CAT Executed Share Funding Model
Summary
SIFMA provided comments to the U.S. Securities and Exchange Commission (SEC) on the proposed amendment to the National Market System Plan Governing the Consolidated Audit Trail (the CAT NMS Plan) to implement a revised funding model (Executed Share Model) for the consolidated audit trail (CAT) and to establish a fee schedule for the participants in the CAT NMS (Participants) in accordance with the Executed Share Model.
Excerpt
June 22, 2022
Ms. Vanessa Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Joint Industry Plan; Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail; File No. 4-698
Dear Ms. Countryman:
On behalf of its members firms, the Securities Industry and Financial MarketsAssociation (“SIFMA”)1 respectfully submits this letter to the U.S. Securities and Exchange Commission (the “Commission”) to comment on the proposed amendment to the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan”) to implement a revised funding model (“Executed Share Model”)2 for the consolidated audit trail (“CAT”) and to establish a fee schedule for the participants in the CAT NMS (“Participants”) in accordance with the Executed Share Model.3 As discussed below, the self-regulatory organizations (“SROs”) as the Participants in the CAT NMS Plan have not demonstrated that the proposal meets the relevant standards under the Securities Exchange Act of 1934 (“Exchange Act”) governing SRO fees.
While SIFMA members have long understood that they would pay some portion of CAT costs, the Executed Share Model continues to suffer from the same defects as prior CAT funding proposals. By proposing to impose most of the CAT costs on Industry Members, the CAT Operating Committee in creating the Executed Share Model has not established a cost allocation
methodology that is consistent with the Exchange Act fee standards. In addition, although the committee has provided some additional transparency regarding CAT costs in the Executed Share Model proposal, it still has not provided the Commission with sufficient information to allow it to determine whether the Executed Share Model meets the Exchange Act fee standards. We therefore recommend that the Commission disapprove the Executed Share Model.
1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
2 See Exchange Act Release No. 94984 (May 25, 2022), 87 FR 33226 (June 1, 2022).
3 Capitalized terms not otherwise defined in this letter have the same meanings as they do in the CAT NMS Plan. For instance, “CAT Data” and “CAT System” are defined in Article I, Section 1.1 of the CAT NMS Plan. CAT Data is defined as “data derived from Participant Data, Industry Member Data, SIP Data, and such other data as the Operating Committee may designate as ‘CAT Data’ from time to time.” CAT System is defined as “all data processing equipment, communications facilities, and other facilities, including equipment, utilized by the [CAT LLC] or any third parties acting on [CAT LLC’s] behalf in connection with operation of the CAT and any related information or relevant systems pursuant to [the CAT LLC Agreement].