On May 15th, the SEC adopted amendments to the national market system plan governing the consolidated audit trail (the “CAT NMS Plan”). These changes will bring additional transparency, governance, oversight, and financial accountability to the national market system by decreasing the likelihood of additional delays to CAT implementation and furthering the information available as part of the CAT NMS plan voting process.
The amendments to the CAT NMS Plan require the Financial Industry Regulatory Authority (FINRA) and the exchanges, which are self-regulatory organizations participate in the CAT NMS Plan, to publish and file with the SEC a complete implementation plan for the CAT and quarterly progress reports. At each participant, these reports must be approved by the operating committee established by the CAT NMS Plan and submitted to the CEO, President, or an equivalently situated senior officer. In addition, operational transparency will be increased through attaching financial accountability to the participants’ regulatory obligations to implement the CAT in an efficient and expeditious manner.
Specifically, the amendments declare that:
- the participants must file with the SEC and make publicly available a detailed implementation plan and ongoing quarterly progress reports
- each document must be submitted to the CEO, President, or an equivalently situated senior officer at each participant and then approved by a supermajority vote of the participant’s operating committee
- if any document is approved without a unanimous vote of the operating committee, each participant whose operating committee member did not vote to approve the document must separately file with the SEC and make publicly available a statement identifying itself and explaining why it did not vote to approve the document in question
The amendments establish target deadlines for four critical implementation milestones defined in the proposal. If the participants do not meet these target deadlines, the amount of CAT funding that they can recover from industry members will be reduced by 25% at regular intervals. The deadlines are as follows:
- July 31, 2020: Initial Industry Member Core Equity and Option Reporting
- December 31, 2020: Full Implementation of Core Equity Reporting Requirements
- December 31, 2021: Full Availability and Regulatory Utilization of Transactional Database Functionality
- December 31, 2022: Full Implementation of CAT NMS Plan Requirements
The amendments will become effective 30 days after publication in the Federal Register.
Sources:
SEC Adopts Amendments to the CAT NMS Plan to Improve Transparency and Financial Accountability (www.sec.gov)
Amendments to the National Market System Plan Governing the Consolidated Audit Trail (www.sec.gov)
