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SEC Approves Consolidated Audit Trail for Trading Activity

The SEC recently voted to require the national securities exchanges and FINRA to establish a single system to collect information on US equity and options trading activity.  The consolidated audit trail will make it easier for authorities to oversee activity conducted in the nation's various exchanges and options markets and by broker-dealers that execute stock trades away from public venues. This initiative is part of the agency's response to the May 6, 2010 flash crash that temporarily wiped out almost $1 trillion in shareholder equity in a matter of minutes. Currently, regulators must obtain and merge together large volumes of disparate data from different entities when analyzing market activity.  The final rule did not include a controversial provision that would have required the trade data to be submitted in real time.   Instead, data will need to be submitted by 8 a.m. the following morning.

After the rule is published in the Federal Register, the U.S. exchanges have 270 days to jointly submit a plan for establishing a consolidated audit trail. Once approved by the SEC, exchanges will be required to report the required data to the database within one year, and brokers will be  required to report within two years. Certain small broker-dealers will have up to three years to report the data.

Additional information, including a copy of the rule, can be found here.

 

 
 
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