SEC Issues Order to Lower Consolidated Audit Trail Operating Costs

USA: SEC Issues Order to Lower Consolidated Audit Trail Operating Costs

A new order released by the U.S. Securities and Exchange Commission today grants conditional exemptive relief aimed at cutting the operating expenses of the Consolidated Audit Trail (CAT) while preserving its core regulatory functions. The relief targets participants of the CAT National Market System (NMS) Plan and is intended to address rising cost pressures identified by both the Commission and market participants.

Background on the Consolidated Audit Trail

The CAT, established under Rule 613 of Regulation NMS and Rule 17a-1 of the Securities Exchange Act of 1934, provides a comprehensive, real‑time record of trading activity across U.S. markets. Recent litigation, including the Eleventh Circuit Court of Appeals’ decision to vacate the 2023 Funding Model Order, has heightened scrutiny of the program’s financial sustainability.

Key Provisions of the Relief Order

The conditional exemptive relief permits CAT participants to discontinue several non‑essential processes: (1) creating interim lifecycle linkages without a regulator request; (2) re‑processing late records under current requirements; (3) delivering certain functionalities of the online targeted query tool; and (4) retaining and storing older CAT data more cost‑effectively. These changes are designed to streamline operations without compromising the trail’s regulatory purpose.

Projected Cost Savings

The original 2025 CAT budget, approved by the Operating Committee, exceeded $248 million. After implementing prior cost‑saving measures and the newly granted relief, the Commission forecasts that expenses will fall an additional $20 million‑$27 million below the projected $196 million for the year, representing a notable reduction in anticipated outlays.

SEC Leadership Comments

SEC Chairman Paul S. Atkins emphasized the need for participants to address “seemingly endless cost increases,” noting that the order marks “just the start” of efforts to improve efficiency. Jamie Selway, Director of the SEC’s Division of Trading and Markets, described the action as the beginning of an “overdue journey” to reform and rationalize the CAT, with ongoing engagement planned for industry stakeholders.

Future Outlook

The Division of Trading and Markets will continue to work with CAT participants and other market participants to identify further improvements that reduce costs for investors while maintaining the integrity of the audit trail. The SEC indicated that additional adjustments may be considered as the program evolves.

This report is based on information from SEC, licensed under Public Domain (U.S. Government Work). Source: Official U.S. Government release.