reserve would help to assure that the CAT has
sufficient resources to cover costs should there be unanticipated costs
or costs that are higher than expected.\156\
---------------------------------------------------------------------------
\156\ Id.
---------------------------------------------------------------------------
The SEC also recognized that a reserve would help address the
difficulty in predicting certain variable CAT costs, like trading
volume.\157\ The SEC also recognized that CAT fees will be collected
approximately three months after trading activity on which a CAT fee is
based, or 25% of the year, and that the reserve would be available to
address funding needs related to this three-month delay.\158\ The
inclusion of the proposed reserve in the Updated 2026 CAT Budget would
provide each of these benefits to the CAT. The reserve is discussed
further above.\159\
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\157\ Id.
\158\ Id.
\159\ See Section 3(a)(2)(C)(xii) above.
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As discussed further below,\160\ however, a surplus reserve balance
in excess of the budgeted 25% reserve has been collected as of the
beginning of the year of 2026. Accordingly, the Updated 2026 CAT Budget
indicates that this surplus would be used to offset a portion of CAT
costs for the CAT Fee 2026-1 Period, thereby reducing the fee rate for
CAT Fee 2026-1 ($0.000001 per executed equivalent share). If the fee
rate for CAT Fee 2026-1 were calculated solely based on the reasonably
budgeted costs for CAT for May-December 2026, excluding the reduction
in that amount due to the surplus reserve offset, the fee rate would be
$0.000010 per executed equivalent share.
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\160\ See Section 3(b)(2)(B) below.
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(B) Reconciliation of Budget to the Collected Fees
The CAT NMS Plan also requires fee filings for Prospective CAT Fees
to include ``a discussion of how the budget is reconciled to the
collected fees.'' \161\ As discussed above,\162\ this reserve balance
of $102,391,135 collected via prior CAT Fees would be used to offset a
portion of CAT costs for CAT Fee Period 2026-1, thereby reducing the
fee rate to be paid for CAT Fee 2026-1. Specifically, the total costs
(including the 25% reserve) for CAT Fee 2026-1 of $117,540,783 would be
reduced by the $102,391,135 in reserve. Therefore, the Total Budgeted
CAT Costs 2026-1 would be $15,149,648. Such surplus reserve balance
would be used to reduce the fee rate for CAT Fee 2026-1 ($0.000001 per
executed equivalent share).
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\161\ Section 11.3(a)(iii)(B)(C) of the CAT NMS Plan.
\162\ See Section 3(a)(2)(C)(xii) above.
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(C) Total Executed Equivalent Share Volume for the Prior 12 Months
The total executed equivalent share volume of transactions in
Eligible Securities for the period from March 2025 through February
2026 was 5,980,937,549,360.49 executed equivalent shares. CAT LLC
determined the total executed equivalent share volume for the prior
twelve months by counting executed equivalent shares in the same manner
as it counts executed equivalent shares for CAT billing purposes.\163\
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\163\ See Section 3(a)(2)(D) above.
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(D) Projected Executed Equivalent Share Volume for the CAT Fee 2026-1
Period
CAT LLC has determined that the projected total executed equivalent
share volume for the eight months of the CAT Fee 2026-1 Period by
multiplying by 8/12ths the executed equivalent share volume for the
prior twelve months: 8/12 times 5,980,937,549,360.49 executed
equivalent shares.\164\ The Operating Committee determined that such an
approach was reasonable as the CAT's annual executed equivalent share
volume has increased from prior years (e.g., the executed equivalent
share volume for 2024 was 4,295,884,600,069.41), and the Operating
Committee believes that it is reasonable to conclude that the annual
executed equivalent share volume will remain at the higher level.
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\164\ Id.
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(E) Actual Fee Rate for CAT Fee 2026-1
(i) Decimal Places
As noted in the approval order for the CAT Funding Model, as a
practical matter, the fee filing for a CAT Fee would provide the exact
fee per executed equivalent share to be paid for each CAT Fee, by
multiplying the Fee Rate by one-third and describing the relevant
number of decimal places for the fee rate.\165\ Accordingly, proposed
paragraph (a)(vi)(B) of the fee schedule would set forth a fee rate of
$0.000001 per executed equivalent share. This fee rate is calculated by
multiplying Fee Rate 2026-1 by one-third and rounding the result to six
decimal places. CAT LLC determined that the use of six decimal places
is reasonable as it balances the accuracy of the calculation with the
potential systems and other impracticalities of using additional
decimal places in the calculation.\166\
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\165\ CAT Funding Model Approval Order at 13445, n.677.
\166\ See Section 3(a)(5)(A) above.
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(ii) Reasonable Fee Level
The Exchange believes that charging CAT Fee 2026-1 with a fee rate
of $0.000001 per executed equivalent share is reasonable because it
provides for a revenue stream for the Company that is aligned with the
Budgeted CAT Costs 2026-1. Moreover, the Exchange believes that the
level of the fee rate is reasonable, as it is less than CAT Fee 2025-2
and is comparable to other transaction-based fees, including fees
assessed pursuant to Section 31.\167\ As a result, the magnitude of CAT
Fee 2026-1 is small, and therefore will mitigate any potential adverse
economic effects or inefficiencies.\168\
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\167\ For example, as the SEC noted in the CAT Funding Model
Approval Order, recent Section 31 fees ranged from $0.00007 per
share to $0.00072 per share. CAT Funding Model Approval Order at
13469.
\168\ Id.
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(3) CAT Fee 2026-1 Provides for an Equitable Allocation of Fees
CAT Fee 2026-1 provides for an equitable allocation of fees, as it
equitably allocates CAT costs between and among the Participants and
Industry Members. The SEC approved the CAT Funding Model, finding that
each aspect of the CAT Funding Model satisfied the requirements of the
Exchange Act, including the formula for calculating CAT Fees as well as
the Industry Members to be charged the CAT Fees.\169\ In approving the
CAT Funding Model, the SEC stated that ``[t]he Participants have
sufficiently
[[Page 26099]]
demonstrated that the proposed allocation of fees is appropriate and
meets the Rule 608(b) approval standard.'' \170\ Accordingly, the CAT
Funding Model sets forth the requirements for allocating fees related
to Budgeted CAT Costs among Participants and Industry Members, and the
fee filings for CAT Fees must comply with those requirements.
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\169\ See Section 11.3(a) of the CAT NMS Plan.
\170\ CAT Funding Model Approval Order at 13412.
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CAT Fee 2026-1 provides for an equitable allocation of fees as it
complies with the requirements regarding the calculation of CAT Fees as
set forth in the CAT NMS Plan. For example, as described above, the
calculation of CAT Fee 2026-1 complies with the formula set forth in
Section 11.3(a) of the CAT NMS Plan. In addition, CAT Fee 2026-1 would
be charged to CEBBs and CEBSs in accordance with Section 11.3(a) of the
CAT NMS Plan. Furthermore, the Participants would be charged for their
designated share of the Budgeted CAT Costs 2026-1 through a fee
implemented via the CAT NMS Plan, which would have the same fee rate as
CAT Fee 2026-1.
In addition, as discussed above, each of the inputs into the
calculation of CAT Fee 2026-1--the Budgeted CAT Costs 2026-1, the count
for the executed equivalent share volume for the prior 12 months, and
the projected executed equivalent share volume for the CAT Fee 2026-1
Period--is reasonable. Moreover, these inputs lead to a reasonable fee
rate for CAT Fee 2026-1 that is lower than other fee rates for
transaction-based fees. A reasonable fee rate allocated in accordance
with the requirements of the CAT Funding Model provides for an
equitable allocation of fees.
(4) CAT Fee 2026-1 Is Not Unfairly Discriminatory
CAT Fee 2026-1 is not an unfairly discriminatory fee. The SEC
approved the CAT Funding Model, finding that each aspect of the CAT
Funding Model satisfies the requirements of the Exchange Act. In
reaching this conclusion, the SEC analyzed the potential effect of CAT
Fees calculated pursuant to the CAT Funding Model on affected
categories of market participants, including Participants (including
exchanges and FINRA), Industry Members (including subcategories of
Industry Members, such as alternative trading systems, CAT Executing
Brokers and market makers), and investors generally, and considered
market effects related to equities and options, among other things. CAT
Fee 2026-1 complies with the requirements regarding the calculation of
CAT Fees as set forth in the CAT NMS Plan. In addition, as discussed
above, each of the inputs into the calculation of CAT Fee 2026-1 and
the resulting fee rate for CAT Fee 2026-1 is reasonable. Therefore, CAT
Fee 2026-1 does not impose an unfairly discriminatory fee on Industry
Members.
The Exchange believes the proposed fees established pursuant to the
CAT Funding Model promote just and equitable principles of trade, and,
in general, protect investors and the public interest, and are provided
in a transparent manner and with specificity in the fee schedule. The
Exchange also believes that the proposed fees are reasonable because
they would provide ease of calculation, ease of billing and other
administrative functions, and predictability of a fee based on fixed
rate per executed equivalent share. Such factors are crucial to
estimating a reliable revenue stream for CAT LLC and for permitting
Exchange members to reasonably predict their payment obligations for
budgeting purposes.
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 6(b)(8) of the Act \171\ requires that the Exchange's rules
not impose any burden on competition that is not necessary or
appropriate in furtherance of the purpose of the Exchange Act. The
Exchange does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange notes that CAT Fee
2026-1 implements provisions of the CAT NMS Plan that were approved by
the Commission and is designed to assist the Exchange in meeting its
regulatory obligations pursuant to the Plan.
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\171\ 15 U.S.C. 78f(b)(8).
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In addition, all Participants (including exchanges and FINRA) are
proposing to introduce CAT Fee 2026-1 on behalf of CAT LLC to implement
the requirements of the CAT NMS Plan. Therefore, this is not a
competitive fee filing, and, therefore, it does not raise competition
issues between and among the Participants.
Furthermore, in approving the CAT Funding Model, the SEC analyzed
the potential competitive impact of the CAT Funding Model, including
competitive issues related to market services, trading services and
regulatory services, efficiency concerns, and capital formation.\172\
The SEC also analyzed the potential effect of CAT fees calculated
pursuant to the CAT Funding Model on affected categories of market
participants, including Participants (including exchanges and FINRA),
Industry Members (including subcategories of Industry Members, such as
alternative trading systems, CAT Executing Brokers and market makers),
and investors generally, and considered market effects related to
equities and options, among other things. Based on this analysis, the
SEC approved the CAT Funding Model as compliant with the Exchange Act.
CAT Fee 2026-1 is calculated and implemented in accordance with the CAT
Funding Model as approved by the SEC.
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\172\ CAT Funding Model Approval Order at 13457-81.
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As discussed above, each of the inputs into the calculation of CAT
Fee 2026-1 is reasonable and the resulting fee rate for CAT Fee 2026-1
calculated in accordance with the CAT Funding Model is reasonable.
Therefore, CAT Fee 2026-1 would not impose any burden on competition
that is not necessary or appropriate in furtherance of the purpose of
the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\173\ and Rule 19b-4(f)(2) \174\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\173\ 15 U.S.C. 78s(b)(3)(A)(ii).
\174\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 26100]]
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#e496918881c9878b8989818a9097a4978187ca838b92"><span class="__cf_email__" data-cfemail="7604031a135b15191b1b131802053605131558111900">[email protected]</span></a>. Please include
file number SR-MIAX-2026-17 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-MIAX-2026-17. 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-MIAX-2026-17 and should be submitted on
or before June 2, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\175\
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\175\ 17 CFR 200.30-3(a)(12).
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Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2026-09344 Filed 5-11-26; 8:45 am]
BILLING CODE 8011-01-P
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