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SEC Seeks Public Comment on Plan to Create A Consolidated Audit Trail

Washington D.C., April 27, 2016

The Securities and Exchange Commission today voted to publish for public comment a proposed national market system (NMS) plan to create a single, comprehensive database that would enable regulators to efficiently track all trading activity in the U.S. equity and options market. The plan for the database, known as the consolidated audit trail (CAT), was submitted jointly by the self-regulatory organizations (SROs) as required by Rule 613 of Regulation NMS.

“The Commission’s action to approve the proposed CAT plan for public comment is a major market structure milestone. CAT will enable regulators to harness today’s technology to enhance the regulation and oversight of today’s trading markets,” said SEC Chair Mary Jo White. “It will significantly increase the ability of regulators to conduct research, reconstruct market events, monitor market behavior, and identify and investigate misconduct.”

The proposed NMS plan details the methods by which SROs and broker-dealers would record and report information, including the identity of the customer, resulting in a range of data elements that together provide the complete lifecycle of all orders and transactions in the U.S. equity and options markets. The proposed NMS plan also sets forth how the data in the CAT would be maintained to ensure its accuracy, integrity and security.

In seeking public comment on the NMS plan, the Commission also prepared a detailed preliminary economic analysis of the proposal, which includes a discussion of the economic effects, including costs of the creation, implementation and maintenance of the CAT as proposed by the SROs.

Public comments on the proposal should be received by the Commission within 60 days of its publication in the Federal Register.

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FACT SHEET

SEC Seeks Public Comment on National Market System Plan to Create a Consolidated Audit Trail

SEC Open Meeting

Action

The Securities and Exchange Commission voted to publish for public comment a national market system (NMS) plan to create a single, comprehensive database–a consolidated audit trail (CAT)–that would enable regulators to more efficiently and accurately track trading in equity and option securities throughout the U.S. markets. The proposed plan would increase the effectiveness of market research and monitoring, event re-construction, and the ability to identify and investigate market misconduct. The plan is being submitted jointly by the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) to the Commission.

Highlights of the Plan

Plan Processor and Central Repository

The CAT NMS plan provides that a plan processor will build a central repository that would receive, consolidate, and retain the trade and order data reported as part of the CAT. Among other things, the plan processor would be responsible for:

· Operating, maintaining, and upgrading the central repository

· Ensuring the security and confidentiality of all data reported to the central repository

· Publishing technical specifications containing detailed instructions for the submission of data by the self-regulatory organizations (SROs) and broker-dealers to the central repository

Data Recording and Reporting

The CAT NMS plan applies to NMS securities as well as to over-the-counter equity securities. At the various stages in the lifecycle of an order–e.g., origination, routing, modification/...


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