CAT Goes Live – Where Are We Now?

By Ralph Magee

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Oyster Consulting attended a webinar on June 6, 2020 hosted by SIFMA entitled “CAT Goes Live,” which included industry panelists from the SEC, FINRA CAT LLC, clearing firms and broker-dealers. This diverse panel conducted significant discussions about the impending compliance dates for Phase 2a and 2b for Consolidated Audit Trail (CAT) reporting.  Most industry members can appreciate the long road it has been since the Securities and Exchange Commission (SEC) first adopted Rule 613 in 2012 requiring the creation of the CAT.  Yet, an overwhelming sense of pride and accomplishment resounded across this panel, many of whom have been involved since the early conceptual discussions of what is about to become a reality.  One panelist reminded participants of the four cornerstones of CAT:

  1. Access
  2. Completeness
  3. Accuracy
  4. Timeliness

The consensus was that Completeness will be the most difficult cornerstone for industry members to adhere to and for Self-Regulatory Organizations (SROs) to assure.

Current State of the Industry

Oyster Consulting shares the view expressed by the panel that we’ve observed unprecedented collaboration across the industry and many lessons have been learned.  Without the cooperation of the plan provider, SROs and participants, the industry would not have arrived at the upcoming milestones.  Current error rates have been trending less than a percentage point on both equity and option events, which is a remarkable accomplishment.  It is our opinion that this directly correlated to the significant planning and communication by FINRA CAT, LLC through the development of the Technical Specification documents, the Member Scenarios documents and the continued touch point calls with the industry.

In the first week of June 2020, FINRA CAT had 277 firms submit over 13 billion equity records with a rejection rate of .01% and an un-linked rate of 1.00% in Production.  As expected, the volume in options is a bit lighter with 59 firms submitting over 12 million events with a reject rate of .07% and un-linked rate of .26%.  These statistics will continue to increase as more firms meet the compliance Go Live dates for Phases 2a and 2b.  Additional statistics provided by panelist Shelly Bohlin of FINRA CAT LLC indicated that as of June 10, 2020, 1,208 firms had been certified to report to production out of the roughly 1,300 expected firms.  It should also be noted that if your firm is among those that has yet to certify, you should expect an inquiring call from your SRO.

What Should Industry Members Do Next?

If your firm isn’t certified, obtain the help you need to become certified for reporting to the CAT production environment.  At this point no one, including the SROs, can guarantee that you will be allowed to report, but be proactive.  Reach out to your coordinator and take advantage of the many resources you have at your disposal through the FINRA CAT help desk and website.

If your firm is certified, continue to take every advantage of the remaining testing window for phase 2a and 2b.  Vigorously test your submission data and, wherever possible, validate the data back to your internal source files.  If you have CAT Reporting Agents reporting on your behalf, identify any open defects in their reporting and present these risks appropriately to the management of your firm.

Lastly, shift your internal focus to the upcoming phases of CAT including linkages, LTID and phase 2c.  In doing so, make sure you have appropriate support staffing and continue to provide adequate training and supervision. This is especially important as most firms are entering duplicative reporting to OATS and CAT.  In the coming weeks we will be providing more detailed workflow suggestions for each upcoming phased implementation.

Oyster can help you assess how your firm is positioned for CAT readiness, manage your requirements assessment and implementation phases, interface with your own technology providers, and assist you in determining what and how your technology providers will report for you. We can also assist in testing data scenarios and data linkage, as well as creating an error repair process. Firms can also leverage Oyster testing tools to gather and analyze reported data and errors.

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“In comparison to available competing CAT solutions Oyster was both more cost effective and delivered an equal if not greater amount of functionality.  Their partnership with us in improving the application in a very timely manner has been invaluable.  We have also found great value in them coordinating joint calls with their clients so we can all collaborate as a Team.”

DA Davidson & CO.

About The Author
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Ralph Magee Jr.

Ralph Magee Jr. is a securities industry professional with over 25 years of experience in the financial services industry. Ralph has led multifaceted teams in large-scale client remediation and clearing platform conversion-related projects. Ralph also uses his expertise in trade reporting providing large broker dealers project management and subject matter expertise related to the Consolidated Audit Trail (CAT).