Federal Register, Volume 78 Issue 239 (Thursday, December 12, 2013)

[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75669-75670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29620]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71018]

Order Granting a Temporary Exemption Pursuant to Section 36(a)(1)
of the Securities Exchange Act of 1934 From the Filing Deadline
Specified in Rule 613(a)(1) of the Exchange Act

December 6, 2013.
Rule 613(a)(1) of the Securities Exchange Act of 1934 (``Exchange
Act'') \1\ requires the Financial Industry Regulatory Authority, Inc.
(``FINRA'') and the eighteen registered national securities exchanges
(collectively, the ``SROs'') to ``jointly file on or before 270 days
from the date of publication of the Adopting Release [for Rule 613 of
the Exchange Act \2\] in the Federal Register a national market system
plan to govern the creation, implementation, and maintenance of a
consolidated audit trail and central repository as required by [the
rule].'' The Adopting Release for Rule 613 was published in the Federal
Register on August 1, 2012,\3\ thus requiring the national market
system plan (``NMS plan'') to be filed on or before April 28, 2013.\4\
On March 7, 2013, the Securities and Exchange Commission
(``Commission'') granted a request from the SROs for a temporary
exemption from this deadline until December 6, 2013.\5\ On November 8,
2013, the SROs filed an application, pursuant to Rule 0-12 under the
Exchange Act,\6\ to request the Commission to grant a temporary
exemption under Section 36 of the Exchange Act,\7\ from the deadline
specified in Rule 613(a)(1) of the Exchange Act \8\ for submitting the
NMS plan to the Commission until September 30, 2014.\9\
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\1\ 17 CFR 242.613(a)(1).
\2\ 17 CFR 242.613.
\3\ Securities Exchange Act Release No. 67457 (July 18, 2012),
77 FR 45722 (August 1, 2012) (``Adopting Release'').
\4\ April 28, 2013, was a Sunday. Therefore, in accordance with
Rule 160(a) of the Commission Rules of Practice, the deadline for
filing the NMS plan was Monday, April 29, 2013.
\5\ See Securities Exchange Act Release No. 69060, 78 FR 15771
(March 12, 2013); and letter from Robert L.D. Colby, Executive Vice
President and Chief Legal Officer, FINRA, to Elizabeth M. Murphy,
Secretary, Commission, dated February 7, 2013 (``February 7, 2013
Letter'').
\6\ 17 CFR 240.0-12.
\7\ 15 U.S.C. 78mm.
\8\ 17 CFR 242.613(a)(1).
\9\ See Letter from Robert L.D. Colby, Executive Vice President
and Chief Legal Officer, FINRA, to Elizabeth M. Murphy, Secretary,
Commission, dated November 7, 2013 (the ``Current Request Letter'').
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In their Current Request Letter, the SROs explain that on February
26, 2013, they published a Request for Proposal (``RFP'') to solicit
bids from which they will select an entity to serve as the consolidated
audit trail (``CAT'') plan processor to build, operate, administer, and
maintain the CAT.\10\ Thirty-one firms, including four distinct SRO
groups, initially indicated that they planned to submit bids on the
RFP.\11\ The SROs further state in the Current Request Letter that
following the publication of the RFP, potential bidders and members of
the public, including broker-dealer members of the SROs, expressed
interest in the process by which the SROs will review and evaluate
bids, narrow down the list of bids, use those bids in formulating the
CAT NMS Plan, and, ultimately, select the CAT plan processor.
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\10\ In the February 7, 2013 Letter, the SROs stated that an RFP
process was necessary prior to filing an NMS plan pursuant to Rule
613 (``CAT NMS Plan''). The SROs explained their belief that such a
process would ensure that potential alternative solutions for
creating the consolidated audit trail could be presented to the SROs
for their consideration, and would provide the SROs with information
necessary to prepare a detailed cost/benefit analysis as required by
Rule 613. See February 7, 2013 Letter, supra note 5.
\11\ According to the SROs, since that time, seven firms have
formally notified the SROs of their intent to withdraw as primary
bidders. See Current Request Letter, supra note 9. Of the seven
firms that formally notified the SROs of their intent to withdraw as
primary bidders, two are SRO groups. See http://catnmsplan.com/web/groups/catnms/@catnms/documents/appsupportdocs/p217583.pdf (last
visited November 19, 2013).
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The SROs state in the Current Request Letter that they solicited
views from potential bidders regarding whether they preferred to know
the process the SROs will follow to review, evaluate, and select a
bidder in advance of submitting their bids and whether that process
could influence either a decision regarding whether to submit a bid or
the contents of a bid. The SROs represent that many potential bidders
indicated that knowing the process by which the SROs will choose the
plan processor is important to finalizing their bids. According to the
SROs, the potential bidders also generally expressed the view that
providing bidders with four weeks between approval of a selection
process and the submission deadline for the bids would be an
appropriate timeframe to allow bidders to make any changes to their
bids in light of the approved evaluation and selection process. Based
on this

[[Page 75670]]

feedback, the SROs filed with the Commission an NMS plan to govern the
SROs' process for the selection of a CAT plan processor, and for
mitigating conflicts of interest that might arise in the process (the
``Selection NMS Plan'').\12\
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\12\ The Commission published the Selection NMS Plan for notice
and comment. See Securities Exchange Act Release No. 70892 (November
15, 2013), 78 FR 66910 (November 21, 2013).
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In the Current Request Letter, the SROs state that a temporary
exemption is necessary and appropriate regardless of whether the
Commission approves the Selection NMS Plan. Specifically, the SROs note
that if the Selection NMS Plan is approved, they believe it will take
``approximately seven months from the receipt of the bids to review and
evaluate the bids, perform the in-depth and thorough analysis . . .
required by Rule 613, and draft the CAT NMS plan for submission to the
SEC.'' \13\ The SROs further state that ``[b]ecause the content of the
bids is critical to the analysis needed to draft the CAT NMS Plan, the
SROs estimate that seven months following the receipt of bids is
necessary to ensure that they can fully address the considerations
enumerated in Rule 613, including a discussion of the costs and
benefits of not only the proposed solution(s) but also of the
alternative solutions considered but not proposed as the solution in
the CAT NMS Plan, so that the Commission and the public have
sufficiently detailed information to carefully consider all aspects of
the CAT NMS Plan ultimately submitted by the SROs.'' \14\ If the
Selection NMS Plan is not approved, the SROs explain that they will
need the temporary exemption to allow bidders additional time to
finalize their bids, and allow the SROs additional time to develop an
alternative process for evaluating the bids, developing the CAT NMS
Plan, and selecting the CAT plan processor.\15\
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\13\ See Current Request Letter, supra note 9.
\14\ Id.
\15\ Id.
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Section 36 of the Exchange Act \16\ authorizes the Commission, by
rule, regulation, or order, to exempt, either conditionally or
unconditionally, any person, security, or transaction, or any class or
classes of persons, securities, or transactions, from any provision or
provisions of the Exchange Act or any rule or regulation thereunder, to
the extent that such exemption is necessary or appropriate in the
public interest, and is consistent with the protection of investors.
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\16\ 15 U.S.C. 78mm.
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The Commission finds that it is appropriate in the public interest,
and is consistent with the protection of investors, to grant the SROs a
temporary exemption from the deadline for filing the CAT NMS Plan
contained in Rule 613(a)(1) until September 30, 2014. The Commission
believes that granting the exemption is appropriate in light of the
need for the SROs to establish a deadline for finalizing and submitting
bids in response to the RFP; to evaluate the bids submitted and select
the CAT Plan Processor under the Selection NMS Plan, if the Selection
NMS Plan is approved by the Commission, or an alternative process if
the Selection NMS Plan is not approved by the Commission; and to draft
the CAT NMS Plan.
Accordingly, it is hereby ordered, pursuant to Section 36 of the
Exchange Act,\17\ that the SROs are temporarily exempted from the
deadline for submitting the NMS plan to govern the creation,
implementation, and maintenance of a consolidated audit trail and
central repository contained in Rule 613(a)(1) \18\ until September 30,
2014.
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\17\ 15 U.S.C. 78mm.
\18\ 17 CFR 242.613(a)(1).

By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-29620 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P