Order Granting Limited Exemptive Relief, Pursuant to Section 36 of the Securities Exchange Act

SECURITIES AND EXCHANGE COMMISSION 
(Release No. 34-88703) 
 
April 20, 2020 
 
Order Granting Limited Exemptive Relief, Pursuant to Section 36 of the Securities Exchange Act 
of 1934 (“Exchange Act”) and Rule 608(e) of Regulation NMS Under the Exchange Act, 
Related to Certain Introducing Brokers, From the Requirements of the National Market System 
Plan Governing the Consolidated Audit Trail                                 
 
 By letter dated February 3, 2020, BOX Exchange LLC; Cboe BYX Exchange, Inc.; Cboe 
BZX Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe C2 
Exchange, Inc.; Cboe Exchange, Inc.; Financial Industry Regulatory Authority, Inc. (“FINRA”); 
Investors Exchange LLC; Long-Term Stock Exchange, Inc.; Miami International Securities 
Exchange, LLC; MIAX Emerald, LLC; MIAX Pearl, LLC; Nasdaq BX, Inc.; Nasdaq GEMX, 
LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq PHLX LLC; The Nasdaq Stock Market 
LLC; New York Stock Exchange LLC; NYSE American LLC; NYSE Arca, Inc.; NYSE 
Chicago, Inc.; and NYSE National, Inc. (collectively, the “Participants” to the National Market 
System (“NMS”) Plan Governing the Consolidated Audit Trail (“CAT NMS Plan”))
 1
 requested 
that the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to its 
authority under Section 36 of the Securities Exchange Act of 1934 (“Exchange Act”)
 2
 and Rule 
608(e) of Regulation NMS under the Exchange Act,
3
 grant exemptive relief from certain 
provisions of the CAT NMS Plan related to broker-dealers that do not qualify as Small Industry 
Members solely because such broker-dealers satisfy Rule 0-10(i)(2) under the Exchange Act
4
 in 
                                                 
1
  The Commission approved the CAT NMS Plan, as modified, on November 15, 2016.  
See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR 84696 
(November 23, 2016) (“CAT NMS Plan Approval Order”).       
2
  15 U.S.C. 78mm(a)(1).  
3
  17 CFR 242.608(e). 
4
  17 CFR 240.0-10(i)(2).       

 
2 
 
 
that they introduce transactions on a fully disclosed basis to  clearing firms that are not small 
businesses or small organizations (for purposes of this order, such broker-dealers are referred to 
as “Introducing Brokers” or “Introducing Industry Members”).
5
  Specifically, the Participants 
request that the Commission provide 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.
6
  The Participants state that the CAT 
NMS Plan permits Small Industry Members to begin reporting to the CAT later than Large 
Industry Members.
7
       
Under the CAT NMS Plan, a Small Industry Member is  an Industry Member that 
qualifies as a small broker-dealer as defined in Rule 613 under the Exchange Act.
8
  Rule 613 
incorporates the definition of small broker-dealer in Rule 0-10(c) under the Exchange Act.
9
   
Exchange Act Rule 0-10(c) defines a small broker or dealer to mean a broker or dealer that: 
                                                 
5
  See letter from Mike Simon, CAT NMS Plan Operating Committee Chair, to Vanessa 
Countryman, Secretary, U.S. Securities and Exchange Commission, dated February 3, 
2020 (“Exemption Request”).  Unless otherwise noted, capitalized terms are used as 
defined in Rule 613 of Regulation NMS, in the CAT NMS Plan, or in this letter.  
“Industry Member” means “a member of a national securities exchange or a member of a 
national securities association.”  “Small Industry Member” means “an Industry Member 
that qualifies as a small broker-dealer as defined in SEC Rule 613.”  See CAT NMS Plan 
at Section 1.1.   
6
  See Exemption Request.       
7
  See id. at 2.         
8
  17 CFR 242.613.  See CAT NMS Plan at Section 1.1.       
9
  17 CFR 240.0-10(c).   

 
3 
 
 
(1) Had total capital (net worth plus subordinated liabilities) of less than $500,000 on the 
date in the prior fiscal year as of which its audited financial statements were prepared 
pursuant to § 240.17a-5(d) or, if not required to file such statements, a broker or dealer 
that had total capital (net worth plus subordinated liabilities) of less than $500,000 on the 
last business day of the preceding fiscal year (or in the time that it has been in business, if 
shorter); and 
(2) Is not affiliated with any person (other than a natural person) that is not a small 
business or small organization as defined in this section.  
Under Exchange Act Rule 0-10(i),
10
 a broker or dealer is affiliated with another person 
for purposes of Exchange Act Rule 0-10(c) if: 
(1) Such broker or dealer controls, is controlled by, or is under common control with such 
other person; a person shall be deemed to control another person if that person has the 
right to vote 25 percent or more of the voting securities of such other person or is entitled 
to receive 25 percent or more of the net profits of such other person or is otherwise able 
to direct or cause the direction of the management or policies of such other person; or 
(2) Such broker or dealer introduces transactions in securities, other than registered 
investment company securities or interests or participations in insurance company 
separate accounts, to such other person, or introduces accounts of customers or other 
brokers or dealers, other than accounts that hold only registered investment company 
securities or interests or participations in insurance company separate accounts, to such 
other person that carries such accounts on a fully disclosed basis. 
                                                 
10
  17 CFR 240.0-10(i).       

 
4 
 
 
In the CAT NMS Plan Approval Order, the Commission stated that the CAT NMS Plan 
provides a capital level-based definition of Small Industry Members for purposes of the CAT 
NMS Plan implementation schedule.
11
  The Commission further stated that the definition is 
derived from Exchange Act Rule 0-10, which defines small entities under the Exchange Act for 
purposes of the Regulatory Flexibility Act, and reflects an “existing regulatory standard that is an 
indication of small entities for which regulators should be sensitive when imposing regulatory 
burdens.”
12
  The Commission stated that the definition of Small Industry Member is a reasonable 
means to identify market participants for which it would be appropriate to provide, and that 
would benefit from, an additional year to prepare for CAT reporting due to their relatively 
limited resources.
13
 
Under Exchange Act Rule 0-10(i)(2), an Introducing Broker would not be a small broker-
dealer as defined in Exchange Act Rule 0-10(c) if the Introducing Broker introduced transactions 
in securities on a fully disclosed basis to a clearing firm that was not a small broker-dealer, 
regardless of the Introducing Broker’s capital level.
14
  The Participants believe that excluding 
Introducing Brokers from the definition of a small broker-dealer based on the introducing 
relationship described in Exchange Act Rule 0-10(i)(2) is not consistent with the intention to 
provide small broker-dealers with additional time to comply with the CAT NMS Plan.
15
  The 
                                                 
11
  See CAT NMS Plan Approval Order, 81 FR at 84771.   
12
  See id. (citing Securities Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722, 
45804 (August 1, 2012) (“Rule 613 Adopting Release”)).   
13
  See CAT NMS Plan Approval Order, 81 FR at 84771.     
14
  Only broker-dealers that perform their own trading and either self-clear or clear on an 
omnibus basis, rather than on a fully disclosed basis, would be a small broker-dealer 
under Exchange Act Rule 0-10(i)(2).  See Exemption Request at 3.          
15
  See id.         

 
5 
 
 
Participants state that Introducing Brokers, as defined herein, are excluded from the definition of 
a small broker-dealer solely because of their introducing relationship with a clearing firm, and 
that Introducing Brokers otherwise satisfy the capital threshold in Exchange Act Rule 0-10(c)(1) 
for small broker-dealers.
16
  Accordingly, the Participants request exemptive relief for 
Introducing Industry Members from the requirements in the CAT NMS Plan applicable to Large 
Industry Members.
17
   
The Participants state that the CAT NMS Plan permits Small Industry Members to 
commence reporting to the CAT later than Large Industry Members.
18
  As a condition to the 
exemption, the Participants would require Introducing Industry Members to comply with the 
provisions of the CAT NMS Plan applicable to Small Industry Members.
19
  As a result, 
Introducing Industry Members would report information pursuant to the CAT NMS Plan when 
Small Industry Members begin reporting.
20
  The Participants state that the requested exemptive 
relief would affect only the timing for when data would be reported, but not the type or amount 
of data that would be reported.
21
 
In a separate order, the Commission granted the Participants’ request for exemptive relief 
from certain requirements in the CAT NMS Plan related to Industry Member reporting of 
                                                 
16
  See id.         
17
  See id. at 4.        
18
  See id. at 2.   
19
  See id.  Each Participant would be required to require through its Compliance Rule that 
an Introducing Industry Member comply with the requirements of the CAT NMS Plan 
applicable to Small Industry Members.  “Compliance Rule” means, “with respect to a 
Participant, the rule(s) promulgated by such Participant as contemplated by Section 
3.11.”  See CAT NMS Plan at Section 1.1.      
20
  See id.         
21
  See id.         

 
6 
 
 
Industry Member Data to the Central Repository to allow for the implementation of phased 
reporting for Industry Members to the CAT.
22
  The reporting schedule in the Phased Reporting 
Order addresses Large Industry Members, Small Industry Members that are required to record 
and report information to FINRA’s Order Audit Trail System pursuant to applicable self-
regulatory organization (“SRO”) rules (“Small Industry OATS Reporters”), and Small Industry 
Members that are not required to record and report information to FINRA’s OATS pursuant to 
applicable SRO rules (“Small Industry Non-OATS Reporters”).  Under the relief requested 
herein, the Participants would be exempt from requiring Introducing Brokers to comply with the 
requirements of the Plan applicable to Large Industry Members and the Participants would 
require Introducing Brokers to comply with the requirements of the Plan applicable to Small 
Industry Members.  The implementation schedule that an Introducing Broker would follow 
would depend upon whether the Introducing Broker was an OATS Reporter or a Non-OATS 
Reporter. Specifically, by providing this relief, Introducing Brokers who are OATS Reporters 
would follow the schedule established for Small Industry OATS Reporters and Introducing 
Brokers who are Non-OATS Reporters would follow the schedule for Small Industry Non-OATS 
Reporters, as described in more detail in the Phased Reporting Order.
23
    
 Section 36 of the Exchange Act grants the Commission the authority, with certain 
limitations, to “conditionally or unconditionally exempt any person, security, or transaction . . . 
from any provision or provisions of [the Exchange Act] or of any rule or regulation thereunder, 
to the extent that such exemption is necessary or appropriate in the public interest, and is 
                                                 
22
  See Securities Exchange Act Release No. 88702 (April 20, 2020) (Order Granting 
Conditional Exemptive Relief, Pursuant to Rule 608(e) of the Securities Exchange Act of 
1934, from Sections 6.4, 6.7(a)(v) and 6.7(a)(vi) of the National Market System Plan 
Governing the Consolidated Audit Trail)  (“Phased Reporting Order”).            
23
  See id.         

 
7 
 
 
consistent with the protection of investors.”
24
  Rule 608(e) of Regulation NMS under the 
Exchange Act provides that the Commission may exempt from the provisions of an NMS plan, 
either unconditionally or on specified terms and conditions, any self-regulatory organization or 
its members, if the Commission determines that such exemption is consistent with the public 
interest, the protection of investors, the maintenance of fair and orderly markets, and the removal 
of impediments to, and perfection of the mechanisms of, a national market system.   
The Commission believes that, pursuant to Exchange Act Section 36, this exemption is 
appropriate in the public interest and consistent with the protection of investors, and that 
pursuant to Rule 608(e), this exemption is consistent with the public interest, the protection of 
investors, the maintenance of fair and orderly markets and the removal of impediments to, and 
the perfection of the mechanisms of, a national market system.  This relief will provide 
Introducing Industry Members that meet the capital standard in Exchange Act Rule 0-10(c)(1) 
with additional time to prepare effectively for certain CAT reporting phases depending on 
whether they are OATS Reporters, as described in more detail in the Phased Reporting Order.  
The Commission believes that the introducing relationship described in Exchange Act Rule 0-
10(i)(2) should not prevent an Introducing Broker that meets the capital standard in Exchange 
Act Rule 0-10(c)(1) from being considered a Small Industry Member.  The Commission 
understands that despite their clearing relationships, these Introducing Industry Members have 
the same resource limitations as other small broker-dealers that are similarly capitalized.  
Additionally, although an Introducing Broker may rely on its clearing firm to meet its regulatory 
obligations,  an Introducing Broker is not obligated to choose its   clearing firm as its CAT 
reporting agent.  As the Commission stated in adopting Rule 613, providing small broker-dealers 
                                                 
24 
 15 U.S.C. 78mm(a)(1). 

 
8 
 
 
with a longer implementation time would assist small broker-dealers in identifying the most cost-
effective and the most efficient manner to comply with Rule 613.
25
  The Commission believes 
that this rationale applies equally to all broker-dealers that meet the capital threshold required to 
be considered a Small Industry Member, including Introducing Brokers.  This relief affects only 
the time when certain Introducing Industry Members begin CAT reporting, but not the type or 
amount of information that they will be required to report.  Accordingly, the Commission 
believes that the Participants should be exempt from requiring Introducing Industry Members 
that meet the capital standard in Exchange Act Rule 0-10(c)(1) to comply with the requirements 
of the CAT NMS Plan applicable to Large Industry Members, provided that such Introducing 
Industry Members comply with the requirements of the CAT NMS Plan applicable to Small 
Industry OATS Reporters and Small Industry Non-OATS Reporters, as applicable.    
                                                 
25
  See Rule 613 Adopting Release, 77 FR at 45804.   

 
9 
 
 
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 36(a)(1) of the Exchange 
Act,
26
 and Rule 608(e) of the Exchange Act,
27
 that the Participants are exempt from requiring 
Introducing Industry Members to comply with the requirements of the CAT NMS Plan that apply 
to Large Industry Members, provided that each Participant, through its Compliance Rule, 
requires such Introducing Industry Members to comply with the requirements of the CAT NMS 
Plan applicable to Small Industry Members.   
By the Commission.   
 
      Vanessa A. Countryman 
Secretary  
 
 
 
 
 
                                                 
26
  15 U.S.C. 78mm(a)(1).  
27
  17 CFR 242.608(e). 

SECURITIES AND EXCHANGE COMMISSION 
(Release No. 34-88703) 
 
April 20, 2020 
 
Order Granting Limited Exemptive Relief, Pursuant to Section 36 of the Securities Exchange Act 
of 1934 (“Exchange Act”) and Rule 608(e) of Regulation NMS Under the Exchange Act, 
Related to Certain Introducing Brokers, From the Requirements of the National Market System 
Plan Governing the Consolidated Audit Trail                                 
 
 By letter dated February 3, 2020, BOX Exchange LLC; Cboe BYX Exchange, Inc.; Cboe 

BZX Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe C2 

Exchange, Inc.; Cboe Exchange, Inc.; Financial Industry Regulatory Authority, Inc. (“FINRA”); 

Investors Exchange LLC; Long-Term Stock Exchange, Inc.; Miami International Securities 

Exchange, LLC; MIAX Emerald, LLC; MIAX Pearl, LLC; Nasdaq BX, Inc.; Nasdaq GEMX, 

LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq PHLX LLC; The Nasdaq Stock Market 

LLC; New York Stock Exchange LLC; NYSE American LLC; NYSE Arca, Inc.; NYSE 

Chicago, Inc.; and NYSE National, Inc. (collectively, the “Participants” to the National Market 

System (“NMS”) Plan Governing the Consolidated Audit Trail (“CAT NMS Plan”)) 1 requested 

that the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to its 

authority under Section 36 of the Securities Exchange Act of 1934 (“Exchange Act”) 2 and Rule 

608(e) of Regulation NMS under the Exchange Act,3 grant exemptive relief from certain 

provisions of the CAT NMS Plan related to broker-dealers that do not qualify as Small Industry 

Members solely because such broker-dealers satisfy Rule 0-10(i)(2) under the Exchange Act4 in 

                                                 
1  The Commission approved the CAT NMS Plan, as modified, on November 15, 2016.  

See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR 84696 
(November 23, 2016) (“CAT NMS Plan Approval Order”).       

2  15 U.S.C. 78mm(a)(1).  
3  17 CFR 242.608(e). 
4  17 CFR 240.0-10(i)(2).       



 

2 
 

 

that they introduce transactions on a fully disclosed basis to  clearing firms that are not small 

businesses or small organizations (for purposes of this order, such broker-dealers are referred to 

as “Introducing Brokers” or “Introducing Industry Members”).5  Specifically, the Participants 

request that the Commission provide 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.6  The Participants state that the CAT 

NMS Plan permits Small Industry Members to begin reporting to the CAT later than Large 

Industry Members.7       

Under the CAT NMS Plan, a Small Industry Member is an Industry Member that 

qualifies as a small broker-dealer as defined in Rule 613 under the Exchange Act.8  Rule 613 

incorporates the definition of small broker-dealer in Rule 0-10(c) under the Exchange Act.9   

Exchange Act Rule 0-10(c) defines a small broker or dealer to mean a broker or dealer that: 

                                                 
5  See letter from Mike Simon, CAT NMS Plan Operating Committee Chair, to Vanessa 

Countryman, Secretary, U.S. Securities and Exchange Commission, dated February 3, 
2020 (“Exemption Request”).  Unless otherwise noted, capitalized terms are used as 
defined in Rule 613 of Regulation NMS, in the CAT NMS Plan, or in this letter.  
“Industry Member” means “a member of a national securities exchange or a member of a 
national securities association.”  “Small Industry Member” means “an Industry Member 
that qualifies as a small broker-dealer as defined in SEC Rule 613.”  See CAT NMS Plan 
at Section 1.1.   

6  See Exemption Request.       
7  See id. at 2.         
8  17 CFR 242.613.  See CAT NMS Plan at Section 1.1.       
9  17 CFR 240.0-10(c).   



 

3 
 

 

(1) Had total capital (net worth plus subordinated liabilities) of less than $500,000 on the 

date in the prior fiscal year as of which its audited financial statements were prepared 

pursuant to § 240.17a-5(d) or, if not required to file such statements, a broker or dealer 

that had total capital (net worth plus subordinated liabilities) of less than $500,000 on the 

last business day of the preceding fiscal year (or in the time that it has been in business, if 

shorter); and 

(2) Is not affiliated with any person (other than a natural person) that is not a small 

business or small organization as defined in this section.  

Under Exchange Act Rule 0-10(i),10 a broker or dealer is affiliated with another person 

for purposes of Exchange Act Rule 0-10(c) if: 

(1) Such broker or dealer controls, is controlled by, or is under common control with such 

other person; a person shall be deemed to control another person if that person has the 

right to vote 25 percent or more of the voting securities of such other person or is entitled 

to receive 25 percent or more of the net profits of such other person or is otherwise able 

to direct or cause the direction of the management or policies of such other person; or 

(2) Such broker or dealer introduces transactions in securities, other than registered 

investment company securities or interests or participations in insurance company 

separate accounts, to such other person, or introduces accounts of customers or other 

brokers or dealers, other than accounts that hold only registered investment company 

securities or interests or participations in insurance company separate accounts, to such 

other person that carries such accounts on a fully disclosed basis. 

                                                 
10  17 CFR 240.0-10(i).       



 

4 
 

 

In the CAT NMS Plan Approval Order, the Commission stated that the CAT NMS Plan 

provides a capital level-based definition of Small Industry Members for purposes of the CAT 

NMS Plan implementation schedule.11  The Commission further stated that the definition is 

derived from Exchange Act Rule 0-10, which defines small entities under the Exchange Act for 

purposes of the Regulatory Flexibility Act, and reflects an “existing regulatory standard that is an 

indication of small entities for which regulators should be sensitive when imposing regulatory 

burdens.”12  The Commission stated that the definition of Small Industry Member is a reasonable 

means to identify market participants for which it would be appropriate to provide, and that 

would benefit from, an additional year to prepare for CAT reporting due to their relatively 

limited resources.13 

Under Exchange Act Rule 0-10(i)(2), an Introducing Broker would not be a small broker-

dealer as defined in Exchange Act Rule 0-10(c) if the Introducing Broker introduced transactions 

in securities on a fully disclosed basis to a clearing firm that was not a small broker-dealer, 

regardless of the Introducing Broker’s capital level.14  The Participants believe that excluding 

Introducing Brokers from the definition of a small broker-dealer based on the introducing 

relationship described in Exchange Act Rule 0-10(i)(2) is not consistent with the intention to 

provide small broker-dealers with additional time to comply with the CAT NMS Plan.15  The 

                                                 
11  See CAT NMS Plan Approval Order, 81 FR at 84771.   
12  See id. (citing Securities Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722, 

45804 (August 1, 2012) (“Rule 613 Adopting Release”)).   
13  See CAT NMS Plan Approval Order, 81 FR at 84771.     
14  Only broker-dealers that perform their own trading and either self-clear or clear on an 

omnibus basis, rather than on a fully disclosed basis, would be a small broker-dealer 
under Exchange Act Rule 0-10(i)(2).  See Exemption Request at 3.          

15  See id.         



 

5 
 

 

Participants state that Introducing Brokers, as defined herein, are excluded from the definition of 

a small broker-dealer solely because of their introducing relationship with a clearing firm, and 

that Introducing Brokers otherwise satisfy the capital threshold in Exchange Act Rule 0-10(c)(1) 

for small broker-dealers.16  Accordingly, the Participants request exemptive relief for 

Introducing Industry Members from the requirements in the CAT NMS Plan applicable to Large 

Industry Members.17   

The Participants state that the CAT NMS Plan permits Small Industry Members to 

commence reporting to the CAT later than Large Industry Members.18  As a condition to the 

exemption, the Participants would require Introducing Industry Members to comply with the 

provisions of the CAT NMS Plan applicable to Small Industry Members.19  As a result, 

Introducing Industry Members would report information pursuant to the CAT NMS Plan when 

Small Industry Members begin reporting.20  The Participants state that the requested exemptive 

relief would affect only the timing for when data would be reported, but not the type or amount 

of data that would be reported.21 

In a separate order, the Commission granted the Participants’ request for exemptive relief 

from certain requirements in the CAT NMS Plan related to Industry Member reporting of 

                                                 
16  See id.         
17  See id. at 4.        
18  See id. at 2.   
19  See id.  Each Participant would be required to require through its Compliance Rule that 

an Introducing Industry Member comply with the requirements of the CAT NMS Plan 
applicable to Small Industry Members.  “Compliance Rule” means, “with respect to a 
Participant, the rule(s) promulgated by such Participant as contemplated by Section 
3.11.”  See CAT NMS Plan at Section 1.1.      

20  See id.         
21  See id.         



 

6 
 

 

Industry Member Data to the Central Repository to allow for the implementation of phased 

reporting for Industry Members to the CAT.22  The reporting schedule in the Phased Reporting 

Order addresses Large Industry Members, Small Industry Members that are required to record 

and report information to FINRA’s Order Audit Trail System pursuant to applicable self-

regulatory organization (“SRO”) rules (“Small Industry OATS Reporters”), and Small Industry 

Members that are not required to record and report information to FINRA’s OATS pursuant to 

applicable SRO rules (“Small Industry Non-OATS Reporters”).  Under the relief requested 

herein, the Participants would be exempt from requiring Introducing Brokers to comply with the 

requirements of the Plan applicable to Large Industry Members and the Participants would 

require Introducing Brokers to comply with the requirements of the Plan applicable to Small 

Industry Members.  The implementation schedule that an Introducing Broker would follow 

would depend upon whether the Introducing Broker was an OATS Reporter or a Non-OATS 

Reporter. Specifically, by providing this relief, Introducing Brokers who are OATS Reporters 

would follow the schedule established for Small Industry OATS Reporters and Introducing 

Brokers who are Non-OATS Reporters would follow the schedule for Small Industry Non-OATS 

Reporters, as described in more detail in the Phased Reporting Order.23    

 Section 36 of the Exchange Act grants the Commission the authority, with certain 

limitations, to “conditionally or unconditionally exempt any person, security, or transaction . . . 

from any provision or provisions of [the Exchange Act] or of any rule or regulation thereunder, 

to the extent that such exemption is necessary or appropriate in the public interest, and is 

                                                 
22  See Securities Exchange Act Release No. 88702 (April 20, 2020) (Order Granting 

Conditional Exemptive Relief, Pursuant to Rule 608(e) of the Securities Exchange Act of 
1934, from Sections 6.4, 6.7(a)(v) and 6.7(a)(vi) of the National Market System Plan 
Governing the Consolidated Audit Trail)  (“Phased Reporting Order”).            

23  See id.         



 

7 
 

 

consistent with the protection of investors.”24  Rule 608(e) of Regulation NMS under the 

Exchange Act provides that the Commission may exempt from the provisions of an NMS plan, 

either unconditionally or on specified terms and conditions, any self-regulatory organization or 

its members, if the Commission determines that such exemption is consistent with the public 

interest, the protection of investors, the maintenance of fair and orderly markets, and the removal 

of impediments to, and perfection of the mechanisms of, a national market system.   

The Commission believes that, pursuant to Exchange Act Section 36, this exemption is 

appropriate in the public interest and consistent with the protection of investors, and that 

pursuant to Rule 608(e), this exemption is consistent with the public interest, the protection of 

investors, the maintenance of fair and orderly markets and the removal of impediments to, and 

the perfection of the mechanisms of, a national market system.  This relief will provide 

Introducing Industry Members that meet the capital standard in Exchange Act Rule 0-10(c)(1) 

with additional time to prepare effectively for certain CAT reporting phases depending on 

whether they are OATS Reporters, as described in more detail in the Phased Reporting Order.  

The Commission believes that the introducing relationship described in Exchange Act Rule 0-

10(i)(2) should not prevent an Introducing Broker that meets the capital standard in Exchange 

Act Rule 0-10(c)(1) from being considered a Small Industry Member.  The Commission 

understands that despite their clearing relationships, these Introducing Industry Members have 

the same resource limitations as other small broker-dealers that are similarly capitalized.  

Additionally, although an Introducing Broker may rely on its clearing firm to meet its regulatory 

obligations, an Introducing Broker is not obligated to choose its clearing firm as its CAT 

reporting agent.  As the Commission stated in adopting Rule 613, providing small broker-dealers 

                                                 
24  15 U.S.C. 78mm(a)(1). 



 

8 
 

 

with a longer implementation time would assist small broker-dealers in identifying the most cost-

effective and the most efficient manner to comply with Rule 613.25  The Commission believes 

that this rationale applies equally to all broker-dealers that meet the capital threshold required to 

be considered a Small Industry Member, including Introducing Brokers.  This relief affects only 

the time when certain Introducing Industry Members begin CAT reporting, but not the type or 

amount of information that they will be required to report.  Accordingly, the Commission 

believes that the Participants should be exempt from requiring Introducing Industry Members 

that meet the capital standard in Exchange Act Rule 0-10(c)(1) to comply with the requirements 

of the CAT NMS Plan applicable to Large Industry Members, provided that such Introducing 

Industry Members comply with the requirements of the CAT NMS Plan applicable to Small 

Industry OATS Reporters and Small Industry Non-OATS Reporters, as applicable.    

                                                 
25  See Rule 613 Adopting Release, 77 FR at 45804.   



 

9 
 

 

Accordingly, IT IS HEREBY ORDERED, pursuant to Section 36(a)(1) of the Exchange 

Act,26 and Rule 608(e) of the Exchange Act,27 that the Participants are exempt from requiring 

Introducing Industry Members to comply with the requirements of the CAT NMS Plan that apply 

to Large Industry Members, provided that each Participant, through its Compliance Rule, 

requires such Introducing Industry Members to comply with the requirements of the CAT NMS 

Plan applicable to Small Industry Members.   

By the Commission.   

 

      Vanessa A. Countryman 
Secretary  

 

 
 
 
 

                                                 
26  15 U.S.C. 78mm(a)(1).  
27  17 CFR 242.608(e). 


	Order Granting Limited Exemptive Relief, Pursuant to Section 36 of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 608(e) of Regulation NMS Under the Exchange Act, Related to Certain Introducing Brokers, From the Requirements of the Nati...