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Robert Cook, FINRA CEO

Regulation and Compliance > Federal Regulation > FINRA

FINRA's Cook: 'Mission Accomplished' With CAT Database

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Speaking about the status of the Consolidated Audit Trail’s transaction database on Thursday, Financial Industry Regulatory Authority CEO Robert Cook said, “Mission accomplished.” Cook also signaled that paring back the amount of information collected via CAT may be warranted.

“If you go back and think about what was the purpose of CAT — coming out of the flash crash, the SEC wasn’t in a position to reconstruct what happened; it didn’t have the data available,” Cook said during comments at the Securities Traders Association’s annual Market Structure conference, held in Washington.

“Fast forward to today, we have an integrated consolidated audit trail that allows for surveillance of all listed products in [over the counter] trading; it allows for market reconstruction, it allows for policy informing/policy analysis,” Cook explained.

CAT is the SEC-mandated central repository of trades, quotes and orders for all U.S. exchange-listed and over-the-counter equity securities and U.S. exchange-listed options contracts across all U.S. markets and trading venues. Investors’ personal identifiable information, or PII, became available via the CAT on March 17.

While there are “tons of problems that people raise with CAT,” Cook explained, “overall, the transactional database has been very successful in meeting those goals.”

As for “legitimate” privacy concerns related to CAT, Cook said, it’s “never to late to do the right thing. Just because we’re there now doesn’t mean we can’t say, ‘Maybe we went too far. Let’s go back and collect less data and really shrink the footprint of that.’”

CAT Funding

In terms of CAT funding, FINRA was “disappointed that the SEC approved the funding model that came out,” Cook explained. “We had commented against it several times; we don’t think it’s the appropriate allocation of the costs of CAT.”

Cook encouraged attendees to “be on top of this at your firms; this is coming very quickly.

On Sept. 6, the SEC approved an amendment to the National Market System Plan governing the CAT to adopt a revised funding model, called the Executed Share Model. Industry groups blasted the plan, calling it unfair to broker-dealers.

The SEC’s plan also establishes a schedule for CAT fees for the self-regulatory organizations that participate in the CAT NMS Plan in accordance with the new model.

FINRA said then that it “has not been supportive of the proposed CAT funding model. FINRA is disappointed by the SEC’s approval of the proposal, which does not appear to reflect FINRA’s comments on the equitable allocation of CAT fees.”

As FINRA explained, under the fee proposal, “FINRA — a not-for-profit national securities association — would be assessed an estimated 34% of the total CAT costs to be borne among the 25 Plan Participants (based on 2021 data), even though FINRA is the only Participant that does not operate a market.”

Further, the SEC’s plan would “concentrate a substantial share of the self-regulatory organization responsibility for funding CAT on FINRA — more than double that of the next highest participant and $4 million more than all option exchanges combined.”


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