SEC to create Consolidated Audit Trail


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

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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,” said SEC Chair Mary Jo White. “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.

The NMS plan details the methods by which 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 Commission modified several provisions of the NMS plan in response to public comments and recommendations from the SROs:

  • The Commission 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, rather than the industry as a whole, and reflect that refined assessment annually in a report submitted to the Commission.
  • Enhanced the CAT plan governance by expanding the membership of the advisory committee to include an additional institutional investor representative and a representative of a service bureau that provides CAT reporting services.
  • 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.

Within two months of the approval of the NMS plan the SROs must select a plan processor to build and operate the CAT. SROs will be required to begin reporting to the CAT within one year of approval, with large broker-dealers following the next year and small broker-dealers the year after.

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SEC to create Consolidated Audit Trail

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