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October 21, 2019

Congress Must Hold the SEC and CAT NMS Accountable for Failure to Create the Consolidated Audit Trail

Monday, October 21, 2019
Contact: or (202)618-6433

Washington, D.C.  –  Lev Bagramian, Senior Securities Policy Advisor of Better Markets, issued the following statement in advance of the Senate Banking Committee’s hearing on “Oversight of the Status of the Consolidated Audit Trail,” scheduled for Tuesday, October 22, 2019:

The Senate Banking Committee, as the oversight Committee of the SEC, FINRA, and the financial markets, must hold the SEC and CAT NMS LLC to account for their failure to implement the Consolidated Audit Trail (CAT).  The CAT system has the potential to be a game-changer for the SEC and would revolutionize the Commission’s capabilities to protect investors, facilitate capital formation and promote fair and orderly capital markets. CAT will be a repository of information which will serve two vital functions: enabling the SEC not only to reduce, manage, and better understand market disruptions and crashes, but also to identify, deter, and punish illegal manipulations and other trading abuses – all for the benefit of investors and our markets.

Almost a decade has passed since the “Flash Crash,” a confidence-shattering event that took just 18 minutes to unfold and where some stocks inexplicably plummeted to $1 per share, while others skyrocketed to more than $100,000 per share. Our Wall Street regulators still do not have the mission-critical tools and data needed to understand or mitigate events like the Flash Crash, and to protect investors and the integrity of markets.

CAT is still not implemented because the governance of the CAT NMS is conflicted to its core, and the SEC has failed to hold the entity accountable when it repeatedly failed to meet regulatory deadlines. The exchanges that benefit from the current broken market structure also dominate the governing bodies of CAT NMS. It is not in their interest to have an effective tool that would be used to detect and punish market predators (who happen to be members of these very same exchanges). Frankly, it is like asking bank-robbers to provide the police with the getaway routes for their future crimes.  And, despite their clear regulatory authority, the SEC has decided to not enforce its own rules.

At Tuesday’s hearing, the Members of the Senate Banking Committee should rigorously challenge the industry representatives about the lack of progress in implementing CAT.  The Committee should conduct additional oversight by holding the SEC accountable for its lack of enforcement of Rule 613 and securities laws.

Here are five areas of inquiry that Members of the Senate Banking Committee should explore:

  1. What were the causes for implementation delays?  How was the SEC engaged with CAT NMS as it began experiencing significant delays?
  2. How do the exchanges that have commercial interests in catering data and connectivity services to some of their members—who engage in certain problematic practices that CAT can expose and deter—mitigate potential conflicts of interest when it comes to ensuring that CAT is implemented and is technologically robust?
  3. To what extent is the CAT intended to be used as a tool for the SEC to help oversee the exchanges?  Additionally, how do the exchanges manage the inherent conflict of interest in designing the CAT and ensuring it is implemented?
  4. How does SEC’s recent rule proposal address the embedded conflicts of interest in the CAT NMS governance and control?
  5. What are their views on including futures, initial public offerings, clearing and other data in the CAT database? How is CAT NMS ensuring that CAT will remain technologically robust and modern? Assuming CAT is implemented in the next three years, what are the upgrades that will need to take place to ensure CAT does not fall behind industry best-practices?  


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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