Updated: February 16, 2021

Background

The Consolidated Audit Trail (CAT) system promises to be 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 – on which job creators and savers, and indeed all Americans, depend. The CAT system will be the world’s largest data repository for securities transactions, tracking billions of orders, executions, and quotes in all of the equities and options markets every day.  The CAT will collect order, cancellation, modification, and trade execution information for every trade (someday, it is hoped, in real time). That information 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 investors and our markets.

The SEC first proposed to create the CAT immediately after the “Flash Crash” in May 2010.  During the “Flash Crash” nearly one trillion dollars of stock market value was temporarily wiped out from investors’ accounts. This confidence-shattering event took just 18 minutes to unfold and saw some stocks inexplicably plummet to $1 per share while others skyrocketed to more than $100,000 per share.  Neither the SEC nor other regulators understood this event.  It took regulators months to reconstruct and understand it.

Below is a timeline with key milestones showing the development of CAT, and Better Markets advocacy on the matter.

Pre-CAT

• May 6, 2010 – Flash Crash occurs. 
• May 26, 2010, the SEC releases a proposal of SEC Rule 613 which would eventually create the CAT.   The proposal envisions the CAT to enable the SEC to monitor and react to market events and manipulations in real time.
• August 12, 2014 – Better Markets CEO Dennis Kelleher discusses the need for CAT on Bloomberg TV.
• August 13, 2014 – Better Markets Newsletter Article About the Need for CAT.
• March 3, 2016 – Better Markets Press release applauding Senator Mark Warner’s efforts on CAT.

CAT Plan

• July 18, 2012 – The SEC unanimously approves SEC Rule 613 which creates a National Market System Plan (NMS Plan) called the CAT NMS.  CAT NMS is mandated by the SEC to propose a Joint Industry Plan called the CAT Plan which would see the creation and implementation of the CAT system.
• April 27, 2016 – The SEC releases for public comment a 1,090 pages-long Joint Industry Plan developed by the CAT NMS consortium which proposes to create the CAT system.
• April 27, 2016 – Better Markets raises initial concerns about governance and technical issues with the CAT NMS Plan.
• May 9, 2016 – Better Markets issues a Newsletter Article Announcing the Release of the long-wait CAT NMS Plan.
• July 18, 2015 – Better Markets submits Comment Letter to the SEC calling on for major fixes for CAT Plan before the approval of the Plan.
• November 15, 2016 – Better Markets Press release on the final CAT Plan expressing disappointment. While the SEC makes some improvements before the approval of the final CAT NMS Plan, the governance structure remains deeply flawed.

CAT (Un)Implementation

Leading up to the November 15, 2017 implementation deadline of the CAT system, Better Markets continued its advocacy and support of the CAT system.

• March 14, 2017 –  Better Markets release Memo to Senate Banking Committee Members on the eve of Confirmation Hearing of SEC Commissioners highlighting the need for Senators to ask questions to nominees about the CAT.
• April 14, 2017 – Better Markets submits a letter to U.S. Senate Banking Committee calling on oversight of the SEC to implement CAT.
• September 26, 2017 – Better Markets releases Memo to reporters on the eve of SEC oversight hearing before the Senate Banking Committee discussing the importance of CAT implementation.
• October 4, 2017 – Better Markets again releases a Memo to reporters on SEC oversight hearing discussing CAT.
• November 8, 2017 – Better Markets posts a Blog Post on Why Policymakers shouldn’t bail on plan to prevent next ‘flash crash’ and implement the CAT.
• November 15, 2017 – The CAT NMS consortium fails to meet the November 15, 2017 deadline by which date the CAT system needed to be online to receive the submission of data from exchanges and FINRA.  The CAT NMS groups requests a “no action” letter which would essentially excuse their non-compliance with the SEC Rule 613 and delay the implementation of the CAT system.  The SEC, under the leadership of Chairman Clayton, declines to provide such “no action” letter which signals that it can bring enforcement proceedings against the CAT NMS consortium for non-compliance.
• November 15, 2017 – Better Markets sends a letter to SEC Chairman Clayton applauding his decision to not excuse implementation delay and urges the SEC to ensure compliance with Rule 613 and swift implementation of the CAT system.
• November 15, 2017 – Better Markets releases a Press release applauding the SEC for not excusing industry’s non-compliance.
• November 16, 2017 – Better Markets includes in its newsletter an article highlighting the need for CAT implementation and applauding SEC’s Chairman Clayton for rejecting CAT delay.

As the deadline of November 15, 2017 comes and goes with the CAT system still not implemented, Better Markets continues to work through the press and with the SEC to continue to advocate for the CAT system.

• January 18, 2018 –  Better Markets posts a Blog Post Encouraging the SEC to Stay the Course on CAT and implement it swiftly.
• May 4, 2018 – Better Markets Blog Post on Flash Crash Anniversary a Reminder of Why We Need CAT.
• May 10, 2018 – Better Markets Newsletter Article on the Anniversary of the Flash Crash and Why we need to have a CAT.
• September 24, 2018 – Better Markets sends a Letter to SEC Chairman Clayton expressing deep disappointment regarding CAT implementation, calls on the SEC to begin levying fines on the industry consortium for lack of compliance.
• October 12, 2018 – Better Markets Newsletter Article Calling on the SEC to Enforce Its Rules and Implement CAT.
• October 21, 2019 – Better Markets puts out a Press Release titled, “Congress Must Hold the SEC and CAT NMS Accountable for Failure to Create the Consolidated Audit Trail,” in advance of the Senate Banking Committee’s 10/22/2019 hearing on “Oversight of the Status of the Consolidated Audit Trail.” 
• October 22, 2019 – Sen. Sherrod Brown (D-OH) enters Better Markets’ investor protection letter into the record during the Senate Banking Committee’s 10/22/2019 hearing on “Oversight of the Status of the Consolidated Audit Trail.”
• October 28, 2019 – Better Markets submits Comment Letter to the SEC addressing inexcusable delays and conflicts of interest in implementing CAT.
• October 29, 2019 – Better Markets puts out a Press Release titled, “Better Markets Supports the SEC Fighting for Investors Over the Industry for the Consolidated Audit Trail (CAT),” regarding SEC’s proposed amendments to the national market system plan governing the Consolidated Audit Trail.
• January 24, 2020 – In letter to SEC Chair Jay Clayton, Better Markets addresses ACLU’s concerns about privacy and calls on the SEC to expeditiously implement CAT.
• November 30, 2020 – In a comment letter to the SEC, Better Markets cautioned against changes to CAT that risks making the mission-critical tool less user-friendly and ineffective to fight against predatory market practices.