31 Aug FINRA Reminds Firms of Their Supervisory Responsibilities Relating to CAT
August 31, 2020 –
Members that receive or originate orders in NMS stocks, OTC equity securities or listed options must report to CAT; all proprietary trading activity is subject to CAT reporting. There are no exclusions or exemptions for size or type of firm or trading activity type. Member CAT reporting is being phased in over several time periods.
Small members that do not report to OATS must report to CAT starting December 13, 2021. Several ways to report and members may develop or purchase a proprietary system for CAT. May enter agent agreement with another member to report on its behalf, rule 6870(c). CAT Supervisory Systems,
Procedures Supervisory procedures should address CAT Rules and, at a minimum, identify individuals responsible for the review of CAT reporting, and describe the type of review that will be conducted. Specify the frequency of reviews and describe how reviews will be evidenced. How and when clocks synchronized, responsible party, evidence, self-report breaches. Must ensure that the data reported is timely transmitted and is complete and accurate.
Recommended Steps for Supervisory Systems
- Daily clock synchronization prior market open
- Daily review of CAT portal including file status
- Identifying late records, data ingestion and linkage errors
- Reporting statistics
- Periodic comparative reviews of accepted CAT data against order and trade records
- Ongoing steps e.g. regular communication with CAT reporting agent, review CAT FAQs
- Periodic review of the reporting agent’s activities as members are ultimately responsible
Common OATS Supervisory Deficiencies
Provided a list of frequent deficiencies during OATs reviews, instructive for CAT purposes. Written procedures merely recite rules and have an inadequate description of the review process. Failure to timely update procedures related to new regulations and no documentation of reviews. Deficient monitoring of reporting agent to which member delegated its responsibilities.
For more information, visit www.federalregister.gov