Interpretive FAQ

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
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)

Q2. Is a CAT Reporter required to report two separate timestamps for Manual Order Events? added 2/13/18
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)

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"?
added 2/13/18
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)

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?
added 2/13/18
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)

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?
added 2/13/18
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.

Q6. Are all Industry Members required to report NBBO information to the CAT? added 2/13/18
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)

Q7. Are orders in foreign securities reportable? added 2/21/18
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)

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
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.

Q9. If a Reportable Event is priced in a non-U.S. dollar currency, how will such prices be reported to the CAT? added 4/4/18
A9. If a Reportable Event is priced in a non-U.S. dollar currency, CAT Reporters are required to convert such prices into U.S. dollars based on the conversion rate applicable at the time that the Reportable Event occurred and report such prices to the CAT in U.S. dollars. The treatment of prices in non-U.S. dollar currencies is consistent with FINRA’s treatment of such prices under OATS reporting requirements (See Compliance FAQ C71 available at: http://www.finra.org/industry/faq-oats-compliance-faq).

Q10. How should an Industry Member report timestamps to the CAT if its order handling and order execution systems use different timestamp increments?
added 4/4/18
A10. Section 6.8 of the CAT NMS Plan requires that “[e]ach Participant shall, through its Compliance Rule: (i) require that, to the extent that its Industry Members utilize timestamps in increments finer than the minimum required in this Agreement in their order handling or execution systems, such Industry Members shall utilize such finer increment when reporting CAT Data to the Central Repository.”  This requirement is reflected in each Participant’s CAT compliance rule series. Therefore, to the extent that any Industry Member’s order handling or execution systems utilize timestamps in increments finer than milliseconds for a given Reportable Event, such Industry Member shall record and report that Reportable Event to the CAT with timestamps in such finer increment. To the extent that an Industry Member has order handling or execution systems that utilize timestamps with varying increments, the Industry Member shall use the timestamps associated with each relevant system and Reportable Event when reporting CAT Data to the Central Repository, provided that in all instances such timestamps meet the minimum requirement of 1 millisecond for non-Manual Order Events.

Q11. Are Industry Members required to report to the CAT all messages related to the transmission of an order? added 4/18/18
A11. No. Industry Members only are required to report the “details for each order and each Reportable Event, as applicable,” as set forth in Section 6.3(d) of the CAT NMS Plan, as applied to Industry Members by Section 6.4(d)(i) of the CAT NMS Plan. The definitions of “orders” and “Reportable Events” are set forth in Section 1.1 of the CAT NMS Plan. If a message does not meet the definition of an order or a Reportable Event, then details related to that message do not have to be reported to the CAT. For additional information on reporting to the CAT, please see Section F (Reporting) of the General Frequently Asked Questions (FAQs) About the CAT.

Q12. Are Industry Members required to report the receipt of an order to the CAT if the Industry Member rejects the order? added 4/18/18
A12. If the Industry Member receives an order, the Industry Member must report the receipt of the order to the CAT. The details that must be reported for the receipt of an order are set forth in Sections 6.3(d)(i) (for the original receipt of an order) and 6.3(d)(iii) (for the receipt of an order that has been routed) of the CAT NMS Plan, as applied to Industry Members by Section 6.4(d)(i) of the CAT NMS Plan.

Q13. Are Industry Members required to report to the CAT the routing of an order if the routed order is rejected by the Industry Member or Participant to which the order is routed? added 4/18/18
A13. If the Industry Member routes an order to another Industry Member or a Participant, the Industry Member must report the routing of the order to the CAT. The details that must be reported for the routing of an order are set forth in Section 6.3(d)(ii) of the CAT NMS Plan, as applied to Industry Members by Section 6.4(d)(i) of the CAT NMS Plan.

Q14. How would an Industry Member determine the time of order receipt?
added 4/18/18
A14. If an Industry Member receives an order, the Industry Member must report the time of order receipt pursuant to Sections 6.3(d)(i) (for the original receipt of an order) and 6.3(d)(iii) (for the receipt of an order that has been routed) of the CAT NMS Plan, as applied to Industry Members by Section 6.4(d)(i) of the CAT NMS Plan. The time of order receipt for Sections 6.3(d)(i)(E) and 6.3(d)(iii)(C) is the time that the Industry Member receives the order.

Q15. Will the CAT be ready to accept Industry Member Data in November 2018? If not, when will Industry Members be required to begin reporting to the CAT?
added 5/1/18
A15. While SEC Rule 613(a)(3) and Section 6.7(a) of the CAT NMS Plan require that Participants begin reporting to the CAT by November 15, 2017, Industry Members (other than Small Industry Members) begin reporting to the CAT by November 15, 2018, and Small Industry Members begin reporting to the CAT by November 15, 2019, the CAT System currently is not operational and will not begin to accept order or customer data submissions from Industry Members until after November 15, 2018. Moreover, the Operating Committee has not yet approved a final version of the Industry Member Technical Specifications. In November 2017, the Participants requested an extension of these reporting deadlines so that Participants would begin reporting to the CAT by November 15, 2018, Industry Members (other than Small Industry Members) would begin reporting to the CAT by April 13, 2020 and Small Industry Members would begin reporting to the CAT by April 20, 2021 (see also Section C (Timelines and Implementation) of the General Frequently Asked Questions (FAQs) About the CAT). As of the date of this FAQ, the SEC has not granted the Participants’ request to extend the CAT reporting deadlines. The Operating Committee expects that Industry Members will begin reporting to the CAT after Participants begin reporting to the CAT and after a final version of the Industry Member Technical Specifications has been approved and published with sufficient time for development and testing. The Operating Committee will keep the industry informed of the timing for reporting to the CAT.

Q16. Should Industry Members begin coding their CAT reporting systems based on the current draft of the Industry Member Technical Specifications?
added 5/1/18
A16. No. As of the date of this FAQ, the Operating Committee has not approved a final version of the Industry Member Technical Specifications. As noted in all draft versions of the Industry Member Technical Specifications made available to the industry to date, the drafts are for discussion purposes only, not final, should not be used for coding and have not been formally approved by the Operating Committee. The Participants will continue to engage with the industry with respect to the Industry Member Technical Specifications and the Operating Committee will notify the industry when iterative drafts of the Industry Member Technical Specifications are published, as well as when the final Industry Member Technical Specifications are formally approved.

Q17. If an Industry Member holds a peg order, is the Industry Member required to report to the CAT a modification to the peg order every time the market moves?
added 5/16/18
A17. Each time an Industry Member reprices a peg order based on a market move (i.e., when there is a change in the national best bid or offer or the best bid or offer on a particular exchange, as applicable based on the terms of the order), the Industry Member must report a price modification of the peg order to the CAT pursuant to Section 6.3(d) of the CAT NMS Plan, as applied to Industry Members by Section 6.4(d)(i) of the CAT NMS Plan, if the price is modified. If the Industry Member does not reprice a peg order when the market moves, the Industry Member does not need to report a modification of the peg order to the CAT since the order was not modified by either the customer or the Industry Member. For example, for both displayed and non-displayed alternative trading systems (ATSs), if an ATS’s matching engine reprices a peg order when the market moves, the price modification must be reported to the CAT. If a matching engine does not reprice a peg order when the market moves, there is no requirement to report a price modification to the CAT.

Example 1: A display ATS receives a buy order with a primary peg instruction and a limit price of $10. The current market is 9.98 and accordingly, the order is displayed at 9.98. The NBB subsequently moves to 9.99. The ATS reprices the order and re-displays it at 9.99. The re-pricing of this order must be reported to CAT by the ATS.

Example 2: An ATS receives a buy order with a primary peg instruction and a limit price of $10. The order is not displayable or routable and the ATS has no sell orders that are eligible to trade with the buy order. The NBB subsequently moves to 9.99 and the ATS receives no other sell orders that are eligible to trade with the buy order. The ATS takes no action on the open buy order when the NBB moves to 9.99, therefore there is no CAT reportable event.

Example 3: An ATS receives a buy order with mid-point peg instruction when the NBBO is 9.85 x 10. The order is not displayable or routable and the ATS has no sell orders that are eligible to trade with the buy order. The NBBO subsequently moves to 9.90 x 10. The ATS then receives a market order to sell that is eligible to trade with the buy order and the two orders are crossed at 9.95. Because the ATS did not re-price the buy order prior to executing it, there is no CAT reportable event required to reflect a price modification of the buy order to 9.95.

Q18. How has the Operating Committee defined “Trading Day”?
added 6/7/18
A18. The Operating Committee has determined that “trading day” shall have the following meaning for all Eligible Securities: For Participant CAT Reporters the Trading Day is defined as beginning at one millisecond after midnight on one trade date and ending at midnight the next trade date. For Industry Member CAT Reporters, Trading Day is defined as beginning at one millisecond after 4:15 p.m. Eastern Time on one trade date and ending at 4:15 p.m. Eastern Time on the next trade date.