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NYSE head suggests scrapping consolidated audit trail if it holds personal info

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NYSE head suggests scrapping consolidated audit trail if it holds personal info

Investors and markets would be better off without a new trading database if it holds personally identifiable information, the head of the New York Stock Exchange said.

The Securities and Exchange Commission has come under pressure to delay the rollout of its long-awaited consolidated audit trail, which would record trading information across U.S. equities markets and would also hold some identifying information, such as Social Security numbers.

While some market participants and observers have scrutinized the CAT's cybersecurity and pushed the SEC to delay launching the system to review how well it protects the data, NYSE President Thomas Farley went a step further at the Georgetown Financial Markets Quality Conference on Oct. 10.

"Forget about a delay. Do we want to have this audit trail with the personally identifiable information for everybody who trades in the equity markets, even 10 years from now? I'm suggesting we don't. The New York Stock Exchange is suggesting we don't," he said.

Other stock exchange executives, including the heads of Nasdaq Inc.'s Nasdaq Stock Market and CBOE Holdings Inc., expressed fear over the security of the database and the kinds of data it will hold.

The security of the CAT, which is being developed by Thesys Technologies, has been targeted in recent weeks following hacks into credit monitoring agency Equifax Inc. and the SEC's corporate filing system. Self-regulatory organizations, including stock and options exchanges, are set to begin reporting trading data to the CAT's central repository on Nov 15.

CBOE President and COO Chris Concannon said the CAT's current design "sets us back on surveillance." CBOE is the parent company of Bats Global Markets Holdings Inc.

"The CAT was built just as a complete database. It's not harmonized data to surveil," CBOE's Concannon said. "I'm not seeing any benefit. I'm seeing a detriment in the creation of CAT."

The CAT was originally mandated under Regulation National Market System's Rule 613 and came as the SEC's response to the 2010 "flash crash" in which securities, options and index values all plunged only to surge back within minutes.

The repository is meant to give the SEC unprecedented detail in monitoring equities markets. But critics of the system have argued it does not go far enough, as the CAT will not hold data on other securities, such as futures, or on global markets. Others, including NYSE's Farley, say the CAT holds too much personally identifiable information.

A delay in the November date would be the sole action of the SEC, said Thomas Wittman, Nasdaq Stock Market CEO, executive vice president and head of global trading and market services. An SEC spokesperson declined to comment on any potential delays.

Days before the conference, SEC Chairman Jay Clayton attempted to ease lawmakers' concerns over the CAT's data and its protection, saying that the regulatory agency would only be interested in accessing necessary data.

"I don't want information unless we need it for our mission," Clayton said at an Oct. 4 hearing with the House Financial Services Committee.