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Is the Industry Finally Ready to Get Strategic About CAT and Regulatory Reporting?

Traders Magazine Online News, February 6, 2018

John D'Antona Jr.

The U.S. Securities and Exchange Commission’s (SEC) Consolidated Audit Trail (CAT), focused initially on equities and options, is the latest significant effort globally to increase the transparency of capital markets trading while ensuring competition and fair customer treatment. Similar to many other regulatory efforts in different asset classes such as Dodd-Frank OTC trade reporting, the CAT involves shifting timelines, large changes in technology, operations and processing flows. The need to get all the data elements right, continued uncertainty of how it will shape the industry requirements over time, and the already-missed deadlines for the initial implementation have added to its complexity.

The CAT imposes fundamental changes in how SEC-regulated banks and broker-dealers manage information and reporting, as well as how they relate to others in the market. It will incur costs for the entire financial community – with the majority of the burden shared by broker-dealers and exchanges.

However, if firms approach CAT reporting correctly, they can leverage the costs to help them capitalize on three main advantages:

1) effectively address future regulatory requirements and asset class expansions of CAT;

2) simplify and consolidate previous platform builds and processes to meet regulatory requirements outside of CAT – thereby reducing costs and enhancing operating models; and

3) repurpose CAT reporting data for strategic business initiatives and

functions related to equities and options trading.

Currently, broker-dealers are caught in a difficult position: the final shape and timeline of compliance is uncertain. But planning must move forward and solution architectures must be identified. Once the details are finalized, the timelines may be tight depending on a firm’s current situation.

Addressing this level of flux is challenging, especially with stretched resources. However, those firms who take this opportunity to look strategically at how CAT can be a catalyst for applying the agile technology and operational platforms designed to meet the challenges of continuing regulatory rollouts and changes to existing regulations, will have an advantage in meeting the ongoing regulatory requirements cost effectively. On the other hand, firms who take a “wait and see” approach are more likely to replay the MiFID II scenario – although a one-year delay was granted, firms and regulators were still sprinting to the finish line, and many seemed to falter down the homestretch.

The next few months will be the most crucial time for firms in U.S. equities and options markets as they weigh their options: either proactively adopt a strategic approach that can handle the long-term needs of trade event reporting, or wait and work through yet another tactical patch for another reporting regime.Now is the time for firms to take a strategic view of how implementing CAT compliance can streamline their technology and operations, leverage partnerships to mutualize the cost of current and future regulatory changes, and get ahead of today’s challenges to capitalize on what’s coming next.


When new reporting initiatives such as the Dodd-Frank CFTC rules went into effect, many firms built their regulatory reporting solutions in-house in a tactical manner to meet tight deadlines and short-term needs. As other mandates were introduced globally, firms had to create separate infrastructures and solutions for these jurisdictions.

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