In a bid to enhance market surveillance, the U.S. self-regulatory organizations and exchanges have filed a plan for the creation of a new consolidated audit trail (CAT) system.
The various national U.S. exchanges and the Financial Industry Regulatory Authority, Inc. (FINRA) filed a plan to govern the creation, maintenance and implementation of the CAT system and central repository with the U.S. Securities and Exchange Commission (SEC). Under the plan, which is subject to both public comment and regulatory approval, the SROs would establish a company, CAT NMS, LLC, to create the new market surveillance system.
The agreement that was filed with the SEC establishes the policies and procedures to create and maintain the new system. The consortium of exchanges and SROs have been working on the plan since July 2012.
The system, which is expected to take three years to implement, will be the world’s largest data repository of securities transactions. It will maintain data on more than 100 million customer accounts, and is expected to take in 58 billion records of orders, executions, and quote life-cycles for equities and options on a daily basis. Approximately 2,000 firms and 19 SROs will be required to report data to the system.
The consortium says that the system “represents a paradigm shift in the regulation of U.S. markets with the creation of a central database covering all market participants across multiple asset classes.” It will allow regulators to more efficiently and accurately track activity throughout the 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,” it says.