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FINRA Proposed Rule Change to Delete the FINRA Order Audit Trail System (OATS) Rules

November 23rd | 2020



FINRA recently filed a proposal to eliminate the Order Audit Trail (“OATS”) rules in the FINRA Rule 7400 Series and FINRA Rule 4554 once members are effectively reporting to Consolidated Audit Trail (“CAT”) and the CAT’s accuracy and reliability standards have been achieved. Under the proposal, before OATS can be retired, the CAT would need to meet the following conditions:

  1. The CAT achieves the specific accuracy and reliability standards described in the rule filing.

  2. FINRA has determined that its usage of the CAT data has not revealed material issues that have not been corrected.

  3. FINRA has confirmed that the CAT includes all data necessary to allow FINRA to continue to meet its surveillance obligations.

  4. FINRA has confirmed that the Plan Processor is sufficiently meeting its obligations under the CAT NMS Plan relating to the reporting and linkage of Phase 2a Industry Member Data.

Sunsetting OATS is generally welcomed by industry members, but as noted in #3, decommissioning OATS depends on FINRA’s ability to operationalize CAT Data in its automated surveillances. Accordingly, some commenters are calling for FINRA to provide transparency to the industry regarding its progress.

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