On August 27, the Securities and Exchange Commission’s Division of Trading and Markets issued a public statement on the status of the consolidated audit trail (CAT) and the SROs’ (defined below) currently expected timetable for compliance with their obligations under the revised Plan (defined below).
As discussed in a previous edition of Corporate and Financial Weekly Digest, the various national securities exchanges and the Financial Industry Regulatory Authority (the SROs) filed with the SEC a plan (Plan) to create, implement and maintain a CAT to capture information related to customers and order events for transactions in National Market System (NMS) securities and over-the-counter equity securities. Under the Plan, the first phase of reporting to the CAT was required to begin on November 15, 2017.
Just before the November 2017 deadline, the SROs submitted an exemption request letter to the SEC, requesting that the SEC issue exemptive relief to delay the first phase and other deadlines by a year or more. The SEC did not issue the relief requested by the SROs. To date, the SROs have not begun reporting required data.
The Division of Trading and Markets requested that the SROs create a detailed “Master Plan” that would, among other things, set forth a catalog of material steps necessary to effectively implement the CAT, a revised timeline with detailed, objective and achievable milestones, and clearly defined obligations
Pursuant to the Master Plan, the “first phase” reporting will commence on November 15, 2018 (compared to November 15, 2017 under the Plan); the “second phase” for large broker-dealer reporting will commence on November 15, 2019 (compared to November 15, 2018, under the Plan); and all phases of small broker-dealer reporting will be complete by November 15, 2022 (compared to November 15, 2019 under the Plan). However, not all data and functionality required by the Plan will be available on those dates. For example, only equities data—not options data—will be included in the large broker-dealer reporting that will commence on November 15, 2019.
The SEC also notes that the SROs’ Master Plan affects the temporary exemption that the SEC issued from the third phase of Securities Exchange Act Rule 13h-1 (the large trader rule). This temporary exemption is scheduled to expire on November 15, and covers all large trader transactions beyond those currently phased-in.
In light of the delay in implementing the CAT, industry participants have raised the issue of whether a further extension of the temporary exemption from phase three of the large trader rule is necessary or appropriate.