CAT Changes Could Cut Level of Client Data Collection and Shift Reporting Deadline

Blog entry

Changes to the controversial Consolidated Audit Trail (CAT) – which will record all equities and options traded in the US – have been put forward in a bid to tackle serious concerns in the industry about the level of sensitive client data the CAT will collect. The CAT Operating Committee approved a different approach to personally identifiable information (PII) collection earlier this month ‘in an effort to minimise the PII captured and stored in the CAT’. The change is not final, however, and is being discussed with the Securities and Exchange Commission (SEC).

The current CAT plan is to create a database that captures around 58 billion daily trading records and PII on some 100 million institutional and retail clients. This prompted the Securities Industry & Financial Markets Association (SIFMA) to warn last November: “This raises serious concerns around data protection and the ability to confidently secure critical investor information.”

Christopher Bok, programme manager with the Financial Information Forum (FIF) industry association says the push now is for a two-stage approach to PII capture. He explains: “The first phase would require the reporting of firm designated identifiers (FDIDs), large trader identifiers (LTID) and legal entity identifiers (LEIs), as applicable on CAT order and allocation reports, concurrent with the start of industry member reporting. The second phase would require the building of an FDID request/response system, through which regulators could obtain from firms PII related to specific FDIDs, LTIDs and LEIs.”

The current CAT schedule is for large broker-dealers and self-regulatory organisations (SROs) to start sending data to the CAT Processor this November, with smaller firms following a year later in November 2019. FIF and the SROs have both called for changes to the start of reporting.

Bok said the SROs have proposed an extended implementation timeframe that would trigger reporting on April 13, 2020. The Plan Processor is working off this date in the technical spec drafting process. But FIF has put forward a more streamlined approach that it believes should allow phase one reporting to begin in November 2019.

Bok explains: “The current CAT implementation plan outlined in the CAT NMS Plan encompasses all CAT-reportable events – equities, options, allocations, PII – and that plan is working towards an April 13, 2020 implementation date, although the date has not been officially approved by the SEC. The FIF plan, in contrast, suggests initial reporting is possible in November 2019 because it would only include equities and equity market-making activity, with options and allocations, expanded equities and PII reported at a later date. The idea is that the CAT would phase in reportable events to allow it to develop and for complex business scenarios to get fleshed out and developed.”