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Federal Register / Vol. 86, No. 171 / Wednesday, September 8, 2021 / Notices Timeline for Elimination of Duplicative Rules
approved by the Commission in the OATS Retirement Filing.

The CAT NMS Plan states that the elimination of rules that are duplicative of the requirements of the CAT and the retirement of the related systems should be effective at such time as CAT Data meets minimum standards of accuracy and reliability.10 As discussed in more detail in the OATS Retirement Filing, FINRA believes that OATS may be retired effective September 1, 2021
given the error rate thresholds have been met, and FINRA has determined that its usage of the CAT Data has not revealed material issues that have not been corrected and further confirmed that the CAT includes all data necessary to allow FINRA to continue to meet its surveillance obligations.

1 Maximum Error Rates
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OATS Retirement Filing In the OATS Retirement Filing, FINRA proposed to eliminate the OATS
rules once Industry Members are effectively reporting to the CAT and the CATs accuracy and reliability meet certain standards. Specifically, FINRA
proposed that before OATS could be retired, the CAT generally must achieve a sustained error rate for Industry Member reporting in five categories for a period of at least 180 days of 5% or lower on a pre-correction basis, and 2%
or lower on a post-correction basis measured at T+5. In addition to the maximum error rates and matching thresholds, FINRAs use of CAT Data must confirm that i there are no material issues that have not been corrected, ii the CAT includes all data necessary to allow FINRA to continue to meet its surveillance obligations, and iii the Plan Processor is sufficiently meeting its obligations under the CAT
NMS Plan relating to the reporting and linkage of Phase 2a Industry Member Data.
In the OATS Retirement Filing, FINRA explained that its review of CAT
Data and error rates would be based on data and linkages in the initial phase of reporting or Phase 2a, which replicate the data in OATS today and thus are most relevant for OATS
retirement purposes. Phase 2a Data includes all events and scenarios covered by OATS and applies only to equities. FINRA did not consider options order events or Phase 2c data and validations, which are not in OATS
today, for purposes of OATS retirement.
As described below, FINRA has determined that the CAT meets the accuracy and reliability standards 10 Appendix C of CAT NMS Plan, Approval Order at 85010.

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As discussed in the OATS Retirement Filing, FINRA believes that relevant error rates are the primary, but not the sole, metric by which to determine the CATs accuracy and reliability and will serve as the baseline requirement needed before OATS can be retired.
FINRA proposed that, before OATS
could be retired, the CAT would generally need to achieve a sustained error rate for Industry Member reporting in five categories for a period of at least 180 days of 5% or lower, measured on a pre-correction or as-submitted basis, and 2% or lower on a post-correction basis measured at T+5.11 FINRA
proposed to average the error rates across the period, rather than require a 5% pre-correction and 2% postcorrection maximum each day for 180
consecutive days. FINRA also proposed to measure the error rates in the aggregate, rather than on a firm-by-firm basis. Finally, FINRA proposed to measure the error rates separately for each of the five categories, rather than evaluate all categories in the aggregate.
As noted above, FINRAs assessment of the error rates for Industry Member reporting is based solely on Phase 2a CAT reporting for equity events since options orders are not included in OATS today.
As discussed in the OATS Retirement Filing, FINRA measured the error rates in each of the five categories discussed below during the period from October 26, 2020 through April 26, 2021 the applicable period. FINRA
commenced this period on October 26, 2020, which was the date that Industry Members were required to begin correcting all errors for inter-firm linkages and exchange/TRF/ORF match validations. As discussed in the Response to Comments, although the production environment for inter-firm linkage and exchange/TRF/ORF match validations was open for testing as of September 28, 2020, FINRA did not believe it would be appropriate for the 180-day period to commence prior to the October 26, 2020 compliance date.12
11 As clarified in the OATS Retirement Filing, although FINRA does not believe that postcorrection errors need to be de minimis before OATS can be retired, FINRA was not suggesting, with the proposal, that 2% would meet the ultimate objective of de minimis error rates for CAT. See CAT NMS Plan, Appendix C, note 102 error rates after reprocessing of error corrections are ultimately expected to be de minimis for the CAT. See also Approval Order.
12 See FINRAs Response to Comments, supra note 7.

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Rejection Rates and Data Validations.
As described in the OATS Retirement Filing, the Plan Processor must perform certain basic data validations,13 and if a record does not pass these basic data validations, it must be rejected and returned to the CAT Reporter to be corrected and resubmitted. FINRA
proposed that over the 180-day period, aggregate rejection rates must be no more than 5% pre-correction or 2%
post-correction across all Industry Member Reporters. FINRA has determined that, over the applicable period, aggregate rejection rates across all Industry Member Reporters were 0.03% pre-correction and 0.01% postcorrection.
Intra-Firm Linkages. As described in the OATS Retirement Filing, the Plan Processor must be able to link all related order events from all CAT Reporters involved in the lifecycle of an order. At a minimum, this requirement includes the creation of an order lifecycle between all order events handled within an individual CAT Reporter, including orders routed to internal desks or departments with different functions e.g., an internal ATS. FINRA proposed that aggregate intra-firm linkage rates across all Industry Member Reporters must be at least 95% pre-correction and 98% post-correction. FINRA has determined that, over the applicable period, aggregate intra-firm linkage rates across all Industry Member Reporters were 99.97% pre-correction and 99.99%
post-correction.
Inter-Firm Linkages. As described in the OATS Retirement Filing, the Plan Processor must be able to create the lifecycle between orders routed between broker-dealers. FINRA proposed that at least a 95% pre-correction and 98%
post-correction aggregate match rate be achieved for orders routed between two Industry Member Reporters. FINRA has determined that during the applicable period there was a 99.08% precorrection and 99.84% post-correction aggregate match rate for orders routed between two Industry Member Reporters.
Order Linkage Rates. As described in the OATS Retirement Filing, in addition to creating linkages within and between broker-dealers, the Plan Processor must be able to create lifecycles to link various pieces of related orders. For example, the Plan requires linkages of 13 Appendix D of the CAT NMS Plan, Section 7.2, for example, requires that certain file validations e.g., file transmission and receipt are in the correct formats, confirmation of a valid SRO-Assigned Market Participant Identifier, etc., and syntax and context checks e.g., format checks, data type checks, consistency checks, etc. be performed on all submitted records.

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