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Where's The CAT?

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Background

The Consolidated Audit Trail (CAT) system promises to be game-changer for the SEC and would revolutionize the Commission’s capabilities to protect investors, facilitate capital formation and promote fair and orderly capital markets – on which job creators and savers, and indeed all Americans, depend. The CAT system will be the world’s largest data repository for securities transactions, tracking billions of orders, executions, and quotes in all of the equities and options markets every day.  The CAT will collect order, cancellation, modification, and trade execution information for every trade (someday, it is hoped, in real time). That information will serve two vital functions: enabling the SEC not only to reduce, manage, and better understand market disruptions and crashes, but also to identify, deter, and punish illegal manipulations and other trading abuses – all for the benefit investors and our markets.

The SEC first proposed to create the CAT immediately after the “Flash Crash” in May 2010.  During the “Flash Crash” nearly one trillion dollars of stock market value was temporarily wiped out from investors’ accounts. This confidence-shattering event took just 18 minutes to unfold and saw some stocks inexplicably plummet to $1 per share while others skyrocketed to more than $100,000 per share.  Neither the SEC nor other regulators understood this event.  It took regulators months to reconstruct and understand it.

Below is a timeline with key milestones showing the development of CAT, and Better Markets advocacy on the matter.

 

Pre-CAT

 

CAT Plan

  • July 18, 2012 – The SEC unanimously approves SEC Rule 613 which creates a National Market System Plan (NMS Plan) called the CAT NMS.  CAT NMS is mandated by the SEC to propose a Joint Industry Plan called the CAT Plan which would see the creation and implementation of the CAT system.
  • April 27, 2016 – The SEC releases for public comment a 1,090 pages-long Joint Industry Plan developed by the CAT NMS consortium which proposes to create the CAT system.
  • April 27, 2016 – Better Markets raises initial concerns about governance and technical issues with the CAT NMS Plan.
  • May 9, 2016 – Better Markets issues a Newsletter Article Announcing the Release of the long-wait CAT NMS Plan.
  • July 18, 2015 – Better Markets submits Comment Letter to the SEC calling on for major fixes for CAT Plan before the approval of the Plan.
  • November 15, 2016 – Better Markets Press release on the final CAT Plan expressing disappointment. While the SEC makes some improvements before the approval of the final CAT NMS Plan, the governance structure remains deeply flawed.

 

CAT (Un)Implementation

Leading up to the November 15, 2017 implementation deadline of the CAT system, Better Markets continued its advocacy and support of the CAT system.

As the deadline of November 15, 2017 comes and goes with the CAT system still not implemented, Better Markets continues to work through the press and with the SEC to continue to advocate for the CAT system.

 

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