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Federal Register / Vol. 86, No. 172 / Thursday, September 9, 2021 / Notices
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elimination of such rules and the retirement of such systems will be effective at such time as CAT Data meets minimum standards of accuracy and reliability. 14 Specifically, the Plan requires the rule filing to discuss the following:
Specific accuracy and reliability standards that will determine when duplicative systems will be retired, including, but not limited to, whether the attainment of a certain Error Rate should determine when a system duplicative of the CAT can be retired;
whether the availability of certain data from Small Industry Members 15
two years after the Effective Date would facilitate a more expeditious retirement of duplicative systems; and whether individual Industry Members can be exempted from reporting to duplicative systems once their CAT reporting meets specified accuracy and reliability standards, including, but not limited to, ways in which establishing cross-system regulatory functionality or integrating data from existing systems and the CAT
would facilitate such Individual Industry Member exemptions.16
On November 30, 2020, the Commission approved a FINRA rule filing proposing to eliminate the FINRA
OATS system once FINRA members are effectively reporting to the CAT and the CATs accuracy and reliability meet certain standards.17 Specifically, FINRA
Proposed amendments to the EBS rules would be subject to a separate rule filing made in conjunction with SEC rulemaking to amend Rule 17a25 under the Exchange Act. 17 CFR 240.17a25.
14 See CAT NMS Plan, Appendix C, Section C.9.
15 Small Industry Member is defined in IEX
Rule 11.610pp as an Industry Member that qualifies as a small broker-dealer as defined in Rule 010c of the Exchange Act. On April 20, 2020, the Commission granted exemptive relief from certain provisions of the CAT NMS Plan related to brokerdealers that do not qualify as Small Industry Members solely because such broker-dealers satisfy Rule 010i2 under the Exchange Act in that they introduce transactions on a fully disclosed basis to clearing firms that are not small businesses or small organizations referred to as Introducing Industry Members. Specifically, the Commission provided exemptive relief from requiring Introducing Industry Members to comply with the requirements of the CAT NMS Plan that apply to Industry Members other than Small Industry Members Large Industry Members, provided that the Participants require such Introducing Industry Members to comply with the requirements of the CAT NMS Plan that apply to Small Industry Members. See Securities Exchange Act Release No.
88703 April 20, 2020, 85 FR 23115 April 24, 2020 Order Granting Limited Exemptive Relief Related to Certain Introducing Brokers From the Requirements of the CAT NMS Plan the Introducing Brokers Exemptive Order. As used herein, the term Small Industry Member includes Introducing Industry Members in accordance with the Introducing Brokers Exemptive Order.
16 See supra note 14.
17 See Securities Exchange Act Release No. 90535
November 30, 2020, 85 FR 78395 December 4,
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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 18 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 hereafter the threshold requirements, 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 in the initial phase of reporting Phase 2a of Industry Member Data.
In the OATS Retirement Plan Order, the Commission approved FINRAs proposal for how it would measure the CAT Datas accuracy and reliability.
Specifically, the Commission endorsed FINRAs proposal that FINRAs review of CAT Data and error rates would be based on data and linkages in 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. And FINRA would not consider options order events or Phase 2c data and validations, which are not in OATS today, for purposes of OATS
retirement.19
On June 17, 2021, FINRA made an immediately effective filing setting forth the basis for its determination that the accuracy and reliability of the CAT met the standards approved by the Commission in the OATS Retirement Plan Order and designating September 1, 2021 as the date on which FINRA
would retire OATS.20 Specifically, FINRA determined that the CAT met the threshold requirements endorsed by the Commission in the OATS Retirement Plan Order for Industry Member reporting in each of the following categories:
A. Rejection Rates and Data Validations As described in the OATS Retirement Filing, the Plan Processor must perform 2020 SRFINRA2020024 OATS Retirement Plan Order.
18 As set forth in the OATS Retirement Plan Order, the 180 day applicable period ran from October 26, 2020 to April 26, 2021. October 26, 2020 was the date that Industry Members were required to begin correcting all errors for inter-firm linkages and exchange/TFR/ORF match validations.
19 See supra note 17.
20 See Securities Exchange Act Release No. 92239
June 23, 2021, 86 FR 34293 June 29, 2021 SR
FINRA2021017 OATS Retirement Filing.

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certain basic data validations, 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.21 FINRA
determined that for the applicable period, aggregate rejection rates across all Industry Member Reporters were 0.03% pre-correction and 0.01% postcorrection, which far exceeds the threshold requirements of a 5% or lower pre-correction error rate and a 2% or lower post-correction error rate.
B. 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 determined that for the applicable period, the intra-firm linkage accuracy rates across all Industry Member Reporters were 99.07% precorrection and 99.99% post-correction, which far exceeds the threshold requirements of 95% or higher precorrection and 98% or higher postcorrection in other words, the intrafirm linkages accuracy far exceeds the threshold requirement that there be less than 5% inaccuracy pre-correction and less than 2% inaccuracy postcorrection.
C. 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
determined that for the applicable period, the intra-firm linkage accuracy rates across all Industry Member Reporters were 99.08% pre-correction and 99.84% post-correction, which far exceed the threshold requirements of 95% or higher pre-correction and 98%
or higher post-correction in other words, the inter-firm linkages accuracy far exceeds the threshold requirement that there be less than 5% inaccuracy pre-correction and less than 2%
inaccuracy post-correction.
21 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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