About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

FINRA CAT: What’s Next?

Subscribe to our newsletter

By Andrew Pheifer, CFA, CAIA, Director, EMS Product Management, SS&C Eze.

The long-awaited Consolidated Audit Trail (CAT) is now live, ingesting billions of equity transactions daily from U.S. broker-dealers (Industry Members). The go-live has largely been considered a success, with more than 1,000 broker-dealers reporting into the CAT.

The CAT’s origins date back to 2012 when the SEC adopted Rule 613 of Reg NMS. The June 2020 go-live represents only one phase of a multi-phased rollout that will extend into 2022. While the industry agrees the phased approach is most pragmatic, iterative rollouts present unique challenges. Unlike a single big-bang event, iterative rollouts create complexity in orchestrating all the moving parts.

FINRA CAT will need to provide support for reporters, publish new technical specifications for future phases, and implement improvements to their tech stack and user web portal as each new phase rolls out. Delays are not an option; the SEC is holding FINRA CAT to strict and immovable deadlines.

For Industry Members and CAT Reporting Agents, the challenge will be delivering seamless upgrades and deployments to handle the new reporting requirements. For many firms, staffing or outsourced support will need to scale to be able to handle dealing with daily issues in addition to adequately preparing for future phases. For those on the frontlines, the challenge will be to get through each phase and not surrender to “CAT fatigue.”

Much of the attention initially will go toward repairing rejects on file submissions and/or rejects on subsets of reported events that need to be corrected. Additionally, broker-dealers must ensure that their reports are comprehensive, covering all eligible reporting activity. Critical fields like FDID need to be correctly populated, and all reported data attributes must be accurate. Enlisting a reputable CAT Reporting Agent to assist with providing reporting expertise and workforce can help tackle these challenges.

For the remainder of 2020, large Industry Members’ sights are set on several key milestones. Options reporting went live on 7/20. Intrafirm linkage validations for equities and options go live on 7/27 and 8/24, respectively. Interfirm linkage validations for equities and options go live on 10/26 and 1/4, respectively. And, all the while, testing will open for new customer reporting requirements and the next big wave of equity reporting requirements that address more complex reporting scenarios on 12/14 and 1/31, respectively.

Options reporting and interfirm linkage validations stand out as the most intriguing areas when assessing whether the industry is truly ready for CAT reporting. The Order Audit Trail System (OATS) that preceded CAT did not require option reporting, so the industry is grappling with this reporting for the first time. Regarding interfirm linkage validations, it remains to be seen how broker-dealers will operate amongst themselves in a maximum T+3 error correction window to resolve who is “at fault” for a given linkage validation issue. FINRA CAT doesn’t have a mechanism to assist broker-dealers with this problem, so the Financial Information Forum (FIF) stepped up to the plate and created a CAT Contact Utility for Industry Members to understand who to contact for issue resolution.

The complexity of the CAT reporting project is prompting some members to ask, “What happens with reporting violations? Who will be fined, and how much?” Just Google “OATS Violations,” and you’ll see that over the years, FINRA and the SEC have cracked down on failures to meet the reporting requirements. These violations underscore the importance of working with experts who not only understand the regulation but also how to navigate the challenges with orchestrating a phased rollout.

Some validation coming from the SEC for the usefulness of the data will be welcome news for Industry Members. Typically, technologists implement phased rollouts so value can be added along the way, and not just at the end. Phased rollouts are a critical component of the agile methodology that expects learning and adjustment after each release.

It’ll be interesting to see if CAT phasing was simply designed to achieve better conformity by Industry Members, or whether the SEC can derive real value before project completion in 2022. Industry Members are hoping for the latter, if only to expedite the sunsetting of OATS to eliminate that reporting burden once and for all.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Detecting and preventing market abuse

Market abuse – unlawful disclosure of inside information, insider trading, circular trading, “pump and dump” schemes, etc. – poses significant threats to the integrity of capital markets. In 2024, global trading house Trafigura agreed to pay a $55 million fine to the U.S. Commodity Futures Trading Commission (CFTC) for trading with non-public information, manipulating a...

BLOG

EU’s AMLA Sets Stage for Direct Supervision of High-Risk Cross-Border Banks

The EU’s new Anti-Money Laundering Authority (AMLA – the Authority)) moved from concept to reality in summer 2025 as it began operations in Frankfurt. The Authority has a mandate to drive supervisory convergence, coordinate Financial Intelligence Units (FIUs) and, from 2028, directly supervise a set of high-risk, cross-border financial institutions. The EU Anti Money Laundering...

EVENT

RegTech Summit London

Now in its 9th year, the RegTech Summit in London will bring together the RegTech ecosystem to explore how the European capital markets financial industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

The DORA Implementation Playbook: A Practitioner’s Guide to Demonstrating Resilience Beyond the Deadline

The Digital Operational Resilience Act (DORA) has fundamentally reshaped the European Union’s financial regulatory landscape, with its full application beginning on January 17, 2025. This regulation goes beyond traditional risk management, explicitly acknowledging that digital incidents can threaten the stability of the entire financial system. As the deadline has passed, the focus is now shifting...