Forefront Communications

TABB Forum: Even If You Weren’t Before, We’re All CAT People Now


Sam Belden

Sam Belden

Almost 10 years after the Flash Crash prompted regulators to call for the Consolidated Audit Trail, the change of CAT processors is expected to delay CAT reporting for broker-dealers to April 2020. So why should you care about the CAT? As the reporting initiative evolves, broker-dealers will be required to transmit to regulators data on who placed every order and made every trade. This, as much as anything, is why you need to pay attention. James Dolan, Chief Compliance Officer at Luminex Trading and Analytics, explains more below.

Jim, why do I have to read this blog post?

First, thank you for reading this far! You have to read this article because you’ve heard of the CAT, you’ve seen some headlines about Thesys and FINRA, but you’ve skipped conference panel presentations about the CAT, thinking it was someone else’s problem. You’ve pretty much ignored every article written about it, and in short, you think that because you’re a trader or you’re on the asset management side of the business, you don’t need to care what happens with CAT.

You have to read this precisely because you don’t care, and for the reasons I’ll get into below, you should. We all should.

How the [bleep] did we get here?

A long time ago, in a galaxy far, far away (the summer of 2012, anyway), the SEC approved Rule 613, which required U.S. SROs to create and submit a plan that would establish a Consolidated Audit Trail, which came to be known as CAT. This development followed the Flash Crash of 2010 by two years. If you were alive then (I was), you may remember that it took regulators a significant amount of time to digest millions of trade and order records in order to come up with an explanation for the Flash Crash, and the CAT rule grew out of a recognition that regulators needed a better system to more efficiently and more quickly reconstruct market activity in order to ferret out aberrant or illegal behavior.

As a former regulator myself, I greatly appreciate the desire to have “one-stop shopping” for a regulator to quickly know who did what in the marketplace in an effort to ensure market integrity and to protect investors.

To read the full article, click here.

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