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SEC's Redfearn Makes Statement on CAT Development, Delays and Implementation

Traders Magazine Online News, August 28, 2018

John D'Antona Jr.

The Securities and Exchange Commission made a public statement on the Consolidated Audit Trail system and how it expects a delay in construction and implementation. Here is the complete statement by Brettt Redfearn, Director, SEC Division of Trading and Markets.

In 2012, the SEC adopted Rule 613 of Regulation NMS requiring FINRA and the national securities exchanges (collectively, the “SROs”) to work together to develop and submit to the SEC a plan to create, implement, and maintain a consolidated audit trail (the “CAT”).  Put simply, the CAT is intended to enable regulators to oversee the securities markets on a consolidated basis—and in so doing, better protect these markets and investors.

Under the plan developed by the SROs (the “SRO CAT Plan”), the first phase of reporting to the CAT—covering SRO reporting—was required to begin on November 15, 2017.  In the Fall of 2017, the SROs requested that the SEC grant relief from this deadline.  

In November 2017, Chairman Jay Clayton issued a statement[1] on the status of the CAT.  In that statement, Chairman Clayton said that he would not support a request from the SROs to extend the deadlines for reporting data to the CAT.  Chairman Clayton was unwilling to support such an extension request in the absence of a comprehensive and credible work plan with, among other components, verifiable milestones, as well as governance and security enhancements.

This statement provides an update on the status of the CAT project. 


Rule 613 was adopted on July 18, 2012 and provided for an April 29, 2013 deadline for submission of the SRO CAT Plan to the SEC.  The SROs submitted exemption requests to extend that deadline, which were granted, extending the deadline to December 6, 2013 and then again to September 30, 2014.  On September 30, 2014, the SROs submitted the SRO CAT Plan to the SEC, and thereafter submitted amendments on February 27, 2015, December 24, 2015, and February 8, 2016.  After public comment, in November 2016 the Commission approved the SRO CAT Plan.

On January 17, 2017, the SROs selected Thesys Technologies LLC (“Thesys”) to build the CAT system, pending execution of a Plan Processor Agreement among Thesys and the SROs.  The Plan Processor Agreement was executed on April 6, 2017.[2]

Under the SRO CAT Plan, the first phase of reporting to the CAT—covering SROs—was required to begin on November 15, 2017.  The SRO CAT Plan also provides that the second phase of reporting to the CAT—covering industry members (other than small industry members)—is required to begin on November 15, 2018, and the third phase of reporting—covering small industry members—is required to begin on November 15, 2019. 

Just before the November 2017 deadline for the first phase of reporting to the CAT, the SROs submitted to the Commission an exemption request letter, explaining that the CAT development and build had been delayed and requesting that the Commission issue exemptive relief to delay the first phase, the SRO reporting, by a year and other deadlines by a year or more.  This substantially delayed state of the development of the CAT had not been communicated to the SEC in a timely manner.  The Commission did not issue the relief requested by the SROs. 

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