FINRA to Operate Consolidated Audit Trail System

calendar iconApril 30, 2019

The Financial Industry Regulatory Authority (“FINRA”) is replacing Thesys Technologies as the builder and operator of the oft-delayed consolidated audit trail (“CAT”) system. Selected by a CAT operating committee, FINRA will take over for the stock trade reporting system to help the Securities and Exchange Commission (“SEC”) improve its effectiveness when monitoring the stock markets. FINRA was selected following discussions with two other bidders for the successor plan processor role.

Thesys Technologies was originally chosen two years ago as the CAT plan processor, but continued delays on the CAT system led to a frustrated SEC. In November 2016, the commission issued Release No. 34-79318, Order Approving the National Market System Plan Governing the Consolidated Audit Trail, in support of a CAT operating plan from the stock exchanges. The exchanges were given two months to choose a plan processor to form the audit system and start reporting to the system by November 15, 2017, but the deadline was missed. Stock exchanges expected to miss the deadline to have the CAT running and asked for an extension, but SEC chairman Jay Clayton rejected their request.

Following Clayton’s denial, the SEC’s Division of Trading and Markets advised stock exchanges to complete the reporting system quickly, but the division will not refer the delay for enforcement action. The stock exchanges submitted a Master Plan, which declared reporting to CAT for large broker-dealers will start November 15, 2019. The previously scheduled date was November 15, 2018.

The delay request was partially due to securities industry concerns over data security. The CAT system is anticipated to manage 58 billion records each day and preserve data on over 100 million customer accounts and customer information. Approximately 3,000 individual users will access the information.