Thursday, September 07. 2023

SEC Adopts Funding Amendment to National Market System Plan Governing the Consolidated Audit Trail

On September 6th, the SEC voted to approve an amendment to the National Market System Plan (NMS Plan) that regulates the Consolidated Audit Trail (CAT) (CAT NMS Plan). The amendment introduces an updated funding model (Executed Share Model) for the CAT and establishes a fee schedule for CAT fees for the self-regulatory organizations that are participants to the CAT NMS Plan under the Executed Share Model.


Audit trail report is shown using text with a magnifying glass and highlighter

Pursuant to the newly adopted Executed Share Model, participants are now required to submit filings under Section 19(b) of the Securities and Exchange Act of 1934 that will impose fees on the industry members. Section 19(b) filings submitted by participants will provide precise details on fees, including the budgeted prospective CAT costs and some of the costs previously covered entirely by the participants prior to the approval of the Executed Share Model.


More specifically, under the funding amendment, the Executive Share Model will:

  • provide a consolidated view of the material information of all orders in NMS securities to trace orders from originations, modifications, cancellations, routings, and executions
  • update the method by which allowable costs associated with building and operating the CAT are allocated. Self-regulatory organizations’ NMS Plan amendments satisfy the requirements under the Exchange Act and the SEC’s Rule 608
  • implement a framework that plan participants will use to recover the costs to create, develop, and maintain the CAT, including the method for allocating CAT costs among participants and the members of a national securities exchange or a member of a national securities association
  • charge fees to Participants and Industry Members based on executed equivalent share volume
  • calculate executed equivalent share volume based on whether securities being traded are NMS Stocks, Listed Options, and/or OTC Equity Securities (securities traded without being listed on an exchange), to account for differences in the trading characteristics of each of those securities
  • establish CAT fees for CAT costs not previously paid by the Participants (Prospective CAT Costs)
  • apply CAT fees (Historical CAT Assessments) to be payable by Industry Members that are CAT Executing Brokers for the Buyer and for the Seller with regard to CAT costs previously paid by the Participants (Past CAT Costs)

The order approving the amendment, which became effective upon the SEC’s approval, will be published in the Federal Register.

For further information regarding the CAT NMS Plan amendment, see the order on the SEC’s website. 


Sources:

SEC Approves Funding Amendment to National Market System Plan Governing the Consolidated Audit Trail (sec.gov)

SEC Order (sec.gov)

Posted by
LeAnn Dey
in SEC at 10:58