Early CAT Reporting Struggles Lead to Improved Error Rates

Compliance for the Firm-to-Firm/Exchange/TRF linkage implementation phase of Consolidated Audit Trail (CAT) reporting came into effect October 26, 2020.  In the weeks leading up to this there were significant concerns around how the industry would be able to bring error rates down to an acceptable level after the initial rejections rate, in some cases, soared to over 30%. There were also significant delays in the timely delivery of feedback data from FINRA CAT, further reducing the time industry members have to make any required repairs to rejected events in the T+3 window.

It is important to note that several systematic sources of rejected events contributed to some rejections.  Most have been resolved in the past few weeks. A significant item that impacted several of our clients was related to the CAT reporting of Market Making Quotes, both PEG and STUB, to a national exchange.  In many cases these systematic errors created consequential “noise,” making it more difficult to focus on legitimate errors. Now that these issues are resolved, our clients can focus on rejections related to actual daily use cases.

As of November 17, 2020, the latest industry statistics continue to trend with initial rejection rates hovering around 3%, or just under 90 billion equity records. These statistics include Interfirm data as well as Exchange and TRF linkages. Adjusted rates on a T+3 basis support that industry members are actively working to resolve the initial rejections across the board.

There are still some known issues reported by FINRA CAT.  We encourage all industry members to regularly attend the weekly industry checkpoint calls as well as use the CAT webpage.

Oyster’s CAT team can assess how your firm is currently positioned for CAT reporting as well as help manage your requirements for future implementation phases.  Oyster Consulting has experience working with several large CAT reporters and has developed a practical analysis tool.  The Oyster CAT Application monitors your firm’s CAT reporting by ingesting CAT reports from any source and combining that data with all feedback files from FINRA CAT.  The application also assists with error correction and repair, enhancing your ability to supervise your firm’s CAT reporting.  The CAT Application software is designed to conform to the recommendation for CAT Supervisory systems and procedures found in FINRA’s Notice to Members 20-31.

To learn more about how your firm can leverage Oyster’s CAT Application, you can schedule a demo and one of our associates will be happy to assist you.

 

About the Author: Ralph is a Senior Consultant with over 20 years of experience in the financial services industry. Through a variety of roles with Wachovia Securities, LLC and The FinancialGroup of Virginia, Ralph gained his expertise in clearing conversions as well as an
extensive understanding of trading and regulatory reporting of equity and fixed income securities. A member of the Oyster Consulting team since 2010, Ralph has led multifaceted teams in large-scale client remediation and clearing platform conversion-related projects. Most recently, Ralph is using his expertise in trade reporting providing large broker dealers project management and subject matter expertise related to the Consolidated Audit Trail (CAT).