Supervision of the Consolidated Audit Trail (CAT)

Overview

In response to the 2008 financial crisis, the Securities and Exchange Commission (SEC) adopted a Rule to create the Consolidated Audit Trail (CAT), a system to allow regulators to monitor National Market System Securities activity in all US financial markets. In November 2016, the SEC approved the resulting CAT NMS Plan (Plan) submitted by the various self-regulatory organizations (SROs). The Plan outlined a broad framework for the creation, implementation, and maintenance of CAT. It is coordinated by CAT NMS LLC, an entity formed by the SROs to select a Plan Processor to be responsible for performing the processing required under the Rule and the Plan. CAT was scheduled to go into operation in April 2020 but has been twice delayed by COVID-19 and will collect information on quotes, orders, routes, and trade execution for exchange-listed equities and options throughout the NMS, including cancellations, modifications, and acceptances of orders and routes. Although Thesys Technologies, LLC was initially selected as the Plan Processor in 2017, the firm was replaced in February 2019 with FINRA as the successor Plan Processor.

CAT applies to all US exchanges and broker-dealers, including Alternative Tradings systems, registered with an SRO. There are no broker-dealer exemptions from CAT reporting requirements as there are with OATS. All broker-dealers that are members of an exchange or the Financial Industry Regulatory Authority (FINRA) and handle orders must report to CAT.

As with all SEC and FINRA rules, FINRA expects that its member firms will include in their supervisory structure, policies, and procedures to oversee the operation of CAT within their firms. FINRA also expects firms will create written supervisory procedures for the same, along with any necessary training for the firm’s associated persons and supervisory personnel. This course is intended to provide that training for member firm supervisors. 

Learning Objectives

The purpose of this course is to give those who supervise registered persons a thorough explanation of, and orientation to, the rules and interpretative materials relating to CAT and supervision CAT operations within their firms. The course will explain the Rule, the National Market System and the Consolidated Audit Trail, and the operations and compliance policies and procedures required to implement the Rule. It will finally survey the applicable rules relating to supervision of CAT.

The course will also explain the specialized terms relating to CAT and the procedures for implementing and supervising CATG within a given firm.

Upon conclusion of this course, you should

  • Have a solid understanding of the Consolidated Audit Trail
  • Have a solid understanding of certain terms used specifically in the Rule
  • Have a solid understanding of the reporting obligations of a member firm under the CAT Plan
  • Have a solid understanding of the Clock Synchronization responsibilities under the Rule
  • Have a solid understanding of the nature and substance of supervision required under the Plan 

Designed For

This course is designed for Supervisors.
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