The Securities Industry and Financial Markets Association (SIFMA) is calling on the U.S. Securities and Exchange Commission (SEC) to take responsibility for funding and operating the Consolidated Audit Trail (CAT).
In April, the SEC launched a review of the CAT, the U.S. market’s audit trail for equities and listed options.
In response to that review, in a letter to the SEC, SIFMA is calling on the regulator to eliminate the current funding model and to take over sole responsibility for financing the costs of operating the CAT from its annual Congressional budget allocation. It also wants the SEC to directly operate the system.
Currently, the system suffers from “misaligned incentives,” the U.S. securities industry trade group said, as the industry firms that largely fund the system have no direct say in its operations, while the regulators that operate it have no incentive to control costs.
“Even though the self-regulatory organizations nominally control the CAT, the commission is the most significant beneficiary of the CAT and effectively controls it and yet has no responsibility for CAT funding,” SIFMA said — whereas the firms that pay the costs have no direct say in its operations.
The industry trade group said the structure “has proven unworkable.” As a result, it recommends that the commission “immediately eliminate the current funding model and assume sole responsibility for CAT costs.”
SIFMA’s also calling for increased representation of a broader range of stakeholders on an advisory committee, including representatives from alternative trading systems, retail brokers, market makers and information security and technology experts.
Having the SEC take over responsibility for the CAT “will help address the longstanding funding and governance issues that have led to the out-of-control system costs and insulated decision-making processes that have come to define the CAT,” said Kenneth Bentsen, Jr., president and CEO of SIFMA, in a release. “They will also put the CAT on a more sustainable foundation going forward.”