As June Deadline Looms, Broker-Dealers Begin Reporting to the CAT

Finra CAT today revealed that 320 firms have begun reporting into the production environment of the Consolidated Audit Trail (CAT) since April 13, while 1,208 firms are certified and ready to meet the June 22 deadline for initial equities reporting. Shelly Bohlin, Finra CAT president and COO, expects about 100 more firms to become certified before that date. Bohlin was speaking during a webinar on June 10, “CAT Goes Live,” hosted by the Securities Industry and Financial Markets Association (Sifma).

The June 22 date—which was arrived at following an extension given by the Securities and Exchange Commission (SEC) in April as a result of the coronavirus pandemic—applies to large broker-dealers and small broker-dealers that currently report to Finra’s Order Audit Trail System (OATS). Bohlin also highlighted that while the CAT NMS plan mandates a maximum error rate of 5%, error rates have been consistently below that mark. Last week, error rates for equities reporting were 0.1% and 0.7% for options.

Results have been similar in the testing environment, Bohlin said, despite earlier delays due to broker-dealers who refused to sign the CAT Reporter Agreement—which is required to access the test environment—citing concerns of exposing sensitive data and limited liability on the parts of self-regulatory organizations (SROs). On March 17, the SEC issued relief that exempts SROs from collecting or retaining data such as individual social security numbers and taxpayer IDs from customers, and will instead require account holder names, addresses, and birth years, said Manisha Kimmel, SEC senior policy advisor of regulatory reporting.

“The rejection rates have been well below 1% on a consistent basis, and we have some very large firms [participating],” Bohlin said during the webinar. She added Finra CAT has been processing about 10 billion messages per day just in the test environment. “So we’re expecting a significantly higher volume of CAT reports than we ever did in the OATS area.”

Keith Jamaitis, managing director of professional services and management consulting at Broadridge, tells WatersTechnology that the CAT implementation timeline, as it stands today, is reasonable—even given the ongoing coronavirus pandemic—now that that firms have had years to prepare for it. As part of that timeline, OATS, the precursor to the CAT, is expected to be fully decommissioned by late 2022.

“There’s been a lot of time and money invested in this, and we have to draw a line in the sand somewhere and get going,” Jamaitis says.