The Consolidated Audit Trail (CAT) is Live

Eight years after the Security and Exchange Commission (SEC) adopted Rule 613, the Consolidated Audit Trail (CAT) has finally gone live for equity reporting as of Monday, June 22, 2020.  Options reporting will also go live on July 20, 2020.

One significant change since the initial adoption of Rule 613 is the speed with which things happen; not only transactional speed, but also the speed with which information is available.  It is remarkable that CAT is capable of ingesting, analyzing and reporting the hundreds of billions of record events each day, and we are only in the infancy of this data base.

Make no mistake.  There are a lot of members who are not pleased about this date.  For many, this busy week includes a period of dual reporting to both the Order Audit Trail (OATS) and CAT.  Trade reporting and compliance resources of a firm are faced with monitoring OATS, CAT, Electronic Blue Sheets and Large Trader reporting, all of which will eventually roll-up under CAT.  There are other members who have asked the question, “What will all of this cost?”

Without a doubt, building what will be the largest database of equity and option transactions comes at a cost, internally and externally.  Industry members will need significant resources to maintain compliance as well as to support the future phased implementations.  Oyster is making sure its clients are aware that the SEC has adopted amendments to impose transparency on the self-regulatory organizations (SROs), known as the Participants of the Plan (Participants).  These amendments are known as Financial Accountability Amendments.

The following dates dictate what fees or Post Amendment Expenses Participants may be able to collect/recover from Industry Members:

1. July 31, 2020 – Initial Industry Member Core Equity and Option Reporting. Post-Amendment Industry Member Fees that the Participants are entitled to collect will be reduced by:

• • 25% if the Participants miss the deadline by less than 45 days
  • 50% if the Participants miss the deadline by more than 45 days, but less than 90 days
  • 75% if the Participants miss the deadline by more than 90 days, but less than 135 days
  • 100% if the Participants miss the deadline by more than 135 days

2. December 31, 2020 – Full Implementation of Core Equity Reporting Requirements

3. December 31, 2021 – Full Availability and Regulatory Utilization of Transactional Database Functionality.  Note: this would likely include the retirement of OATS reporting

4. December 30, 2022 – Full Implementation of CAT NMS Plan Requirements.  Post-Amendment Industry Member Fees that the Participants are entitled to collect for items 2, 3, and 4 will be reduced by:

• • 25% if the Participants miss the by less than 90 days
  • 50% if the Participants miss the deadline by 90 days or more, but less than 180 days
  • 75% if the Participants miss the deadline by 180 days or more, but less than 270 days
  • 100% if the Participants miss the deadline by 270 days or more

FEES – generally understood by the author as all fees, costs, and expenses (including legal and consulting fees, costs, and expenses) incurred by FINRA CAT, LLC in connection with the development, implementation and operation of the Consolidated Audit Trail from the effective date until the Full Implementation of CAT NMS Plan Requirements.

In addition to these milestones, Participants are also required to file Quarterly Progress Reports with the SEC and make these publicly available on the CAT NMS Plan Website no later than 30 days after the end of each quarter.

Because financial incentives are on the line for the Participants of the Plan to deliver on or before these deadlines, Industry Members should not expect further delays.

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.