CAT goes live for broker-dealer reporting; SEC already extends deadline

The consolidated audit trail is now live for broker-dealer reporting, but the Securities and Exchange Commission has already pushed back the planned April 20 deadline because of the COVID-19 pandemic, and U.S. exchanges have requested a further deadline reprieve.

Years in the making, the CAT will be a single database for all equity and options trades executed on U.S. exchanges. It's intended to allow regulators to track illegal or manipulative trades and show a way to quickly determine what caused large, sudden losses in trading value, such as the flash crash of May 6, 2010. When fully operational, the CAT will be the world's largest data repository of information on securities transactions, tracking all orders throughout their life cycle, according to the operating committee for the CAT.

The CAT testing and production environments are now running in parallel, the operating committee said in a news release Tuesday, noting that broker-dealer reporting went live Monday. Firms that need to test can continue to do so while firms that FINRA CAT has certified as production-ready may begin reporting into the production environment. The exchanges selected the Financial Industry Regulatory Authority as the plan processor in February 2019, which then created FINRA CAT to build the audit trail.

On March 17, the SEC released a no-action letter saying due to the coronavirus pandemic, its staff will not enforce CAT implementation deadlines, the next of which was slated for April 20 when broker-dealers were required to submit data to the CAT on trades they execute on behalf of clients — including institutional investors. The letter applies through May 20 but could be extended.

Self-regulatory organizations, or SROs, made up of exchanges and securities associations, which formed CAT NMS to establish a plan to implement the consolidated audit trail, have requested a no-action relief extension until June 2 for the first phase of broker-dealer reporting and until July 20 for the second phase.

"Today marks an important milestone as we have opened the system to receive data in the production system from broker-dealers that have been certified for reporting," the CAT operating committee said in the news release. "Although broker-dealers have additional time before they will need to comply with their reporting obligations, we continue to move full-speed ahead, and firms that are ready can begin live reporting."