21 February 2017
Visit EBAday.com

SEC votes for consolidated audit trail system

12 July 2012  |  5585 views  |  0 Washington Capitol hill

The Securities and Exchange Commission (SEC) has voted to force US exchanges and Finra to build a consolidated audit trail system to monitor and analyse trading activity.

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."

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

SEC could make Nasdaq OMX upgrade systems over Facebook IPO - WSJ

SEC could make Nasdaq OMX upgrade systems over Facebook IPO - WSJ

29 June 2012  |  5692 views  |  0 comments
SEC sets up large trader reporting system

SEC sets up large trader reporting system

27 July 2011  |  7254 views  |  0 comments
Flash crash panel calls for HFT curbs

Flash crash panel calls for HFT curbs

18 February 2011  |  9859 views  |  0 comments
Computer systems fingered in flash crash probe

Computer systems fingered in flash crash probe

12 August 2010  |  9757 views  |  0 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
Visit contisgroup.comvisit BNP paribasvisit dh.com

Top topics

Most viewed Most shared
IBM and Visa join forces to turn billions of connected devices into points of saleIBM and Visa join forces to turn billions...
16791 views 11 comments | 52 tweets | 86 linkedin
Nesta launches £5 million Open API challengeNesta launches £5 million Open API ch...
10272 views comments | 21 tweets | 19 linkedin
Jaguar embeds payments into digital dashboardJaguar embeds payments into digital dashbo...
10131 views comments | 49 tweets | 57 linkedin
The fintech effect: Banks buy in to benefits of boosting financial well-beingThe fintech effect: Banks buy in to benefi...
9211 views comments | 17 tweets | 12 linkedin
Kevin the bot uses blockchain to offer insurance for P2P transactionsKevin the bot uses blockchain to offer ins...
8099 views comments | 17 tweets | 13 linkedin

Featured job

Six Figure Base + Commission + Stock Options
London

Find your next job