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SEC Issues Exemptive Orders for CAT

April 21st | 2020


SEC Provides for Phased CAT Broker-Dealer Reporting Timelines with Conditional Exemption for Impacts of COVID-19


Partly due to the impact of COVID-19, the SEC recently issued two exemptive orders in order to move Consolidated Audit Trail (CAT) implementation forward. The CAT will track orders throughout their life cycle and identify the broker-dealers handling them, thus allowing regulators to more efficiently track activity throughout the U.S. markets.


The two orders cover: (1) establishing a phased CAT reporting timeline for broker-dealers, and (2) permitting introducing brokers that meet certain requirements to follow the small broker-dealer reporting timeline.


Phases 2a and 2b are the next phases for CAT implementation applicable Industry Members, which is the term for broker dealers who must report data to the CAT. Each phase is described in detail in the Technical Specifications for Industry Members; the final phase is scheduled to complete at the end of 2021. Note that large broker dealers are generally ones with more than $500,000 of total capital. Phase 2a/2b deadlines are now as follows:


  • Phase 2a – June 22, 2020: Initial equities reporting for large broker-dealers and small broker-dealers that currently report to FINRA's Order Audit Trail System (OATS)

  • Phase 2b – July 20, 2020: Initial options reporting for large broker-dealers


Be aware, however, that there is a production readiness testing process that must be completed before Industry Members can submit production data to the CAT. Previously, FINRA CAT, the administrator of the CAT, has indicated that a roughly two-week lead time was needed; so Industry Members should aim to pass production readiness testing at least two weeks before the reporting deadline.


The second Commission order focuses on those introducing brokers that meet the net capital requirements for small broker-dealers under Rule 0-10(c)(1) under the Securities Exchange Act of 1934, but fail to qualify as small broker-dealers for the purposes of the CAT NMS Plan. This order provides exemptive relief permitting these firms to follow the CAT reporting timeline applicable to small broker-dealers.

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