Staff Paper on Cross-Market Regulatory Coordination
Dec. 15, 2020
This Staff Paper is presented by the Staff of the Division of Trading and Markets (the “Staff”). In this paper, the Staff addresses certain aspects of regulatory coordination among self-regulatory organizations (“SROs”), particularly with their use of the Consolidated Audit Trail (the “CAT”). The Staff is interested in feedback on ways to enhance cross-market regulatory coordination in recognition of the fact that all self-regulatory organizations have access to cross-market trading activity given their access to the CAT.
This Staff Paper is not a rule, regulation, or statement of the Securities and Exchange Commission (the “Commission”). Furthermore, the Commission has neither approved nor disapproved the content of this Staff Paper. This Staff Paper has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
Each of the national securities exchanges and the Financial Industry Regulatory Authority (“FINRA”), a national securities association, is an SRO with an obligation to, absent reasonable justification or excuse, enforce compliance by its members, and persons associated with its members, with the provisions of the Securities Exchange Act of 1934 (the “Act”), the rules and regulations thereunder, and the SRO’s own rules. Currently, trading is dispersed among multiple exchanges and non-exchange trading centers, and many broker-dealers are members of multiple SROs. Further, order execution and other trading strategies commonly involve multiple exchanges and non-exchange trading centers. As a result, SROs may conduct “cross-market” surveillance, investigation, examination, and enforcement. This creates the potential for multiple SROs to be reviewing the same activity.
While multiple SROs reviewing the same securities activities can have benefits, in that the resources and expertise from several organizations can be brought to bear on assessing these activities, it also can lead to duplication and inefficiencies in the regulatory process and increased burdens on member firms. A variety of steps historically have been taken to address these potential burdens and inefficiencies, and to improve regulatory outcomes. Currently, regulatory coordination among SROs occurs in a number of ways – through the use of 17d-2 Plans, Regulatory Services Agreements (“RSAs”), and the Intermarket Surveillance Group (“ISG”), as discussed in more detail below. We understand that these approaches have largely been successful in mitigating regulatory duplication to date and have enhanced regulatory outcomes.
As provided for in the CAT NMS Plan, with the implementation of the CAT all SROs have access to a full set of cross-market equities and options data. Given this, in its Approval Order of the CAT NMS Plan, the Commission required the SROs to submit a written report to the Commission detailing the Participants’ consideration of coordinated surveillance. The Commission however, did not require the SROs to adopt any other specific steps with respect to regulatory coordination. The Staff is now considering whether additional steps to enhance regulatory coordination in connection with the SROs’ use of the CAT is appropriate. As part of that process, Staff has prepared this Staff Paper to encourage public engagement while the Staff considers these issues.
A. Current Approaches to Regulatory Coordination
The SROs have established systems and procedures to monitor trading in their markets and identify instances of potential violations of the Exchange Act, the rules and regulations thereunder, or SRO rules, such as potential insider trading or, market manipulation. The SROs also oversee their members’ compliance with applicable statutory and regulatory provisions. If an SRO identifies potential misconduct involving persons or entities that are within its jurisdiction, the SRO will conduct further investigation and bring a disciplinary action when appropriate. To meet their obligation, exchange SROs currently engage in real-time monitoring of market activity specific to their own exchanges. These SROs are the front-line regulators for their markets, and they have expertise in regulating unique aspects of their markets such as opening or closing auctions or floor-based activity. Because activity on one market has the potential to impact activity on other markets or other products, the Commission has also recognized the need for regulatory coordination over the last several decades.
The exchanges have relied on FINRA to perform regulatory functions, including surveillance, examinations, investigations, and enforcement functions, pursuant to RSAs and Rule 17d-2 plans. Under these arrangements, FINRA has developed a cross-market program that covers 100% of U.S. equity market activity and approximately 45% of options contract volume. In addition to these cross-market supervision services, FINRA provides market-specific regulatory services to several exchanges.
Pursuant to Section 17(d) (1) of the Securities Exchange Act of 1934 (the “Act”), in 1976, the Commission adopted Rule 17d-2 to allow SROs to enter into collective agreements, known as 17d-2 Plans, to propose joint Plans to the Commission for the allocation of regulatory responsibilities with respect to their common members (i.e., broker-dealers that maintain memberships in more than one SRO) to avoid regulatory duplication. Such Plans are submitted to the Commission and pursuant to Rule 17d-2(c), following notice and opportunity for public comment, the Commission may declare a Plan effective if it finds the Plan, or any part thereof, necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among SROs, or to remove impediments to and foster the development of the national market system and a national system for the clearance and settlement of securities transactions and in conformity with the factors set forth in Section 17(d) of the Act. A 17d-2 Plan relieves the delegating party of its responsibility to receive regulatory reports, to examine for and enforce compliance with applicable statutes, rules, and regulations, or to perform other specified regulatory functions for the common members.
The SROs are currently parties to a 17d-2 Plan pursuant to which regulatory responsibility is allocated among the SROs for rules that pertain to NMS stocks or NMS securities (the “NMS 17d-2 Plan”). For these rules, FINRA serves as the Designated Regulation NMS Examining Authority (“DREA”) and Designated CAT Surveillance Authority (“DCSA”) for common exchange members that are also members of FINRA, and assumes certain examination and enforcement responsibilities for those members with respect to specified Regulation NMS rules (i.e., 606, 607, 611, 612 and 613(g)(2)), and for the cross-market surveillance, examination, investigation and enforcement of Rule 613 and the rules of the SROs regarding compliance with the CAT NMS Plan. For common exchange members that are not members of FINRA, the member’s Designated Examining Authority (“DEA”) serves as the examining authority and DCSA. As part of the NMS 17d-2 Plan, the SROs agreed to hold meetings to discuss how such rules should be surveilled, examined, investigated, and enforced, and FINRA agreed to consult with the other SROs prior to finalizing its disposition and sanctions guidelines with respect to violations of such rules. In addition, the SROs are parties to a 17d-2 Plan which allocates regulatory responsibilities for the surveillance, investigation, and enforcement of common insider trading rules with respect to NMS Stocks to FINRA.
The options exchanges are parties to 17d-2 Plans that address regulatory issues unique to those markets. One such 17d-2 Plan, the Options-Related Sales Practice Matters Plan, reduces regulatory duplication for a large number of firms that are currently members of two or more of the SROs by allocating regulatory responsibility for surveillance and enforcement of a set of options sales practice rules that are substantially identical across the options exchanges to one exchange. Under the Options-Related Sales Practice Matters Plan, the options exchange responsible for surveilling and enforcing covered options-related sales practice rules, and investigating options-related customer complaints and terminations for cause of associated persons of that firm, is known as the firm’s Designated Options Examining Authority (“DOEA”). The Options-Related Sales Practice Matters Plan sets forth principles for determining which SRO will be the DOEA for a member. For example, SROs may not allocate a member to a DOEA unless the member is a member of that SRO. In addition, the SROs attempt to equalize the allocation of common members among them, to the extent practicable and desired by the SROs. They also take into account the amount of customer activity on a given SRO’s exchange when making allocations. Pursuant to the Options-Related Sales Practice Matters Plan, any other options exchange of which the firm is a member is relieved of these responsibilities while the firm is assigned to another options exchange acting as that firm’s DOEA. The Options-Related Sales Practice Matters Plan also sets forth considerations for determining how a DOEA will be assigned to a member.
Another 17d-2 Plan, the Options-Related Market Surveillance Plan, of which the options exchanges are participants, is intended to reduce regulatory duplication for common members by allocating regulatory responsibility for the surveillance, investigation, and enforcement of certain options-related market surveillance matters among the options exchanges. Under the Options-Related Market Surveillance Plan, common members of the options exchanges are assigned a Designated Options Surveillance Regulator (“DOSR”) which assumes regulatory responsibility with respect to that common member’s compliance with applicable common rules for certain accounts. Upon assignment of a common member’s DOSR, all other options exchanges to which the common member belongs will be relieved of regulatory responsibility for that common member, pursuant to the terms of the Plan. The Options-Related Market Surveillance Plan requires the SROs to consider substantially similar principles when allocating common members to SROs for regulatory services. The Options-Related Market Surveillance Plan allocates certain responsibilities specifically to FINRA. FINRA is responsible for conducting examinations for delta hedging for all common members of the options exchanges that are members of FINRA notwithstanding the fact that FINRA’s position limit rule is, in some cases, limited to only firms that are not members of an options exchange (i.e., access members).
In addition to 17d-2 Plans, the SROs use RSAs to, among other reasons, avoid regulatory duplication. An RSA is a negotiated agreement between two SROs whereby one SRO agrees to perform regulatory services such as market surveillance, financial surveillance, examinations, investigations, and/or disciplinary services on behalf of another SRO in exchange for compensation. RSAs generally are not publicly available. Unlike 17d-2 Plans, the presence of an RSA does not relieve the SRO contracting for regulatory services to be performed on its behalf of its statutory obligations to oversee its members; such an SRO is responsible for oversight of the SRO performing the regulatory services. An RSA can be used to cover matters or individuals that may fall outside the scope of a 17d-2 Plan. For example, the SROs have RSAs with FINRA to cover investigation and enforcement in situations involving insider trading in NMS Stocks by non-common FINRA Members.
The SROs also coordinate regulatory efforts through forums provided by the ISG. The ISG, created in 1981, is an international group of exchanges, market centers, and regulators that perform market surveillance in their respective jurisdictions. Its members include all of the registered national securities exchanges and FINRA. Unlike 17d-2 Plans and RSAs, ISG is about regulatory information sharing and coordination for both domestic and foreign regulators. Pursuant to its charter, one of ISG’s purposes is “the coordination and development of programs and procedures designed to assist in identifying possible fraudulent and manipulative acts and practices across markets, where possible, particularly between markets which trade the same or related or derivative Financial Instruments[.]”
Another purpose of the ISG is “to freely share relevant information and documents for regulatory purposes in order to fulfill the regulatory roles expected of each ISG Member.” ISG members may request information from other members to help identify possible fraudulent and manipulative activities across markets and to facilitate information sharing. ISG is the forum through which the Consolidated Options Audit Trail System (“COATS”) for options is administered. The options exchanges work collaboratively to ensure that option order information is reported by each exchange and consolidated for use by all. ISG also hosts a working group of market participants dedicated to discussing issues that arise relating to Electronic Blue Sheets (“EBS”). In response to CAT, the SROs formed a Cross Market Regulatory Working Group (“CMRWG”) of the ISG. This working group is designed to be a forum for the SROs to share information and collaborate in connection with their ongoing surveillance, investigation and enforcement matters to assist in reducing unnecessary duplication in regulatory efforts. This working group is expected to address concerns raised by individuals or firms that they are receiving duplicative or overlapping requests from regulators.
B. Effects of CAT Implementation on Current Regulatory Coordination Efforts
The implementation of CAT is expected to address limitations on exchange access to cross market data. Prior to CAT, there was no single, comprehensive audit trail available to regulators. The SROs however, use a variety of data sources, including the EBS and, through the ISG forum, data from the COATS and ECAT, the ISG’s equity audit trail, to help fulfill their regulatory obligations. In addition, FINRA has had the ability to collect cross-market data through the Order Audit Trail System (“OATS”). OATS is a system operated by FINRA which compiles information reported by member firms. FINRA combines this information with data provided by the exchanges regarding exchange activity pursuant to RSAs. Under the auspices of the ISG, 17d-2 Plans, and RSAs, FINRA and the exchanges share regulatory information and allocate regulatory responsibilities. In this way, FINRA and the exchanges have collaborated to monitor trading activity across different markets so that the SROs can surveil trading activity beyond the boundaries of data from their own markets.
Because the implementation of the CAT will provide each of the SROs with direct access to complete cross-market data and the CAT NMS Plan requires the SROs to develop new or enhance existing surveillance systems to make reasonable use of CAT Data, the manner in which the SROs coordinate their regulatory activities may change. The Commission, in adopting Rule 613 of Regulation NMS, stated that it supported efforts to coordinate surveillance among the SROs. Further, when the Commission approved, in November 2016, the national market system plan to create the CAT that was required by Rule 613, it required the SROs to submit a report detailing their consideration of coordinated surveillance within twelve months thereafter. To date, the SROs have formed the CMRWG to consider issues related to cross-market regulation using the CAT.
III. Possible Models for Cross-Market Regulatory Coordination
The Staff believes it is important to explore possible models for the SROs’ approach to cross-market regulatory coordination, including with respect to surveillance, examinations, investigations, and enforcement, in light of the implementation of CAT. There are different aspects of potential models for cross-market regulatory coordination that should be considered, including the appropriate scope of cross-market activity, the point in the cross-market regulatory process at which coordination may be appropriate, and allocation of responsibility for cross-market regulation among the SROs.
With respect to cross-market activity, there are several stages in the regulatory process at which cross-market regulatory coordination may be appropriate to address the implications of CAT implementation: (1) the surveillance and examination stage, which would involve monitoring of cross-market trading activity to detect potentially disorderly markets or illegal activity and periodic and/or special examinations of firms for compliance with applicable statutes, rules, and regulations; (2) the investigation stage, which would involve reviewing potentially illegal cross-market trading activity identified during the surveillance stage; and (3) the enforcement stage, which would involve bringing disciplinary or legal action to prevent or remedy misconduct or non-compliance identified during the surveillance and investigation stages.
A cross-market regulatory coordination approach could allocate responsibilities among one or more SROs. Although a broker-dealer’s misconduct could impact SROs, and although each SRO is required to examine and enforce compliance by its member firms with applicable statutes, rules, and regulations, the SROs could coordinate among themselves to streamline cross-market regulatory activity. Once potential misconduct is identified, the SROs could allocate responsibility among themselves by designating one or multiple SROs to conduct a single investigation and pursue any resulting enforcement action.
Alternatively, the SROs could centralize cross-market regulatory activities by assigning a single SRO to perform designated activities based on pre-determined allocation principles. Potentially, different SROs could be assigned to perform cross-market regulatory activities for the options and equities markets. However, the concept of centralizing cross-market regulatory responsibilities with one SRO raises several questions, including how the single SRO should be selected, whether such designation is temporary, how to control for possible conflicts of interest in selecting a lead SRO, how to allocate fines, and how to maintain and improve the quality of the regulatory process.
The SROs could achieve cross-market regulatory coordination in several ways. For instance, the SROs could coordinate by consolidating regulatory responsibilities with willing participants through the ISG, through new or updated RSAs and/or 17d-2 Plans, or through the creation of a new NMS Plan. The appropriate approach to consolidation of regulatory responsibilities, and the appropriate method of regulatory coordination, may vary depending on the circumstances and/or the rules involved.
IV. Request for feedback
As the Staff evaluates these matters, feedback would be helpful to the Staff in evaluating what, if any, recommendations Staff might make to the Commission in this area. Below are areas on which feedback would be particularly helpful.
- What is Cross-Market Regulation. How do market participants define “cross-market regulation”? What activities or functions does the term “cross-market regulation” encompass? Should “cross-market regulation” encompass surveillance, examination, investigation, and enforcement activities? Is a rules-based cross-market regulatory coordination approach that focuses on SRO rules related to market conduct and/or member conduct appropriate? If so, what specific SRO rules could be covered by cross-market regulatory coordination? If not, what approach to cross-market regulatory coordination would be appropriate?
- Regulatory Duplication. To what extent is regulatory duplication prevalent despite the availability of 17d-2 Plans and RSAs? How does coordination through the ISG reduce regulatory duplication? Are there additional ways the SROs could coordinate through ISG to mitigate regulatory duplication? Are there differences in regulatory duplication or the effectiveness of regulatory coordination methods on equity markets and options markets?
- Guiding Framework. What features should there be to establish, maintain, and operate a comprehensive, high-quality cross-market regulatory program? What factors drive the outsourcing of cross-market regulatory activity?
- Stages of Coordination. At which stage(s) of the regulatory process should cross-market regulatory coordination occur considering the following stages: surveillance, examination, investigation, and enforcement?
- Allocation of Responsibility. Should cross-market regulatory coordination be allocated across multiple SROs or centralized within a single SRO? What allocation principles should be applied? If the SROs were to coordinate cross-market regulatory responsibility using either method, what factors should weigh in favor of one approach versus the other?
- Mechanism for Coordination. What would be an effective mechanism by which to achieve cross-market regulatory coordination among the SROs? How should the above-described methods of cross-market regulatory coordination be used for CAT Data? What would be the impact on existing RSAs and/or 17d-2 Plans that govern cross-market regulation? For example, should the terms of cross-market regulatory coordination be set forth via new RSAs or 17d-2 Plans between the SROs or via the CMRWG of the ISG? Does the level of coordination impact the mechanism required to achieve the goal (i.e., are different mechanisms required for coordination across SROs versus centralization of cross-market regulatory activity within a single SRO)?
Appendix A outlines in more detail the kinds of questions that the Staff expects to consider in connection with formulating any recommendations to the Commission. The Staff welcomes engagement on these topics.
If you would like to let the Staff know your views regarding the matters discussed in this Staff Paper, we are providing an e-mail box as a convenient method for you to communicate with the Staff; we encourage you to communicate through the following address: TMCrossMarketReg@sec.gov and insert “Cross Market Regulation Staff Paper; CLL-11” in the subject line. The Staff anticipates making submissions public.
Current Approaches to Regulatory Coordination
- Definition of Cross-Market Regulatory Coordination
- Exchange-specific rules versus cross-market rules and associated use of CAT Data to support both single market and cross-market regulatory programs
- Functional approaches based on stage of regulatory process
- Reliance on cross-market data for supervising activity on one exchange
- Effectiveness of Current Cross-Market Regulatory Model
- Scope of cross-market trading activity today and prevalence of cross-market misconduct for both equities and options
- Impact of CMRWG on post-CAT cross-market regulatory coordination
- Impact of reduced use of RSAs for single exchange regulatory programs
- SRO use of cross-market data available before CAT
Effects of CAT Implementation on Current Regulatory Efforts
- Current and expected use of CAT Data by SROs for exchange-specific regulatory programs
- Current and expected use of CAT Data for cross-market regulatory programs
- Likelihood of moving away from existing RSAs and 17d-2 Plans that govern cross-market surveillance as a result of access to CAT Data
Possible Models for Cross Market Regulatory Coordination
- Considerations for Maintaining and Enhancing Cross-Market Regulatory Programs
- Expertise and/or experience in performing cross-market regulatory activities
- Operational, technical and resource requirements
- Achieving efficiencies through economies of scale
- Cross-Market Regulatory Model Attributes
- Stage(s) within the regulatory process where coordination would be most beneficial
- Level of coordination required at each stage of the regulatory process – e.g., allocation across multiple SROs or centralization within a single SRO)
- Method of allocation across SROs (e.g., allocation of cross-market regulatory responsibility by member or determined on a case-by-case basis)
- Selection criteria and process for choosing SRO(s) to operate cross-market regulatory programs
- Required changes to existing cross-market regulatory agreements to establish cross-market regulatory model
- Possible incentives for SROs to perform cross-market regulatory activities
- Criteria for Assessing the Efficacy of Cross-Market Regulatory Models
- Benefits of multiple SROs performing same regulatory function
- Duplication of regulatory efforts and the related imposition of duplicative regulatory burdens on market participants
- SRO autonomy and competition between SROs
- Regulatory innovation and competition in the market for regulatory services
- Quality, timeliness, consistency, and comprehensiveness of regulatory programs
- Importance of individual market expertise
- Regulatory responsibilities and oversight and audit capabilities of SROs without a cross-market regulatory program
- Quantity and frequency of CAT Data accessed and associated impact on CAT Data security
- Accommodating differences between equities and options markets
- Conflict between SROs’ commercial interests and regulatory responsibilities
- Impact on the effectiveness of exchange-specific surveillance and examinations
- Allocation of fines paid as a result of coordinated cross-market regulation
- Impact on cross-product regulation
 See 15 U.S.C. 78f(b)(1); 15 U.S.C. 78o-3(b)(2); 15 U.S.C. 78s(g)(1).
 17 CFR 240.17d-2. See also text accompanying notes 13-16.
 See Securities Exchange Act Release No. 78318 (November 15, 2016), 81 FR 84696, (November 23, 2016) (“CAT NMS Plan Approval Order”), at n. 2443.
 See 15 U.S.C. 78f(b)(1) and 78o-3(b)(1) (requiring the SROs to be organized and to have the capacity to comply, and to enforce compliance by their members, with the Exchange Act, the rules and regulations thereunder, and their own rules); 15 U.S.C. 78s(g)(1) (requiring the SROs to comply, and, absent reasonable justification or excuse, to enforce compliance by their members, with the Exchange Act, the rules and regulations thereunder, and their own rules).
 See 15 U.S.C. 78f(b)(1) and 78o-3(b)(1); 15 U.S.C. 78s(g)(1). See also Memorandum to the Equity Market Structure Advisory Committee (“EMSAC”) from the Division of Trading and Markets re: Current Regulatory Model for Trading Venues and for Market Data Dissemination, dated October 20, 2015, at 3, available at https://www.sec.gov/spotlight/emsac/memo-regulatory-model-for-trading-venues.pdf.
 See supra note 1.
 Some exchanges may also perform cross-market and cross-exchange group surveillance. Pursuant to Section 6 of the Exchange Act, exchanges must establish rules that generally: (1) are designed to prevent fraud and manipulation, promote just and equitable principles of trade, and protect investors and the public interest; (2) provide for the equitable allocation of reasonable fees; (3) do not permit unfair discrimination; (4) do not impose any unnecessary or inappropriate burden on competition; and (5) with limited exceptions, allow any broker-dealer to become a member. See U.S.C. 78f(b)(6).
 See e.g., NYSE Rule 7.35 (Series. Auctions), Nasdaq Rule 4752 (Opening Process), and CboeBZX Rule 11.23 (Auctions).
 For example, because the same order could be trading on all of the exchanges simultaneously, one regulatory violation has the potential to touch multiple equities markets, or equities and options markets.
 See Securities Exchange Act Release No. 50700 (November 18, 2004), 69 FR 71255 (December 8, 2004) (“Concept Release Concerning Self-Regulation”) (discussing issues relating to regulatory coordination); Securities Exchange Act Release No. 47849 (May 13, 2003), 68 FR 27722 (May 20, 2003) (“Intermarket Trading Concept Release”) (discussing regulatory arbitrage). See also U.S. General Accounting Office Report to Congressional Committees, Securities Markets Competition and Multiple Regulators Heighten Concern about Self-Regulation (May 2002) (“GAO Report”) (discussing issues related to regulatory coordination).
 See letter from Marcia E. Asquith, Executive Vice President, FINRA, to Vanessa Countryman, Secretary, Commission, dated November 30, 2020.
 15 U.S.C. 78q(d)(1); See also Securities Act Amendments of 1975, Report of the Senate Committee on Banking, Housing, and Urban Affairs to Accompany S. 249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
 17 CFR 240.17d-2.
 17 CFR 240.17d-2(c).
 15 U.S.C. 78q(d)(1).
 See Securities Exchange Act Release No. 63430 (December 3, 2010), 75 FR 76758 (December 9, 2010). See also Securities Exchange Act Release Nos. 76311 (October 29, 2015), 80 FR 68377 (November 4, 2015); 88366 (March 12, 2020), 85 FR 15238 (March 17, 2020) (File No. 4-618).
 See Securities Exchange Act Release Nos. 88246 (February 20, 2020), 85 FR 10746 (February 25, 2020); 88366 (March 12, 2020), 85 FR 15238 (March 17, 2020) (File No. 4-618).
 See Securities Exchange Act Release No. 58536 (September 12, 2008), 73 FR 54646 (September 22, 2008); See also Securities Exchange Act Release Nos. 58806 (October 17, 2008), 73 FR 63216 (October 23, 2008); 61919 (April 15, 2010), 75 FR 21051 (April 22, 2010); 63103 (October 14, 2010), 75 FR 64755 (October 20, 2010); 63750 (January 21, 2011), 76 FR 4948 (January 27, 2011); 65991 (December 16, 2011), 76 FR 79714 (December 22, 2011); 78473 (August 3, 2016), 81 FR 52722 (August 9, 2016); 84392 (October 10, 2018), 83 FR 52243 (October 16, 2018); 86542 (August 1, 2019), 84 FR 38679 (August 7, 2019) (File No. 4-566).
 See Securities Exchange Act Release No. 20158 (September 8, 1983), 48 FR 41256 (September 14, 1983) (File No. S7-966).
 See Securities Exchange Act Release No. 56941 (December 11, 2007), 72 FR 71723 (December 18, 2007) (File No. 4-551).
 Id. at 71724.
 See Securities Exchange Act Release No. 58765 (October 9, 2008), 73 FR 62344 (October 20, 2008) (File No. 4-551).
 See Securities Exchange Act Release No. 86542 (August 1, 2019), 84 FR 38679 (August 7, 2019) (File No. 4-566)
 See https://www.isgportal.org/isgPortal/public/overview.htm; see also Intermarket Trading Concept Release, supra note 10, at 27723.
 Intermarket Surveillance Agreement at 4.
 The EBS system, supplemented by the requirements of Rule 17a-25 under the Exchange Act, is generally used by SRO staff to assist in the investigation of possible securities law violations, typically involving insider trading and market manipulations. In its electronic format, the EBS system provides certain detailed execution information, upon request by SRO for specific securities during specified timeframes. 17 CFR 240.17a-25.
 See Notice to SRO Members ISG CMRWG 2020-01 (April 8, 2020), available at https://boxoptions.com/assets/ISG-CMRWG-Notice-2020-01.pdf.
 See In the Matter of Certain Activities of Options Exchanges, Administrative Proceeding File No. 3-10282, Securities Exchange Act Release No. 43268 (September 11, 2000) (Order Instituting Public Administrative Proceedings Pursuant to Section 19(h)(1) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions) ("Options Settlement Order"). See also, e.g., Securities Exchange Act Release No. 50996 (January 7, 2005), 70 FR 2436 (order approving proposed rule change by CBOE relating to Phase V of COATS).
 For example, individual exchanges have typically had access to their own markets’ equity and options order book information and consolidated quotation and transaction information, while not having direct access to FINRA’s OATS reports. See Robert W. Cook, President and CEO, FINRA, Equity Market Surveillance Today and the Path Ahead, at n.3, available at https://www.finra.org/media-center/speeches-testimony/equity-market-surveillance-today-and-path-ahead (“FINRA Speech”). The SROs have taken steps in recent years to update their audit trail requirements. For example, NYSE, NYSE MKT LLC, and NYSE Arca, Inc. adopted audit trail rules that coordinate with OATS requirements. See Securities Exchange Act Release No. 65523 (October 7, 2011), 76 FR 64154 (October 17, 2011); Securities Exchange Act Release No. 65524 (October 7, 2011), 76 FR 64151 (October 17, 2011); Securities Exchange Act Release No. 65544 (October 12, 2011), 76 FR 64406 (October 18, 2011). This allows the SROs to submit their data to FINRA, which FINRA can then reformat and combine with OATS data. Despite these efforts, however, significant deficiencies in the available audit trail data remain. See Securities Exchange Act Release No. 77724 (April 27, 2016), 81 FR 30614 (May 17, 2016), at Section IV.D.2.b.
 Rule 613 of Regulation NMS required the SROs to jointly develop and submit to the Commission a national market system plan to create, implement and maintain the CAT. See Securities Exchange Act Release No. 67457 (July 18, 2012), 77 FR 45722 (August 1, 2012) (“Rule 613 Adopting Release”).
 The Commission stated that it “believes that it is appropriate to require SROs to enhance their surveillance programs to make full use of the increased functionalities and the timeliness of the consolidated audit trail. Additionally, because trading and potentially manipulative activities could take place across multiple markets, the Commission supports efforts to coordinate surveillance among the SROs, such as through a plan approved pursuant to Rule 17d-2 under the Exchange Act, or through regulatory services agreements between SROs. In this regard . . . SROs could ‘outsource’ surveillance efforts to another SRO, if there are efficiencies to be gained.” Id. at 45788.
 See CAT NMS Plan Approval Order, supra note 3. The CAT NMS Plan is Exhibit A to the CAT NMS Plan Approval Order. See id., at 84943–85034. In approving the CAT NMS Plan, the Commission added ISE Mercury, LLC (n/k/a Nasdaq MRX, LLC) and Investors Exchange LLC as Participants to the CAT NMS Plan. See id. at 84728. On January 30, 2017 and March 1, 2019, the Commission noticed for immediate effectiveness amendments to the Plan to add MIAX Pearl, LLC and MIAX Emerald, LLC, respectively, as Participants. See Securities Exchange Act Release Nos. 79898 (January 30, 2017), 82 FR 9250 (February 3, 2017), and 85230 (March 1, 2019), 84 FR 8356 (March 7, 2019). Unless otherwise noted, capitalized terms are used as defined in Rule 613, in the CAT NMS Plan, or in this release.
 Id. at 84799. In so requiring, the Commission stated, “the CAT is designed to facilitate the ability of regulators to conduct cross-market surveillances and to review conduct that occurs across the market. As a result, the Commission believes that it may be efficient for the Participants to coordinate to conduct cross-market surveillances.” Id.
On November 15, 2017, the SROs submitted a “Report Detailing Participants’ Consideration of Coordinated Surveillance.” See letter from Michael J. Simon, CAT NMS Plan Operating Committee Chair, dated November 15, 2017, to Brent J. Fields, Secretary, Commission (“Coordinated Surveillance Letter”). See also letter from Michael J. Simon, CAT NMS Plan Operating Committee Chair, dated April 18, 2019, to Brett Redfearn, Director, Division of Trading and Markets, Commission (Updated Report on Anticipated use of CAT Data for Surveillance and Regulatory Purposes).
 Industry Members began reporting transactional data to the CAT on June 22, 2020. See, e.g., https://catnmsplan.com/timeline/calendar.
 In addition, it may be appropriate to consider the possibility that SROs might refer cases to the Commission.
 As discussed above, the Commission has previously permitted SROs to agree, with Commission approval, with each other on how to allocate regulatory responsibilities. See Part I., supra.