maze globe, SEC Rule 613, NMS


Consolidated audit trail: The wait is over

Timeline for compliance with SEC Rule 613

The consolidated audit trail (CAT) has arrived. What steps do broker-dealers need to take to stay ahead of key implementation milestones?

Firm’s guide to the Consolidated Audit Trail

Looking for guidance on implementing the new CAT in your organization? Read this August 2019 publication from the Securities Industry and Financial Markets Association (SIFMA) and Deloitte which is intended to educate industry members on the CAT, enable a detailed understanding of the regulation, and provide considerations for implementation including a readiness checklist.

Back to top

Rule 613

With the approval of the Securities and Exchange Commission (SEC) Rule 613, consolidated audit trail (CAT) National Market System (NMS) plan, industry timelines for the implementation of the CAT are in effect. And now is the time for broker-dealers to kick off their compliance programs.

Due to the complexities of planning for CAT’s fundamental operational and technical changes, as well as the simple reality of budget cycles, it’s crucial for firms to seize the opportunity to assess the impact CAT will have on their regulatory reporting operations. Organizations should also identify potential opportunities to enhance their broader business operations—in surveillance, data analytics, and client relationship management.

Back to top

Key requirements

  • Broker-dealers conducting business in the US equity and options markets will be required to report order lifecycles for equities and options markets on a daily basis, including orders, quotes, cancels, routes (including internal routes), and allocations.
  • Firms will have to provide internal identifiers for these records to support CAT linkage processes. Unlike existing regulatory regimes, customer-identifying information must be included, which will require reporting firms to locate consistent “golden source” data for all customers.
  • Firms should note that CAT isn’t simply an “order audit trail system (OATS) on steroids.” It will include substantial additional requirements, such as options data, allocations, and customer data. These new data sets may require firms to rethink their target reporting architectures. Additionally, unlike OATS, the CAT will have no exemptions to these reporting requirements.

Back to top

Major milestones

Now that Rule 613 has been approved, broker-dealers will need to stay ahead of these key deadlines:

sec consolidated audit trail compliance timeline
Click on the image for enlarged version

Getting started

With a November 2018 compliance deadline for large industry members, it’s critical—especially given budgetary, software development, and testing timelines—for firms to start planning today. Firms should look to break down the CAT’s reporting requirements and assess them against their current regulatory reporting regimes. Firms should seize this window of opportunity to gain a better understanding of their own regulatory reporting landscape and current data reporting architectures, as well as how they will be affected by CAT requirements, to put a robust nonfinancial regulatory reporting program in place.

It’s in every firm’s best interest to assess technical and architectural designs; understand internal data flows and source systems; test internal units, systems, and integration; and comprehend changes to control environments early.

To accomplish all these tasks, broker-dealers should start to define their readiness and planning efforts, determine budgets, and establish governance structures as soon as possible. Firms should also start to consider their compliance strategy—tactical versus strategic. Given that the CAT will provide regulators with a complete end-to-end picture of a broker-dealer’s activities, firms should consider if the CAT is an opportunity to strengthen their own internal surveillance programs—before regulators understand their activities better than they do.

To avoid falling behind regulators, broker-dealers should embrace this as a call to action and use it as an opportunity to enhance their internal surveillance and analytics programs.

Download the full PDF to learn more about the steps you can take to stay ahead of the Rule 613 requirements.

Back to top

Did you find this useful?