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SEC Publishes Consolidated Audit Trail Rule Proposal

The SEC has published the text of the consolidated audit trail rule release proposed at their May 26 open meeting.  The purpose of the proposed rule is to allow the SEC and self regulatory organizations to track trade data across multiple markets, products and participants simultaneously, in real time. This "consolidated audit trail," if adopted, would allow regulators to reconstruct trading activity rapidly and to analyze both suspicious trading behavior and unusual market events.


The proposed Rule 613 under Section 11A(a)(3)(B) of the Securities Exchange Act of 1934, would require the self regulatory organizations like FINRA and the exchanges jointly to develop a national market system plan to create, implement, and maintain a consolidated audit trail. Also, the rules, if adopted, would require the SROs and their members to collect in a a newly created central database significant detailed information about each quote and order, including identifying the "ultimate customer" who generated the order. The information collected in the new system would capture in real time each step in the life of the order, from receipt or origination, through the modification, cancellation, routing and execution of an order, and also "tag" each order with a unique order identifier that would stay with that order throughout its life. This collected data would then be made available to the SEC and other financial regulators.

The Commission has published the text of the rule proposal at:  http://www.sec.gov/rules/proposed/2010/34-62174.pdf