Consolidated Audit Trail (CAT)
SEC Rule 613 requires FINRA and the national securities exchanges to jointly submit a National Market System (NMS) plan detailing how they would develop, implement and maintain a consolidated audit trail that collects and accurately identifies every order, cancellation, modification and trade execution for all exchange-listed equities and options across all U.S. markets. FINRA is working with the exchanges to develop an NMS plan that meets the requirements of Rule 613.
For more information, see the CAT NMS Plan website.
Rule 613 of the Securities Exchange Act of 1934 requires national securities exchanges and national securities associations to submit a national market system plan to the Commission to create, implement, and maintain the CAT that would allow regulators to more efficiently and accurately track all activity in U.S. equity and options markets. Pursuant to Rule 613, the Participants filed with the Commission the CAT NMS Plan, which was approved by the Commission on November 15, 2016.
Under Rule 613(g)(2), each member of a national securities exchange or national securities association is required to comply with all the provisions of the CAT NMS Plan. Relatedly, as mandated under Rule 613, the CAT NMS Plan requires each Participant to adopt rules requiring its members to comply with Rule 613 and the CAT NMS Plan, and to agree to enforce compliance by its members in that regard. Accordingly, each Participant has adopted rules requiring its members to comply with Rule 613 and the CAT NMS Plan. See, e.g., FINRA Rule 6800 Series.
The SROs jointly own and operate CAT NMS, LLC, which was formed by the SROs to arrange for and oversee the creation, implementation, and maintenance of the CAT as required under Rule 613. Further, the CAT is a facility of each SRO. Accordingly, when Industry Member reporting commences, Industry Members will submit data to an SRO facility.
2022 Report on FINRA’s Examination and Risk Monitoring Program
The Consolidated Audit Trail (CAT) section of the 2022 Report on FINRA’s Risk Monitoring and Examination Activities (the Report) informs member firms’ compliance programs by providing annual insights from FINRA’s ongoing regulatory operations, including (1) relevant regulatory obligations and related considerations, (2) exam findings and effective practices, and (3) additional resources.
CAT Reporting Obligations
FINRA is reminding all members, regardless of size, that receive or originate orders in NMS stocks, OTC equity securities or listed options that they will be required to report to CAT. Further all proprietary trading activity, including market making activity is subject to CAT reporting. There are no exclusions or exemptions of any kind for type of firm or type of trading activity. Further, FINRA members required to report to CAT can NOT assume their clearing firm, or any other entity, will automatically report on their behalf. If an introducing firm elects to have their clearing firm report on their behalf the firm must have a signed agreement in place and a supervisory system designed to ensure that data reported to CAT on their behalf by their clearing firm is timely, accurate and complete.
Any member of a national securities exchange or national securities association that handles orders or quotes in NMS equity securities, OTC equity securities, or listed options and any CAT Reporting Agent that is or will be authorized to submit data to CAT on behalf of an Industry Member must register in order to report to the CAT system. See FINRA Regulatory Notice 19-19 for more information about CAT registration.