What is Consolidated Audit Trail (CAT)?

The Consolidated Audit Trail (CAT), also known as Rule 613, was approved by the Securities and Exchange Commission (SEC) on November 15, 2016. The plan creates a single, comprehensive database to enable regulators to more effectively and accurately track equity and option securities trading throughout the US markets in the National Market Systems (NMS).

CAT is being implemented to address the lack of consolidated information available to regulators for market reconstruction and surveillance. Currently, regulators have no single point of reference to meet the comprehensive market data requirements necessary for effective regulatory surveillance.

CAT aims to serve as a replacement of the Order Audit Trail System (OATs), but will also incorporate elements of existing regulations, such as Electronic Blue Sheets (EBS) and Large Trader Reporting (LTR).

Under the CAT NMS plan, broker-dealers and members of exchanges will be required to report order, quotes, trades, and account details to the CAT processor on a daily basis. The CAT NMS plan calls for a Plan Processor to build and maintain a centralised data warehouse that will collate the reported information to provide the SEC with an up-to-date view on a US firm’s trading activity.

The regime requires Self-Regulating Organizations (SROs), like the national securities exchanges and FINRA, to submit an NMS plan to the SEC that outlines the creation, implementation, maintenance, and reporting requirements for a CAT warehouse (CAT Processor).

This warehouse will become the central repository for regulators to store and query the data gathered.

What are the timelines for CAT implementation?

Event Implementation Date
NMS Plan Approval by SEC 15 November 2016
CAT Processor Selected (Thesys Technologies) by NMS Plan Participants 18 January 2017
Business Clock Synchronization for SROs and Broker-dealers By March 2017
SROs begin submitting data to the central repository By November 2017
SROs must implement enhanced surveillance using CAT data By February 2018
SRO members, except small members, must begin submitting data to the central repository By November 2018
Small SRO members must begin submitting data to the central repository By November 2019

Based on current information we can estimate an initial go-live for CAT participants:

  • For SROs submitting data to the central processor: Est. Nov 2017
  • SRO member’s submission Est.  by: Nov 2018
  • Small SRO Members submission Est. by: Nov 2019

Which firms will this affect?

The reporting obligation falls on:

  • all SROs (exchanges),
  • all members of SROs (broker-dealer/executing brokers), and
  • introducing brokers

What are the main reporting obligations of CAT?

Firms will be expected to report their trade information to the CAT processor on a daily basis. This information will also be more extensive than previously seen in OATs as brokers will be expected to include customer information and market-maker proprietary order submission data.

Types of reports expected:

  • Orders
  • Market-Maker Quotes
  • Customer Information (Account details)
  • Market participant information

The reports are expected to include lifecycle events and the following:

  • Receipt or origination of order
  • Routing of an order to another broker-dealer, national securities exchange, or foreign exchange
  • Routing of an order between desks or departments within a broker-dealer
  • Modifications
  • Cancellations
  • Executions
  • Details of the customer when modified

High level of comparison between OATs and CAT:

# Category OATS CAT (Rule 613)
1 Options Not in Scope In scope
2 OTC Equities In scope Not included in the initial phase
3 Link the audit trail execution reports for buy and sell orders to the public trade report In scope Not In scope
4 Timestamp granularity Seconds One millisecond
5 Market maker proprietary order submission Not in Scope In scope
6 Customer information Not in Scope In scope
7 Error correction timeline Reject-repair window is within five business days of final rejection delivery Proposed reject-repair window is within three business days from the date the trade was executed
8 Exemptions for manual orders of certain broker-dealers/firms In scope No exemptions
9 Exclusions from definition of Reporting Member firms In scope No exclusions allowed