Consolidated Audit Trail ("CAT") Frequently Asked Questions for Industry Members
The following sets forth Frequently Asked Questions regarding the CAT requirements applicable to Industry Members ("CAT Industry Member FAQs"). Questions regarding the FAQs should be directed to the CAT Help Desk. Capitalized terms used here, but not otherwise defined, shall have the meanings ascribed to them in the CAT NMS Plan.
Q1. Are indications of interest ("IOIs") or requests for quotes ("RFQs") reportable to the CAT? added 2/13/18
Q2. Is a CAT Reporter required to report two separate timestamps for Manual Order Events? added 2/13/18
A1. No, neither IOIs nor RFQs are reportable to CAT, as neither falls within the definition of an "order" as set forth in the CAT NMS Plan. For CAT purposes, an IOI is a non-firm expression of trading interest that contains one or more of the following elements: security name, side, size, capacity and/or price. The CAT treatment of IOIs is consistent with FINRA’s treatment of IOIs under the OATS reporting requirements. (See OATS Compliance FAQ C76 available at http://www.finra.org/industry/faq-oats-compliance-faq)
Q3. When an order is routed internally at an Industry Member, Section 6.3(d)(ii)(F) of the CAT NMS Plan ("routing of an order"), as applied by Section 6.4 of the CAT NMS Plan, requires the reporting of the identity and nature of the department or desk to which the order is routed. What is considered "routed internally"?
A2. Yes, a CAT Reporter is required to report two separate timestamps for Manual Order Events that are entered into an electronic system. If an order is received manually and then later entered into an electronic system for further handling and execution, the CAT Reporter must report both the manual receipt time and the Electronic Capture Time. Specifically, CAT Reporters are required to record and report: (1) the time of a Manual Order Event in increments up to and including one second; and (2) the time when a Manual Order Event has been captured electronically in an order handling and execution system of the Participant or Industry Member ("Electronic Capture Time") in milliseconds. (See Section 6.8 of the CAT NMS Plan available at https://www.catnmsplan.com/wp-content/uploads/2017/03/34-79318-exhibit-a.pdf)
Q4. Are CAT Reporters required to record and report information related to any securities other than NMS Securities and OTC Equity Securities to the CAT?
A3. For purposes of Section 6.3(d)(ii) of the CAT NMS Plan, an order is considered to have been routed internally at the Industry Member when the Industry Member originates or receives an order and then subsequently transmits that order to another desk or department within the Industry Member. A desk or department is interpreted as a place or system within the Industry Member where an order can be executed, either automatically or with the assistance of traders. Examples of a desk or department include an agency desk, sales desk or arbitrage desk. The Industry Member, however, is not required to report information regarding an order’s movement between two systems within the same desk or department as an internal route. The CAT reporting requirements for internal routes within an Industry Member are consistent with FINRA’s OATS reporting requirements for internal routes within a broker-dealer. (See OATS Technical Reporting Specifications (Jan. 20, 2017), Section 4.2.2 (Transmittal to a Desk or Department within a Firm), Section 4.4.5 (Partial Desk Transmittal and Subsequent Execution), Section 4.4.6 (Desk Transmittal to another Desk or Department and Subsequent Execution and Routing), Section 4.4.15 (Single Desk Usage of Multiple Order Handling Systems), and Section 4.4.17 (Multiple Desk Usage of Multiple Order Handing Systems) available at http://www.finra.org/sites/default/files/TechSpec_012017.pdf)
Q5. If a non-US broker-dealer routes an order to a US broker-dealer, how is the US broker-dealer required to report the receipt of the order to the CAT?
A4. No. CAT Reporters are not required to record and report information related to non-Eligible Securities to the CAT. CAT Reporters only are required to report information related to Reportable Events in Eligible Securities – that is, NMS Securities and OTC Equity Securities. (See Section 1.1 of the CAT NMS Plan (definition of Eligible Security) available at https://www.catnmsplan.com/wp-content/uploads/2017/03/34-79318-exhibit-a.pdf)
Q6. Are all Industry Members required to report NBBO information to the CAT?
A5. The receiving US broker-dealer is required to report the receipt of an order from a non-US broker-dealer in the same way as it would report the receipt of an order from a Customer. Specifically, the receiving US broker-dealer would report the receipt of this order as the original receipt of the order from the non-US broker-dealer, and the receiving US broker-dealer would report the Firm Designated ID of the Customer, which is the non-US broker-dealer. The US broker-dealer would not report the ultimate customer of the non-US broker-dealer.
Q7. Are orders in foreign securities reportable? added 2/21/18
A6. No, only CAT Reporters that are ATSs are required to submit NBBO information to the CAT. Specifically, ATSs would be required to report certain NBBO information upon the receipt and execution of an order. The CAT reporting requirement for ATS NBBO information is consistent with FINRA’s OATS reporting requirements for ATS NBBO information. (See FINRA Rule 4554)
Q8. Are CAT Reporters required to report to the CAT quotes received via subscriptions to receive market data from market data vendors (such as exchanges or market data aggregators)? added 3/13/18
A7. The origination or receipt of an order involving any security that meets the definition of an NMS security pursuant to SEC Rule 600 must be reported to the CAT, regardless of where the order is ultimately executed. If the order is sent to a foreign market for execution, the CAT Reporter is required to report the relevant Reportable Events for the order (e.g., origination or receipt of the order and the routing of the order to the foreign market). All prices must be converted into U.S. dollars based on the conversion rate applicable at the time of the transaction.
Orders in foreign equity securities that do not meet the definition of an NMS stock pursuant to SEC Rule 600 are required to be reported only in those instances where the resulting execution is subject to the transaction reporting requirements in FINRA Rule 6622. The requirements of FINRA Rule 6622 do not apply to transactions in foreign equity securities provided that: (1) the transaction is executed on and reported to a foreign securities exchange; or (2) the transaction is executed over the counter in a foreign country and is reported to the regulator of securities markets of that country.
The CAT reporting requirement for foreign securities is consistent with FINRA’s OATS reporting requirements for foreign securities. (See OATS OTC FAQs for Foreign Equity Securities Traded in the US and Foreign Equity Securities available at http://www.finra.org/industry/faq-oats-otc-faq;
and OATS for all NMS Stocks FAQ 6 available at http://www.finra.org/industry/faq-oats-all-nms-stocks-faq)
A8. No. CAT Reporters are not required to report to the CAT quotes received via subscriptions to receive market data from market data vendors. Under Sections 6.3(d)(iii) and 6.4(d)(i) of the CAT NMS Plan, CAT Reporters are required to report certain data to the CAT “for the receipt of an order that has been routed.” Although such quotes may fall within the definition of an “order” under the CAT NMS Plan (and SEC Rule 613(j)(8)) as “bids” and “offers,” such quotes have not been routed to the CAT Reporter, and therefore, not subject to the reporting requirement.