Investing

SEC Announces Plan to Create Consolidated Audit Trail

Chris Lange

Published: November 16, 2016 2:57 pm

Last Updated: January 12, 2020 5:43 pm

The U.S. Securities and Exchange Commission (SEC) recently voted to approve a national market system (NMS) plan to create a single, comprehensive database known as the consolidated audit trail (CAT). Ultimately this program will enable regulators to more efficiently and thoroughly track all trading activity in the U.S. equity and options markets.

The NMS plan details the methods by which self-regulatory organizations (SROs) and broker-dealers will record and report information, including the identity of the customer, resulting in a range of data elements that together provide the complete lifecycle of all orders and transactions in the U.S. equity and options markets.

The NMS plan also sets forth how the data in the CAT will be maintained to ensure its accuracy, integrity and security.

The SEC modified several provisions of the NMS plan in response to public comments and recommendations from the SROs, including:

• Strengthened several of the data security requirements of the NMS plan, including with respect to personally identifiable information.
• Tightened the clock synchronization standards for SROs to within 100 microseconds of the time maintained by the National Institute of Standards and Technology to enable regulators to better sequence order events across multiple exchanges and required the SROs to assess industry standards for clock synchronization based on the type of market participant or system.
• Enhanced the CAT plan governance by expanding the membership of the advisory committee.
• Accelerated the deadline for the SROs to submit proposals to retire regulatory data reporting systems that will be rendered obsolete by CAT, to reduce the burden on broker-dealers of reporting to multiple systems.

Mary Jo White, SEC Chair, commented:

With the approval and ultimate implementation of CAT, the Commission’s regulatory capacity strongly embraces 21st century technology, enabling the Commission and the SROs to harness data and technology to more effectively oversee market participants. Through the CAT, regulators will have more timely access to a comprehensive set of trading data, enabling us to more efficiently and effectively conduct research, reconstruct market events, monitor market behavior, and identify and investigate misconduct.