SEC Adopts Consolidated Audit Trail Rule

Author:Mr Andre Owens, Elizabeth K. Derbes and Rebekah E. Goshorn
Profession:WilmerHale
 
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On 12 July, 2012, the U.S. Securities and Exchange Commission ("SEC") adopted new Rule 613 under Section 11A of the Securities Exchange Act of 1934, which directs the development and implementation of a consolidated audit trail ("CAT") with respect to the trading of NMS securities (exchange-listed equities and equity options). Under the rule, national securities exchanges and the Financial Industry Regulatory Authority ("FINRA") (self-regulatory organizations or "SROs") are required to submit a national market system ("NMS") plan to the Commission to create, implement, and maintain a CAT. The NMS plan will capture order event information for orders in NMS securities across all U.S. markets, throughout the life cycle of each order. As discussed in greater detail below, the adopted rule does not require reporting in real time â€" perhaps the most contentious aspect of the rule as proposed. The SEC adopted the new Rule with a 3-2 vote, with Commissioners Walter and Aguilar dissenting. Rule 613 becomes effective 60 days after publication in the Federal Register. SROs are required to submit the NMS plan within 270 days of that same date. SROs will begin reporting information to the central repository within one year after approval of the NMS plan by the Commission; and, subject to an extended reporting requirement for small broker-dealers, broker-dealers generally will be required to begin reporting within two years of approval of the plan. This summary is based on statements at the open meeting; we will provide additional detail when the adopting release for the rule becomes available. 

Key Requirements of Rule 613

Report data to a central repository. SROs and their members will be required to provide to a central repository detailed data on each quote and order in an NMS security, including the order's origination, modification, cancellation, routing and execution. Information regarding broker-dealer's proprietary quotes is included in the reporting requirements. Unique identifier for broker-dealers and exchanges. Reportable order information must include a unique, cross-market identifier for each broker-dealer and national securities exchange. Customer/account holder identifiers. The SEC's press release regarding the adopted rule states that "each customer as well as any customer adviser who has trading discretion over a customer's account [will] be assigned a unique, cross-market customer identifier" that must accompany all order information reported...

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