SEC Releases Consolidated Audit Trail Plan

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By Rob Tricchinelli

April 27 — The Securities and Exchange Commission took a major step April 27 toward completing the consolidated audit trail, a huge database that will amass trading information from across U.S. exchanges and dark pools, and allow regulators to analyze market volatility and sniff out wrongdoing.

National securities exchanges and the Financial Industry Regulatory Authority have formulated a plan to build the long-awaited trail, which was released by the agency for public comment in a 3-0 vote. The SEC's rule requiring those self-regulatory organizations to establish the CAT was adopted in July 2012.

‘Comprehensive and Sophisticated.'

Under the plan, a central repository would receive data on equities orders from exchanges and broker-dealers. It also sets out data accuracy and security requirements for those submitting order data, as well as clock synchronization standards.

“Once completed, it will be one of the world’s most comprehensive and sophisticated financial databases, providing the complete lifecycle of all orders and transactions in the U.S. equity and options markets,” SEC Chairman Mary Jo White said at an agency meeting.

‘Very, Very Overdue.'

The timing of the plan has come under fire from many parts of the industry as well as lawmakers (43 SLD, 3/4/16).

“Today’s news that the SEC is finally moving forward with a plan to implement the Consolidated Audit Trail is extremely welcome and a very, very overdue development,” Sen. Mark Warner (D-Va.), a frequent critic of the timing, said in a news release.

SEC Commissioner Kara Stein cited lengthy waits for reports on the May 6, 2010, “flash crash” and exchange-traded fund volatility on Aug. 24, 2015, as reasons to get moving faster on the plan.

“These months-long delays in analyzing important market events are unacceptable in this digital age,” she said at the open meeting. “We need a clear and timely picture of what is going on in our markets to better minimize risk and increase resiliency.”


Under the plan, the central database will be built and maintained by a vendor that the SROs select from three finalists—a group led by SunGard, a group led by Thesys, or FINRA itself.

Firms would have to submit robust order data to the central repository, where the SEC would have access to it. Firms' clocks across the industry for tracking order timing would have to be synchronized within 50 milliseconds.

The public comment window is 60 days, and the SEC has 180 days to approve the plan. After the agency approves the plan, the SROs will have two months to pick a vendor and a year to begin submitting some data to the central processor.


SEC staff estimated that once the CAT is up and running, broker-dealers' and exchanges' compliance costs would level off to current data reporting cost levels—roughly $1.7 billion industry-wide—within about two-and-a-half years.

The transition costs for those groups would depend on the bid, but SEC staff estimated it to be on the order of $100 million for the industry.

“Developing and maintaining the CAT is going to be an incredibly costly endeavor,” Commissioner Michael Piwowar said. “Therefore, it is especially important for our analysis of the plan to be informed by data.”

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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