SEC adopts consolidated audit trail

Abstract

Purpose

The purpose of this paper is to explain the requirements of SEC Rule 613 under the Securities Exchange Act of 1934, which requires national securities exchanges and FINRA jointly to develop a national market system plan (NMS Plan) that provides for the creation, implementation and maintenance of a consolidated order tracking system (“consolidated order trail” or “CAT”) as well as the creation of a central repository responsible for the receipt, consolidation, and retention of all order and quote information for NMS securities.

Design/methodology/approach

The paper discusses weaknesses of current, multiple order tracking systems; core features of the framework adopted by the SEC to create a CAT, including the creation of a central repository; key considerations for market participants, including data reporting methods and funding the creation, implementation and maintenance of the CAT; timing and phased implementation of the NMS Plan; security and order types covered by the CAT; persons required to report information to the central repository; reportable events and CAT data elements; timing and reporting to the central repository; ownership, governance and operation of the central repository; access to CAT data; parties required to comply with Rule 613e and the NMS Plan; and governance and operation of the NMS Plan.

Findings

Under the requirements of Rule 613, and through the NMS Plan that must be developed by the exchanges and FINRA, the CAT is intended to provide a comprehensive and uniform tracking mechanism for secondary market activity in all NMS securities.

Originality/value

The paper provides guidance by experienced financial services lawyers.

Citation

Brigagliano, J., Campion, K., Katz, D. and Blake, A. (2012), "SEC adopts consolidated audit trail", Journal of Investment Compliance, Vol. 13 No. 4, pp. 18-24. https://doi.org/10.1108/15285811211284092