No further action is required on the customer’s part to generate any order for a particular series. Broker 2 would report a MONO for each option series provided in the list of eligible securities within the algorithmic parameters, even though all material terms for an order in a given component security may not be known at the time. The pairedOrderID field is required on Option and Multi-leg Order Route events for orders that are routed electronically as a single message containing both the initial and contra side orders for simple or multileg options directly to an exchange for crossing and/or price improvement. The CAT NMS Plan requires the trade event to be reported with the “time of execution”.
-18 Rules: Safe Harbor for Stock Repurchases
Yes, Small Industry Non-OATS Reporters may voluntarily choose to begin reporting prior to December 2021, the date on which Small Industry Non-OATS Reporters are required to begin reporting to the CAT. 7 For example, the transaction database has become the foundation of FINRA’s program for fulfilling its statutory obligation to monitor trading by its member firms across all exchanges and other trading venues. Before CAT, regulators used a different two-step process to determine the party responsible for potentially problematic trading activity. After detecting such activity from anonymized audit trail data, they would make tailored requests for investor-identifying information from the broker-dealer carrying the relevant account using an electronic system called “Blue Sheets” (which is still operational) or other investigatory tools.
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Since then, the costs have skyrocketed, exceeding balance sheet the original estimates by hundreds of millions of dollars. The court criticized this omission as unreasonable and inadequate under the Administrative Procedure Act. Agencies must respond reasonably when faced with dramatically changed circumstances. The SEC had argued that Exchange Act safeguards and assumptions of future compliance would sufficiently protect broker-dealers.
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These private trading venues match buyers and sellers away from the open market, providing anonymity and often lower transaction costs. The foundation audit trail for CAT was SEC Rule 613 under the Securities Exchange Act of 1934, which mandated a new, unified market surveillance system. Prior systems, such as the Order Audit Trail System (OATS) and Electronic Blue Sheets (EBS), proved inadequate because they were fragmented and lacked the necessary detail for modern market analysis. OATS covered only equity orders, not options, and failed to capture the full order lifecycle across trading venues. EBS involved manual requests for trading information, increasing the risk of human error and preventing timely market reconstruction.
- Systems to collect trading information are called audit trails and have existed for many decades in the U.S. markets, but pre-CAT versions were incomplete and siloed among different segments of the market.
- In Phases 2a and 2c, CAT will interpret the combination of a market order with a handlingInstructions value of ‘OPT’, or a limit order with a price of ‘0’ and a handlingInstructions value of ‘OPT’ as an order with a net price.
- Source data would flow through several steps, including enrichment, validation controls, and submission formatting for CAT reporting.
- FRMC is a clearing firm with an obligation to report post-trade allocation events (MEPA/MEAA/MOPA/MOAA).
- In Phase 2a/2b, any response to an RFQ or other solicitation process is not required to be reported as a MENO or MONO no matter the method of response (electronic or manual).
The clearing firm may know the introducing broker-dealer’s FDIDs, in which case the firmDesignatedID in the introducing broker-dealer’s MENO/MONO may be the same as the firmDesignatedID in the clearing firm’s MEPA/MOPA. In this scenario, the clearing firm would also be required to populate the correspondentCRD and newOrderFDID fields. For production readiness testing, each of the Industry Member’s CRAs must submit its portion of a full day of production data to the Test Environment; it does not have to be on the same processing date or for the same trade date. However, an Industry Member will not be granted access to Production until all CRAs have reported and Liability Accounts the Industry Member achieves a combined error rate of less than 10% across all CRA submissions.
CFR § 242.613 – Consolidated audit trail.
Since the registered representative did not have discretion in the accounts, but instead received orders for these accounts, each order must be reported separately; therefore, you would be required to send 10 New Order Events to CAT. Additionally, BD A must report a separate New Order Event for the aggregated 10,000 share order created to represent the 10 customer orders. Beginning in Phase 2d, Industry Members will be required to populate the netPrice field on equity or simple option order events with the net price of the order if the order is tied to stock, fixed income, futures, or another product that is not reportable to CAT at a net price. The netPrice field will not be required if the order is tied to stock, fixed income, futures, or another product that is not reportable to CAT with another formula such as a specific delta.
- The definition of a “CAT Executing Broker” would determine the CAT Executing Brokers for transactions executed on an ATS.
- Allocations to firm owned or controlled accounts are not required to be reported but may optionally be reported.
- However, if the customer requests that an order quantity be changed from 100 to 1,000 shares, the Industry Member must instead submit an Order Modified event.
- A Historical CAT Assessment will remain in effect until the full amount of the relevant Historical CAT Costs is collected.
For example, an order that was internally routed from a sales desk to a trading desk is subsequently modified at both the sales and trading desks, and ultimately executed at the trading desk. In this example, in Phase 2a the orderID on the related Trade event may link to either the MEIR reported by the trading desk or the MEOM reported by the sales desk. Starting in Phase 2c, the Trade event must link to the MEIM reported by the trading desk. Additionally, beginning on December 5, 2022, if an order is partially routed internally and a new orderID is not assigned, the deskOrderID field is required to be populated in the Order Internal Modified event (MEIM, MOIM or MLIM).