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Regulation and Compliance > Federal Regulation > SEC

FINRA, Exchanges Set New CAT Schedule After Missing Deadline

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The Financial Industry Regulatory Authority and national securities exchanges have failed to begin reporting required data under the first phase of the Consolidated Audit Trail, or CAT, as required by the Securities and Exchange Commission, and have given the securities regulator an updated timetable, according to head of the agency’s Division of Trading and Markets.

The SEC adopted Rule 613 of Regulation NMS requiring the self-regulatory organizations — FINRA and the national securities exchanges — to develop and submit to the SEC a plan to create, implement and maintain CAT, which would track market trading activity.

In a Monday statement, Brett Redfearn, director of the SEC’s Division of Trading and Markets, stated that under the plan developed by the SROs, the first phase of reporting to the CAT—covering SRO reporting — was required to begin on Nov. 15, 2017.

In the fall of 2017, the SROs requested that the SEC grant relief from this deadline, but SEC Chairman Jay Clayton declined.

“To date, the SROs have not begun reporting required data to the CAT as required by the first phase of the SRO CAT Plan,” Redfearn stated. “There continue to be delays in the SROs’ development and build of the CAT, and, recently, the SROs and [Thesys Technologies LLC, the tech company chosen to build the CAT] have missed new, self-imposed deadlines.”

Redfearn explained that Trading and Markets requested that the SROs create a detailed “master plan” that would, among other things, set forth a catalogue of material steps necessary to effectively implement the CAT, a revised timeline with detailed, objective and achievable milestones and clearly defined obligations for the SROs and Thesys, and a comprehensive description of the functionality that will be delivered on specific dates.

The agency received the master plan on May 25, 2018.

The SROs’ master plan calls for “first phase” reporting to commence on Nov. 15, “second phase” (large broker-dealer) reporting to commence on Nov. 15, 2019 (compared to Nov. 15, 2018 under the SRO CAT Plan), and all phases of small broker-dealer reporting to be complete by Nov. 15, 2022 (compared to Nov. 15, 2019 under the SRO CAT Plan) — but not all data and functionality required by the SRO CAT Plan will be available on those dates.

“For example, only equities data — not options data — will be included in the large broker-dealer reporting that will commence on Nov. 15, 2019,” Redfearn said.

Trading and Markets is continuing to review the master plan, according to Redfearn.

“The Division and other SEC staff will continue to monitor the development of cybersecurity controls for the CAT and work with the SROs, Thesys and the industry regarding the security of CAT data,” he stated.


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