CAT Plan Details Expected Soon


The timetable for publishing more details about the stock market’s audit trail may soon be made public and available for comment.

In a recent Security Traders Association update call, the organization’s CAT IO outreach group reported that the consolidated audit trail plan should be made public in the second quarter at the latest.

“As it stands now, the actual CAT plan is not published but I have every reason to believe it will be by the end of the first quarter or in the second quarter,” said Peter Santori, chief regulatory officer at the Chicago Stock Exchange and member of CAT IO. “We hope to get plan published shortly — as soon as possible. We’re continuing to work closely with the bidders through April to get more information on the bids and get feedback from industry.”

Santori explained on the call that the delay in getting the full CAT plan out was due in part to Self Regulatory Organizations’ desire for an exemptive amendment to Rule 613, which outlines a broad framework for the creation, implementation, and maintenance of the CAT, including the minimum elements the SEC believed are necessary for an effective audit trail.

As originally proposed, the CAT was envisioned as a real-time, comprehensive database of all quotes and orders in Reg NMS Securities. The CAT is intended to enhance regulators’ ability to monitor and analyze trading activity on a market-wide basis.

Rule 613 requires that the CAT system developed by the SROs meet certain requirements, including:
– All exchanges, FINRA and broker-dealers report quote and order information in Reg NMS Securities to a newly created data repository;
– Data must be reported by 8 a.m. ET the following trading day;
– Reported data must be tagged and stored by the repository in a linked manner so that regulators can track the life cycle of an order;
– Each broker-dealer and securities exchange must be assigned a unique identifier that must be reported to the repository along with all reported data;
– Each customer (including any adviser to a customer who has trading discretion) must be assigned a unique customer identifier to be reported to the repository for every order originated by the customer.

However, after exploring options in creating the CAT, the SROs found that some provisions of Rule 613 would not permit certain cost effective and efficient solutions to be included in the CAT plan. Therefore, on January 30, 2015, the SROs submitted to the SEC a request for exemptive relief from certain provisions of Rule 613 regarding options market maker quotes; customer IDs; CAT-reporter-IDs; linking of executions to specific subaccount allocations on allocation reports; and timestamp granularity for manual order events.

Earlier this month, the SEC agreed with the SROs’ concerns and granting exemptive relief.

Santori said that the next step is for the CAT IO group to meet with technology providers to build the CAT processor.

“We have scheduled an additional round of working sessions with the remaining three bidders in April,” Santori said, referring to Finra, SunGard and Thesys. “We’ll be engaging the bidders, giving them more questions, such as to include the cost of financing the system, plans for system retirement and other logistical items.”

Santori said that the working group hopes to name the final winning bidder within two months of the formal CAT plan’s approval.

Once a final bidder is selected, the anticipated build and implementation timeline will be:
– Develop exchange interface specifications and protocols, obtain approval by NMS plan participants and publish to exchanges — within six months of effective date of plan
– Implement exchange reporting — within 12 months
– Develop broker-dealer interface specifications and protocols, obtain approval by NMS plan participants and publish to broker-dealers — within 12 months
– Implement broker-dealer reporting — within 24 months
– Develop small broker-dealer reporting tools, obtain approval by NMS plan participants and publish to small broker-dealers — within 24 months
– Implement small broker-dealer reporting – within 36 months

The CAT will allow regulators to more efficiently and accurately track activity in NMS securities throughout U.S. markets. The purpose of the CAT NMS Plan is to create a central repository for the SROs and the SEC to perform surveillance on order event data, linked to customer and account information, and to permit regulators to efficiently and effectively perform market reconstructions. When complete, the CAT will be the world’s largest data repository for securities transactions. tracking 58 billion records of orders, executions, and quote life-cycles for equities and options markets daily.


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