Microsoft Trials CAT Offering with Broker-Dealers

Microsoft is close to completing a service aimed at helping broker-dealers comply with the consolidated audit trail (CAT) regulation.

Lee Bressler, director and US capital markets lead at Microsoft, says the firm hopes to have the service ready in the next four to six weeks. The firm is currently carrying out pilots of the project with broker-dealers.

The CAT, a trading database mandated by the Securities and Exchange Commission (SEC), is intended to help regulators track all US activity in listed equities and options. 

“CAT is coming into force very soon. It is going to be in six different phases over a three-year period, and that is not a lot of time for the broker-dealers to have a solution in place that they have tested and that they know will comply with the regulations,” Bressler says. “So they are on a tight timetable. As a result, we are trying to work with them to make sure we have a solution that one of our partners builds and that is going to be ready to go in time.”  

Bressler says the offering will gather the data required by the regulator and then submit it to the centralized system overseen by the Financial Industry Regulatory Authority (Finra). 

Finra was chosen earlier this year to manage the centralized database that will house all the CAT information. It will be a repository of data on securities transactions and an audited trail of every single buy and sell order that is placed. 

“Every single broker-dealer and market participant needs to have a CAT solution to capture the data at the broker-dealer side and then submit it to that centralized Finra system on a certain schedule,” Bressler says.  

Part of the challenge lies in gathering the data in a way that is precise and covers all the data required to meet the regulation. “The idea is that an ISV [independent software vendor] will build this solution to run on Azure to capture all of the data from the broker-dealer and then submit it up to the Finra centralized system,” Bressler says, adding that Microsoft is working with several ISVs on a solution.

Bressler says it was difficult to build the service because of delays and changes to the CAT regulation. CAT was first supposed to go live in November 2017. Earlier this year, the consortium of US exchanges responsible for implementing CAT fired Thesys, the technology company tasked with building and operating it, and hired Finra instead.