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FLASHBACK FRIDAY: CAT's Long and Winding Road

Traders Magazine Online News, March 29, 2019

John D'Antona Jr.

When it comes to the Consolidated Audit Trail or CAT – its anything but quick as a cat.

It has been almost nine years since the May 10, 2010 Flash Crash that precipitated the Securities and Exchange’s decision to create a new audit trail to serve as a transaction database. As conceived, this database would serve to help the regulator piece together events surrounding future market stress events.

Nine years later the equity markets, while healthy and functioning, still don’t have a universal audit trail system.

Nine years.

So, what gives?

Most recently industry members and third-party trade-reporting providers who have an SRO membership and handle quotes or orders in NMS equities securities, OTC equities, or listed options have until June 27 to register as CAT reporters.

Firms that do not have an obligation to report to OATS have a responsibility to report to the CAT and will need to register, according to Paul McKenney, a senior director at FINRA.

“That would be true whether or not you are reporting on your own behalf or somebody else is going to be reporting data on your behalf,” he said during a recent industry conference call. “Either way, you will have to submit a registration form.”

The recently named plan processor has added a registration tab to the CAT NMS Plan’s homepage and started taking submissions on March 18.

“We already have a few dozen registration forms in,” said McKenney.

Amongst the information requested for registration includes: a registered principal, the manner of data submission (self-reporting or via a vendor), preferred reporting method (SFTP or via the CAT Reporting Portal), and the size of the firm (whether it has a capitalization of $500,000 or less). CAT reporters also will need to include a CAT Reporting Industry Member ID number.

“It’s an identifier assigned by an SRO like FINRA or one of the exchanges a firm will use to report trades,” he noted. “An equivalent would be a maker participant identifier, trader mnemonic, or something along those lines.”

The plan processor also spent a portion of the call setting out phases 2a’s and 2b’s testing and production timelines for equities and option respectively. The testing environment for phase 2a will begin in December 2019 and will last until April 2020, when data submission will go into production.

“This will be focusing on file submission and data integrity,” said McKenney. “Those will be the only validation turned on at that point.”

In April 2020, FINRA CAT will open firm-linkage validation testing, for reports submitted from within firms that include information regarding new orders with routes. Industry members can test until July 2020, when reporting the reporting requirement goes live.

Phase 2b’s timeline also begins testing in December 2020 but will last until May 2021 while firm-linkage, inter-firm linkage, and exchange/TRF linkage validations will go live in August 2020, October 2020, and December 2020, respectively.

McKenney ended his presentation noting that the CAT NMS Help Desk is up, functional, and waiting to answer any industry questions.

However, when can the markets expect a fully functional system to go online? In a recent online poll conducted by Traders Magazine, twice the number of respondents (38%) believed that the Trump Administration would complete its border wall before CAT NMS finished the Consolidated Audit Trail, which is now slated for 2020.


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