Officials say the regulator has started “an overdue journey” to rationalize the controversial Consolidated Audit Trail (CAT).
The Securities and Exchange Commission (SEC) granted “exemptive relief “to the self-regulatory organizations (SROs) that are essentially underwriting the operating costs of the consolidated audit trail (CAT).
The ambitious big data CAT system got its start in 2012 in the wake of the Flash Crash of 2010. That event spurred demand for a U.S. securities transaction monitoring project that could help the Financial Industry Regulatory Authority (FINRA) and the SEC scan U.S. equity and options markets, exchanges, industry participants, transactions, and more. FINRA CAT, LLC, a subsidiary of FINRA, was tapped to oversee CAT operations and planning, while the U.S. National Securities Exchanges, alternative trading systems (ATSes), and executing brokers were required to cover CAT’s funding.
However, the SEC recently ordered “conditional exemptive relief related to certain requirements” of the CAT NMS Plan that will “expeditiously and meaningfully reduce the operating costs of the consolidated audit trail (CAT) while maintaining core regulatory functionality,” SEC officials say.
Paul S. Atkins
“Both the Commission and the participants that operate the CAT need to take very seriously their roles in reducing these seemingly endless cost increases. CAT must be more efficient and cost-effective, especially after the recent decision by the U.S. Court of Appeals for the Eleventh Circuit that vacated the 2023 Funding Model Order governing the CAT,” says SEC Chairman Paul S. Atkins, in a prepared statement. “While I am pleased to support today’s exemptive relief, I want to reiterate that this is just the start.”
The SEC’s action “begins an overdue journey to reform and rationalize the CAT. The Division will continue to engage participants and industry members to facilitate needed improvements to reduce costs for investors,” adds Jamie Selway, director of the SEC’s Division of Trading and Markets, in a statement.
The order “will allow the plan participants to, among other things: (1) cease creating interim lifecycle linkages absent regulator request; (2) ease requirements related to the re-processing of late records; (3) cease providing certain functionality associated with the online targeted query tool; and (4) delete certain CAT data and more cost effectively store older CAT data,” according to the SEC.
The full text of the order can be found here: https://shorturl.at/X0T8Y
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