CAT NMS Plan Fee Filings for Industry Members


SIFMA provided comments to the U.S. Securities & Exchange Commission on the proposed CAT NMS Plan fee filings for “Industry Members” (File No. SR-FINRA-2017-011).


Submitted To

Securities & Exchange Commission (SEC)

Submitted By







June 6, 2017

Via Electronic Mail ([email protected])
Mr. Brent J. Fields
U.S. Securities & Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-1090

Re: File No. SR-BatsBYX-2017-11; File No. SR-BatsBZX-2017-38; File No. SRBatsEDGA-2017-13; File No. SR-BatsEDGX-2017-22; File No. SR-BOX-2017-16; File No. SR-C2-2017-017; File No. SR-CBOE-2017-040; File No. SR-CHX-2017-08; File No. SR-IEX-2017-16; File No. SR-MIAX-2017-18; File No. SR-PEARL-2017-20; File No. SR-BX-2017-023; File No. SR-GEMX 2017-17; File No. SR-ISE-2017-45; File No. SR-MRX-2017-04; File No. SR-PHLX-2017-37; File No. SR-NASDAQ-2017-046; File No. SR- NYSE-2017-22; File No. SR-NYSEARCA-2017-52; File No. SR-NYSEMKT2017-26; File No. SR-FINRA-2017-011; Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Adopt a Fee Schedule to Establish the Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail

Dear Mr. Fields:

The Securities Industry and Financial Markets Association (“SIFMA”)1 submits this letter to the Securities and Exchange Commission (“Commission”) to comment on the abovereferenced proposed rule changes filed by the self-regulatory organizations that are the Plan Participants the Consolidated Audit Trail (“CAT”) National Market System (“NMS”) Plan. In these filings, the Plan Participants propose to amend their fee schedules to establish the fees for “Industry Members”. Many of our comments on this issue remain the same as expressed in our July 2016 comment letter on the CAT NMS Plan 2 because the Plan Participants have not addressed those comments. For the Commission’s consideration, we have attached our July 2016 comment letter filed in response to the proposed CAT NMS Plan, and we request that the Commission consider the arguments on the CAT funding model in that letter as being incorporated in this letter. Discussed in further detail below, SIFMA opposes the proposals from both a policy perspective and that they do not satisfy the requirements of the Securities Exchange Act of 1934 (“Exchange Act”). Accordingly, we urge the Commission to suspend the filings pursuant to Section 19(b)(3)(C) of the Exchange Act.

SIFMA Policy Concerns with Proposed CAT Funding Models

SIFMA has repeatedly raised funding of the CAT as a critical issue. Because it is such a critical issue, the CAT funding model should have been the product of collaboration between the Participants and the broker-dealer community. Instead, the Plan Participants developed the proposed fee schedules without incorporating any substantive input from the Industry Members. Moreover, the Plan Participants chose to file the proposals for immediate effectiveness under the Exchange Act without soliciting public comment on the model. If the Plan Participants had engaged in a good faith effort to solicit input on the proposals, then it is possible an appropriate solution could have been achieved. However, given that the Plan Participants want to impose the vast majority of costs and expenses of building and operating the CAT on broker-dealers and the severity of our concerns with the proposals, the Plan Participants have left us with no choice but to urge the Commission to suspend the proposals and institute proceedings to determine whether the proposals should be approved or disapproved.

At the heart of our July 2016 comments is the fact that the Plan Participants have no justification for imposing a CAT fee at all. The self-regulatory model in the securities industry is premised on broker-dealer funding, but broker-dealers already provide the Plan Participants a significant amount of regulatory funding through membership fees, registration and licensing fees, dedicated regulatory fees, options regulatory fees, and monetary fines.3 The proposals provide insufficient financial details on why broker-dealers, which would be tasked with paying nearly all of the costs and expenses of the CAT, should be subject to any CAT fees, especially in light of the Participants’ existing regulatory revenue. The Plan Participants disingenuously state in the proposals that the Operating Committee is “required” under the CAT NMS Plan to impose fees on broker-dealers, but there is no such requirement in the Plan. Nothing under Rule 613 directs or “requires” the Plan Participants to impose a broker-dealer fee to cover the CAT. Rather, the decision to impose fees on broker-dealers was a unilateral decision made by the Plan Participants and one that was fully under their control, as they drafted the CAT NMS Plan. Accordingly, as we have stated previously, there should be no new fee for the CAT until market participants are provided with a complete picture as to how regulatory fees are currently allocated, how the CAT fee fits into the existing regulatory framework and why assessing broker-dealers an additive regulatory fee is necessary to fund the creation and operation of the CAT.

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1 The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA’s mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. 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 Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA to Brent J. Fields, Secretary, Securities and Exchange Commission dated July 18, 2016 (“SIFMA CAT Comment Letter”).

3 Id.