NEW YORK (Reuters) - An audit trail prompted by the 2010 “Flash Crash” that would help U.S. regulators better police Wall Street trading activity in stock and options markets should be up and running by the end of 2017, a top regulatory official said on Tuesday.
The creation of a consolidated audit trail (CAT) would establish a central database for every trade order, execution and cancellation, as mandated by the Securities and Exchange Commission in July 2012.
After several delays, the 18 U.S. stock and options exchanges as well as the Financial Industry Regulatory Authority (FINRA), which are known as self-regulatory organizations (SROs) and are overseeing the system’s creation, handed in a blueprint for the mammoth project to the SEC in late 2014.
“We have been wrestling with that enormous bear for a year now,” Stephen Luparello, the SEC’s head of trading and markets, said at the Investment Company Institute’s Capital Markets Conference.
The SEC looks set to make the plan available for public comment in the second quarter, after which the regulator has 180 days to decide whether it should be approved, he said. After that, the SROs have 60 days to choose a plan processor and then a year to begin sending in data to the repository.
“CAT is this endless process which we’ve poured years into with calls that go on all week long with the other SROs,” Bob Colby, FINRA’s chief legal officer, said at the conference. “We feel like we’ve got a product that’s ready to be noticed, ready to get comments on and we’d love to see this finished and the rollout begun,” he said.
The CAT became a priority for the industry after the 2010 Flash Crash, which wiped out around $1 trillion from the stock market within minutes before an almost equally rapid rebound. It took regulators months to piece together the data needed to attempt to diagnose what caused the event.
Regulators at the time said unsettled market conditions early in the day, combined with a massive, aggressive sell order for the popular E-mini S&P 500 futures security by mutual fund manager Waddell & Reed, helped trigger the selloff.
In April 2015, U.S. authorities accused a UK trader with manipulation of the futures market and said his actions helped spark the Flash Crash.
There are no plans to include futures market trading data in the new audit trail.
Reporting by John McCrank