Consolidated Audit Trail (CAT)
The NAC has revised FINRA’s Sanction Guidelines to incorporate a new guideline for violations of the Consolidated Audit Trail System (CAT) industry member compliance rules. The revised Sanction Guidelines are effective immediately and available on FINRA’s website.
• FINRA Regulatory Notice 21-37 (October 20, 2021): The National Adjudicatory Council (NAC) Revises the Sanction Guidelines
CAT Compliance Rules
Rule 613 under the Securities Exchange Act of 1934 requires FINRA and the national securities exchanges to jointly submit a National Market System (NMS) plan detailing how they would develop, implement and maintain a consolidated audit trail that collects and accurately identifies every order, cancellation, modification and trade execution for all exchange-listed equities and options across all U.S. markets. FINRA is working with the exchanges to develop an NMS plan that meets the requirements of Rule 613.
• FINRA Rule 6800 Series: Consolidated Audit Trail Compliance Rule
• Visit The Consolidated Audit Trail website (https://www.catnmsplan.com/) for more information
Equity Trade Reporting
FINRA has amended its rules to require firms to report time fields in trade reports submitted to a FINRA equity trade reporting facility (or FINRA Facility) using the same timestamp granularity that they use when reporting to the Consolidated Audit Trail (CAT). Once the amendments are effective, firms that report time on CAT order execution events in increments finer than milliseconds must report to the FINRA Facilities in such finer increment—up to nanoseconds.
Effective Dates: November 15, 2021 (Alternative Display Facility & Trade Reporting Facilities); November 14, 2022 (OTC Reporting Facility)
• FINRA Regulatory Notice 20-41 (December 2, 2020): FINRA Amends Its Equity Trade Reporting Rules Relating to Timestamp Granularity
Consolidated Audit Trail
FINRA issued this Regulatory Notice as part of its continuing efforts to provide members with guidance on requirements relating to the Consolidated Audit Trail (CAT), and FINRA Rule 6800 Series (the “CAT Rules”). In particular, FINRA is reminding members of their supervisory responsibilities under the CAT Rules and FINRA’s Supervision Rule (Rule 3110). Members may wish to consider whether the practices and recommended steps described below are applicable to their own circumstances and would enhance their supervisory systems and compliance programs.
• FINRA Regulatory Notice 20-31 (August 31, 2020): FINRA Reminds Firms of Their Supervisory Responsibilities Relating to CAT
Consolidated Audit Trail
FINRA and the national securities exchanges, as CAT NMS Plan Participants, have entered into a Rule 17d-2 Plan and corresponding Regulatory Services Agreements (RSAs) to coordinate regulation of the CAT compliance rules through FINRA. Relatedly, FINRA and the exchanges developed a coordinated approach for enforcement of the CAT compliance rules under the Participants’ respective Minor Rule Violation Plans.
• FINRA Regulatory Notice 20-20 (June 29, 2020): FINRA Provides Updates on Regulatory Coordination Concerning CAT Reporting Compliance
Order Audit Trail System
Effective September 1, 2021, FINRA has retired the Order Audit Trail System (OATS) and amended its rulebook to eliminate OATS rules, including FINRA Rule 7400 Series and FINRA Rule 4554 (Alternative Trading Systems — Recording and Reporting Requirements of Order and Execution Information for NMS Stocks). FINRA has determined that the accuracy and reliability of the Consolidated Audit Trail (CAT) meet the standards approved by the SEC and retired OATS as of September 1, 2021.
• FINRA Regulatory Notice 21-21 (June 17, 2021): FINRA Eliminates the Order Audit Trail System (OATS) Rules
SEC Approves Registration of First Security-Based Swap Data Repository; Sets the First Compliance Date for Regulation SBSR
The SEC has approved the registration of its first security-based swap data repository (SDR). DTCC Data Repository (U.S.), LLC (DDR), the security-based swap market now has the first SDR that can accept transaction reports. DDR intends to operate as a registered SDR for security-based swap transactions in the equity, credit, and interest rate derivatives asset classes.
Nov. 8, 2021, is the first compliance date for Regulation SBSR, which governs regulatory reporting and public dissemination of security-based swap transactions. Regulation SBSR is a key component of the security-based swap regulatory regime established by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Regulation SBSR provides for the reporting of security-based swap information to registered SDRs and for public dissemination of transaction, volume, and pricing information.
• SEC Release No. 34-91798 (May 7, 2021): Security-Based Swap Data Repositories; DTCC Data Repository (U.S.), LLC; Order Approving Application for Registration as a Security-Based Swap Data Repository