Currently, exchanges each operate their own systems to track activity on their platforms. In the absence of a single database, the SEC says it has a tough job obtaining and merging large volumes of disparate data.

The new rule requires the exchanges and Finra to jointly submit a plan within 270 days of its publication detailing how they would develop, implement, and maintain a consolidated audit trail that must collect and accurately identify every order, cancellation, modification, and trade execution for all listed equities and equity options across all US markets. The data will be aggregated and housed in a newly-created central repository.

The watchdog says that this will increase the data available for investigating illegal activities such as insider trading and market manipulation, and improve the ability to reconstruct broad-based market events accurately and quickly.

In addition, it should increase the ability of regulators to monitor overall market structure and assess how SEC rules are affecting it, as well as reduce the regulatory data production burdens on exchanges and broker-dealers by reducing the number of ad hoc requests from regulators presently.

SEC chairman Mary Schapiro says that in a world dominated by electronic market makers and high-frequency traders, with activity measured in milliseconds and microseconds, a central database will "significantly enhance" her organisation's ability to deal with a data deluge and regulate the US equity markets.

Schapiro cites the 6 May 2010 'flash crash' as proof of the database's necessity because "it took dozens of highly-trained economists, financial professionals, and data technologists four months to aggregate and process the information required to fully analyze just a few hours of trading on a single day. While that process was remarkable considering our limitations, and while we were able to identify the various causes of that event, efficient and effective market regulation requires that future analyses not take nearly that long."

However, the rule was only passed three to two, with the two Democrat commissioners, Elisse Walter and Luis Aguilar, arguing that it does not go far enough. Walter says the move is a "positive step forward" but "disappointingly weak", arguing that there should be a real-time reporting.

The decision to opt out of real-time reporting was welcomed by trade association Sifma though, with EVP Randy Snook, insisting: "Sifma and our member firms believe that this [the final plan] is a more manageable and cost-effective approach to this kind of system."