NEW YORK May 13 Ten bidders seeking to manage a
new surveillance system that could track all U.S. equity trading
activity have presented proposals to the exchanges overseeing
the project, a source told Reuters on Tuesday, and the field
should be reduced to five by September.
The bidders had two hours each to give presentations last
week to a selection committee of more than 40 representatives
from all the U.S. stock and options exchanges, said a person
familiar with the presentations.
The presentations for building and managing the Consolidated
Audit Trail, an order tracking system known as the CAT, occurred
over three days in an undisclosed New York City location.
Regulators demanded an audit trail after it took months to
pull together the data needed to investigate the "flash crash"
of May 2010, when the Dow industrials plummeted 700 points in
minutes, before quickly recovering most of the decline.
The Securities and Exchange Commission approved the process
to select a winning bidder in February, after adopting a rule in
July 2012 requiring creation of the audit trail.
An advisory committee to the exchanges of 12 firms, most of
which are brokerages, will be informed of the presentations on
May 21, said the source who was not authorized to speak publicly
about the matter.
After the field of 10 bidders is narrowed to a shortlist of
five, an "optimal" plan for the audit trail will be submitted
for SEC approval, according to the rules for the selection
process. The submission date is expected by Sept. 30.
Once approved, some bidders may be allowed to revise their
proposals. A round of voting will reduce the shortlist of five
to two, then another round will produce the winning bidder.
The Financial Industry Regulatory Authority (FINRA), which
is part of the selection committee, has been considered a
front-runner to win the bid because it already manages a less
robust market surveillance system called the Order Audit Trail
FINRA has imposed restrictions to avoid any conflicts of
"FINRA has put very clear walls between their bid team and
the selection process," the source said. "It's very, very
(Reporting by Herbert Lash; Editing by Ken Wills)