After Delays, CAT Reporting Begins Tomorrow

The Consolidated Audit Trail (CAT) is expected to roll out this week after a long journey of missed deadlines and privacy concerns.

On November 15, self-regulatory organizations (SROs), such as exchanges, are expected to begin reporting to the system, which has been built by Thesys CAT. But the real test will not come until a year after when large broker-dealers start reporting to the system followed by smaller broker-dealers in November 2022.

SROs were meant to begin reporting to the CAT last year, however that deadline came and went without being met. Part of the delay was due to the hiring of a chief information security officer for Thesys CAT, seen as a critical move after a number of high-profile cybersecurity lapses at financial firms and the US Securities and Exchange Commission (SEC). Concerns around privacy protection—particularly around personally identifiable information required by the CAT plan—prompted lawmakers to seek postponement of its implementation, however the CAT has effectively existed in a state of limbo since then.

While large broker-dealers start reporting next year, they will do so in a phased approach. Firms will begin reporting equities in 2019 and then simple options in 2020.

While this is happening, the Financial Industry Regulatory Authority (Finra) will begin the process of retiring the current Order Audit Trail System (Oats) and prevent duplication of data. Shelly Bohlin, a vice president at the quality of markets section of Finra’s markets regulation department, says the plan is for Oats to be retired only when data quality requirements are met.

“We are proposing to the SEC that OATS not be retired until the CAT meets certain quality thresholds approved by the SEC, so we anticipate no decrease in surveillance quality throughout the transition to CAT,” she says. “During the transition period, firms will continue reporting to OATS while, in parallel, adding the reporting to CAT.”

Finra has not determined when it will file an Oats retirement proposal with the SEC.

To make way for firms to begin their CAT preparations, the final technical specifications have been released. By December this year, broker-dealers are required to begin submitting information on their expected reporting date and key reporting personnel to the CAT committee

Broker-dealers, however, are advised to also get their data in order as the CAT will be requiring a larger set of information, according to Broadridge Financial Solutions vice president of strategy and business development in global technology and operations David Campbell.

“You have to look at how you’re aggregating data, not just for the CAT but also for other regulations, so you have a better idea where to get the data once you’re reporting,” Campbell says.