The Securities and Exchange Commission voted to publish a plan to create a single consolidated audit trail (CAT) to track all equities and options trading on US markets. The plan was submitted to the SEC by all securities self-regulatory organizations in the United States. The plan sets forth how SROs and broker-dealers would track all relevant information, including the identity of each customer and broker-dealer, along the life cycle of all orders and transactions on US equity and options markets. The information would be included in one database managed by a new company jointly owned by all SROs. The system would apply to all national market system (NMS) and over-the-counter equity securities. The SEC contemplates that all large broker-dealers would be required to begin reporting data to the new central repository within two years of its approval of a final plan; all broker-dealers would be required to begin reporting within three years. The SEC will accept comments to it proposals for up to 60 days after its publication in the Federal Register.
My View: In light of the proposed centralization of vast amounts of sensitive confidential information by CAT, it is critical that the new company overseeing CAT maintain the most state-of-the-art cybersecurity controls to minimize the possibility of any unauthorized dissemination of any such non-public information regarding trading on US equities and options markets. Given the just-released study by the General Accountability Office regarding flaws in the cybersecurity program of the SEC (click here to access an article in today’sBridging the Week regarding this matter), the securities industry has the right to be skeptical about the likelihood that such high standards will be met.