Show Me the Data!

In a few weeks, my older sister and her husband will be moving from their apartment into their first house, and while my sister was smart enough to hire movers, my parents and I will both trek up to Albany’s suburbs to help them move in.

Unlike the movers, my parents and I won’t require payment for our services. We’ll simply be doing it out of the kindness of our hearts. However, my sister and her husband will likely buy us dinner that night, and hopefully some cold, alcoholic beverages. 

This is the social code most of us follow. One hand washes the other, so to speak. It’s not that I’m expecting dinner and beers—although I suppose it looks like I am—it’s more just nice to be appreciated for my hard work and doing a favor.

Judging by the way the US Securities and Exchange Commission (SEC) is handling the Consolidated Audit Trail (CAT), you’d be lucky to get a warm bottle of water if you helped them move into a new place. 

No Data 

With all that is required of reporting firms, it seems that the least the SEC and SROs could do is offer them access to the data.

As you'll see in my upcoming feature, there are still plenty of issues that need to be resolved around implementing the CAT. One topic I didn’t touch on in my feature was the possibility of reporting firms having access to the data they submit. As it stands now, only the SEC and self-regulatory organizations (SROs) will be able to view data reported to the CAT. And while the topic has been brought up multiple times over the years, the SEC and SROs have stood firm on their belief that not everyone should have access to the data. 

Lest we forget, this is a project that the SEC estimates will cost the industry $2.4 billion initially and $1.7 billion annually. We’re not talking about a drop in the bucket. Serious time and money will be spent on getting systems updated to report to the CAT. 

With all that is required of reporting firms, it seems that the least the SEC and SROs could do is offer them access to the data. Many in the industry see the benefits it would provide firms.

Surveil and Correct 

Dave Emero, a vice president at Goldman Sachs involved in the regulatory operations space, says having access to CAT data would help firms with their surveillance processes and ensure their data is correct.

“If data ends up being corrected within the CAT, either by the CAT processor through its automated tools and techniques that are able to do corrections of data, or manually by firms, having access to that data in its correct state for comparison purposes and to our internal books and records would be able to provide transparency to those actions that occurred. Where that data was updated would be very important to be able to feed it back into solving the root causes that caused those mismatches in the first place or necessitated those error corrections,” said Emero, speaking on a panel at the Securities Industry and Financial Markets Association (Sifma) Ops conference last month.

“Ultimately, I think that the broker-dealer community having access to their data would certainly make things more efficient. The possibility of having feedback to ensure accuracy and better compliance rates are all good reasons why having access to our CAT data would be very helpful," Emero added.

David Shillman, associate director of the division of trading and markets at the SEC who spoke on the same panel, said expanding the CAT to other users is probably worth exploring, but that there is much to be done to simply get the CAT up and running. He added that there are security concerns that can come up from offering more firms access to CAT’s data. 

Jess Haberman, Fidessa’s compliance director who represents the vendor on the CAT Development Advisory Group (DAG), says the SROs aren’t interested in doing anything that doesn’t benefit them.

“I understand the participants being reluctant to add anything else that’s not required,” Haberman says. “I think it should be explored at least with the plan processor. They may be able to do it, charge per use. … We hope that idea continues to be considered.”