Finra to Sunset Oats Over a Two-Year Period

Finra expects to have a plan for public comment soon that the organization feels will not hurt smaller users, William Wollman, executive vice president, risk oversight and operational regulation at Finra, said during a panel at the Sifma Ops conference in Boca Raton, Fla.

“In terms of CAT implementation, there’s a phased-in approach that starts at two years for larger reporters with the option of a third year for others,” Wollman said. “We’ve decided that we would like to implement retirement of Oats on a two-year basis so that way we’ll see a single cut instead of a phased-in approach.

He added that smaller firms primarily use service providers to meet requirements so the two-year sunset period for Oats will not be an issue.

Finra, which has operated Oats since the late 1990s, is required to sunset the system to prevent duplication of processes under the rule 613 of the Securities and Exchange Commission (SEC), or the CAT rules. Self-regulatory organizations (SROs) like Finra must file rules around shutting down duplicate systems within six months of CAT rules approvals.

Wollman did not give exact dates for when Oats will cease to operate but said there is a procedure it is hoping to follow once the CAT is in place.

“We plan to put out for comment an idea that we will look for 180 days of acceptably accurate CAT data before we switch Oats off,” he said. “Once we have six months of experience with that, we would be comfortable eliminating both Oats as a system and as a reporting tool. That time period is important because we have to make sure that all the surveillance is running or operating the right way.”

According to Wollman, acceptably accurate CAT data is still being defined, although it is likely a 98 percent accuracy rate on initial data submissions. Oats will also no longer undergo any other data updates aside from data changes mandated by the tick size pilot.

The CAT system was awarded to Thesys Technologies over Finra and FIS in January. Thesys recently signed a contract with Finra and other SROs to build the CAT system and is expected to come out with technical specifications for the platform this month.

Finra, meanwhile, will not eliminate the other self-regulatory process it oversees, such as the electronic blue sheets.

Wollman said electronic blue sheets contain customer information for securities and timeframes not covered by the CAT.