The Securities and Exchange Commission has approved plans to create a vast Consolidated Audit Trail (CAT) tracking transactions as they pass through US equity and options markets.
The vote of approval ends a six-year tussle with market participants over the cost and complexity of the proposed model, which will create a single data warehouse to record and store the complete lifecycle of all orders and transactions passing through US trading venues.
The moves to build the database were sparked by the flash crash of 2010, which demonstrated the regulator's inability to keep pace with sub-second trading patterns initiated by automated robot traders.
Outgoing SEC Chair Mary Jo White says: “Through the CAT, regulators will have more timely access to a comprehensive set of trading data, enabling us to more efficiently and effectively conduct research, reconstruct market events, monitor market behavior, and identify and investigate misconduct.”
The SEC estimates the system will cost $2.4 billion to build and $1.75 billion a year to run. The watchdog is believed to be sizing up three potential bidders from 31 respondents to a 2013 RFP to build and manage the project, including the Financial Industry Regulatory Authority, SunGard and Thesys Technologies.
Self-regulatory bodies will be required to begin reporting to the CAT within one year of approval, with large broker-dealers following the next year and small broker-dealers the year after.