Audit Trail Is SEC's Top Market Task for Rest of 2016

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By Rob Tricchinelli

Sept. 14 — The Securities and Exchange Commission's top market-structure agenda item for the rest of 2016 is finishing the consolidated audit trail, Chairman Mary Jo White said Sept. 14.

The CAT is designed to be a vast central data repository for equity orders, as provided by brokers and exchanges.

The CAT plan was formulated by the Financial Industry Regulatory Authority and national securities exchanges, and released by the SEC in April (82 SLD, 4/28/16).

The agency plans to act in the coming months on new disclosures for dark pool operators, a pilot program for lowering access fees and rebates on exchanges, and an anti-disruptive trading rule, White said at a conference of the Security Traders Association in Washington.

Anti-Disruptive Trading Data

An anti-disruptive trading proposal won't come right away. Instead, the agency first plans to release data it has collected as it works on the topic.

“One of the most difficult tasks in developing the right regulatory response to such potentially disruptive trading strategies is the need to avoid undue interference with practices that benefit investors and market efficiency,” White said. “Clearly, this is an issue that warrants full opportunity for a well-informed, data-driven public dialogue.”

Industry stakeholders and members of the public will be able to comment on the data once released.

The data analytics likely won't be released in a formal concept release, White told reporters after her speech. For its exact format, “you’ll have to wait until it comes out,” she said.

SEC officials have said the anti-disruptive trading proposal will be the last of a slate of market-structure rules that Mary Jo White is pushing (35 SLD, 2/23/15), and attorneys told Bloomberg BNA earlier in 2016 that it would likely be the most difficult of those rules to implement (13 SLD, 1/21/16).

Aggressive Short-Term Trading

As envisioned by White, the rule would bar active traders from using aggressive short-term trading strategies when liquidity is at vulnerable levels and when risks of price disruption are heightened.

During pronounced volatility among Treasury markets in October 2014, principal trading firms and bank-dealers contributed greatly to an imbalance by aggressively sending buy orders, which spiked prices, White said.

“The surge in aggressive demand by these professional traders appears to have increased, rather than reduced, their exposure to the market in the direction of the price moves,” White said Sept. 14. “Such trading is troubling because it suggests a destabilizing short-term trading strategy during a period of market weakness.”

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To contact the editor responsible for this story: Susan Jenkins at

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