The consolidated audit trail (CAT) is a system that is designed to gather data on all equity and option trades that are executed on U.S. exchanges. The goal of CAT is to provide regulators with a real-time, comprehensive view of the market, which will allow them to track and investigate potential market abuses.
To achieve this goal, the Securities and Exchange Commission (SEC) has mandated that all broker-dealers submit trade data to the CAT system. This means that broker-dealers will need to sign a consolidated audit trail reporter agreement (CATRA) in order to participate in the CAT system.
The CATRA is a legal agreement between the broker-dealer and the CAT National Market System (NMS) Plan, which governs the operation of the CAT system. The agreement outlines the obligations and responsibilities of the broker-dealer in terms of reporting trade data to the CAT system.
Under the CATRA, the broker-dealer is required to report all equity and option trades that are executed on U.S. exchanges, regardless of whether the trade was executed by the broker-dealer or by a third-party executing broker. The broker-dealer must also report certain identifying information for each trade, such as the date and time of execution, the security that was traded, and the price and volume of the trade.
In addition, the broker-dealer is required to maintain certain records related to the trade data that is reported to the CAT system. These records must be kept in a format that is consistent with the technical specifications outlined by the CAT NMS Plan.
Failure to comply with the requirements of the CATRA can result in significant penalties for the broker-dealer. The SEC has the authority to impose fines and other sanctions for non-compliance with the CAT system, which can harm the reputation and financial stability of the broker-dealer.
In conclusion, the consolidated audit trail reporter agreement is a crucial aspect of the CAT system. Broker-dealers must carefully review and comply with the requirements outlined in the CATRA in order to avoid potential penalties and ensure the smooth operation of the CAT system. By participating in the CAT system, broker-dealers can help ensure the integrity of the U.S. equity and option markets and promote a fair and transparent trading environment.