SEC Joint Industry Plan: Notice of Filing of the National Market System Plan Governing the Consolidated Audit Trail

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Gavel.png PLAN APPROVED: On April 27, 2016, the SEC approved the CAT plan and released it for public comment. For more information, click HERE.
Timeline, Consolidated Audit Trail, SEC
Final Rule Issue Effective Date Plan Released
August 1, 2012 October 1, 2012 April 27, 2016

On April 27, 2016, the Securities and Exchange Commission voted to publish for public comment a proposed national market system (NMS) plan to create a single, comprehensive database that would enable regulators to efficiently track all trading activity in the U.S. equity and options market. The plan for the database, known as the consolidated audit trail (CAT), was submitted jointly by the self-regulatory organizations (SROs) as required by Rule 613 of Regulation NMS.<ref>SEC Seeks Public Comment on Plan to Create A Consolidated Audit Trail. SEC. Retrieved on May 5, 2016.</ref>

Public comments on the proposal should be received by the Commission within 60 days of its publication in the Federal Register.


On August 1, 2012, the SEC issued a final rule that adopted Rule 613, which will create a comprehensive consolidated audit trail in order to allow regulators to accurately track all activity throughout the U.S. markets in certain securities known as National Market System (NMS) securities. The rule was first proposed in 2010, soon after the "Flash Crash" of May 6, 2010.

Because markets have become more dispersed, with the advent of multiple trading venues including both "lit" and "dark" markets, regulators, including the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues issued among its recommendations the creation of a single database for uniform, consolidated cross-market order and execution tracking of market data.

The SROs, in conjunction with FINRA, have been tasked with the process of developing the NMS, and are soliciting bids for the development of the system. For more information on the status of the development process, click HERE.

Among other things, the rule requires self-regulatory organizations (SROs) to jointly submit a plan – called an NMS plan – to create, implement and maintain a consolidated audit trail. The rule specifies the type of data to be collected, when the data is to be transmitted, and how the data is to be prepared for regulatory use. For more on the rule's requirements, click HERE.

Summary of the Plan[edit]

Plan Processor The plan provides that a plan processor will build a central repository that would receive, consolidate, and retain the trade and order data reported as part of the CAT. Among other things, the plan processor would be responsible for:

  • Operating, maintaining, and upgrading the central repository
  • Ensuring the security and confidentiality of all data reported to the central repository
  • Publishing technical specifications containing detailed instructions for the submission of data by the self-regulatory organizations (SROs) and broker-dealers to the central repository

Data Recording/Reporting At the various stages in the lifecycle of an order–e.g., origination, routing, modification/ cancellation, and execution–the SROs and broker-dealers would be required to submit certain information about the order to the central repository, such as:

  • A unique identifier, provided by the broker-dealer, for the customer submitting the order
  • An identifier, provided by the SRO, for the broker-dealer receiving, originating, routing, or executing the order
  • The date and time of the order event
  • The security symbol, price, size, order type, and other material terms of the order

Exemptive Relief The CAT NMS plan also reflects exemptive relief from certain requirements of Rule 613 that the Commission previously granted. Specifically, the exemptive relief permits the SROs to propose, in the CAT NMS plan, that:

  • Only options exchanges–but not options market makers–be required to report information to the central repository regarding options market maker quotations
  • Instead of requiring a universal customer identifier for each customer to be used by broker-dealers for all orders, each broker-dealer could assign a unique firm-designated identifier (FDI) to each trading account. Under this approach, broker-dealers would be permitted to use an account number or any other identifier defined by the firm as the FDI, provided each identifier is unique across the firm for each business date. The plan processor would then assign a unique customer identifier for each customer.
  • Instead of requiring a universal identifier for each broker-dealer reporting data to the CAT, a broker-dealer could use its existing SRO-assigned market participant identifier. The plan processor would then assign a unique identifier for each reporting broker-dealer.
  • Instead of requiring broker-dealers to link a particular order or execution to an allocation, a broker-dealer could provide an allocation report that focuses on the shares allocated and the FDI of the applicable accounts or subaccounts
  • Instead of requiring the receipt of manual orders to be time-stamped to the millisecond, a time stamp to the nearest second be permitted

SEC Rule 613 Implementation Timeline[edit]

Event Implementation Date<ref>SEC Rule 613: Consolidated Audit Trail (CAT). Retrieved on March 8, 2013.</ref>
CAT Processor Selected by NMS Plan Participants Within two months after effectiveness of the approved NMS Plan
Business Clock Synchronization for SROs and Broker-dealers Within four months after effectiveness of the approved NMS Plan
SROs begin submitting data to the central repository Within one year after effectiveness of the approved NMS Plan
SROs must implement enhanced surveillance using CAT data Within 14 months after effectiveness of the approved NMS Plan
SRO members, except small members, must begin submitting data to the central repository Within two years after effectiveness of the approved NMS Plan
Small SRO members must begin submitting data to the central repository Within three years after effectiveness of the approved NMS Plan

Related Document: Final Rule as it Appeared in the Federal Register[edit]



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