FINRA – Proposed Rule Change Relating to the Retirement of FINRA’s Order Audit Trail System (OATS)

June 17, 2021 – Described the basis for determination that the accuracy, reliability of the Consolidated Audit Trail (CAT) meets the standards approved by the SEC in FINRA-2020-024. This allows for eliminating OATS rules in FINRA Rule 7400 series and FINRA Rule 4554. Proposal updates cross-references in FINRA rules to reflect the elimination of OATS rules.

Background
FINRA proposed to eliminate OATS rules once members are effectively reporting to CAT and CAT’s accuracy and reliability meet certain standards. The SEC in has determined to retire OATS effective September 1, 2021.

Overview
Based on testing, analysis, and use of CAT data (including integration into POD), FINRA determined that its surveillance of market activity will remain accurate and effective. Among other things, FINRA performed a broad analysis of equity surveillance patterns and determined that all data required to support the transition is available in CAT. Based on qualitative data reviews, FINRA concluded that industry member CAT data, in aggregate, is a sufficient replacement for OATS for purposes of the surveillance programs. FINRA also believes that the complete portfolio of equity surveillance patterns will be capable of consuming CAT Data and achieving comparable (or better) output results.

Effectiveness
FINRA has filed the proposed rule change to become immediately effective upon filing. Set to retire OATS effective September 1, 2021, with comments due 21 days of publication in the Federal Register.

FINRA Notice OATS Retirement
On June 17, 2021, FINRA issued notice on OATS retirement details, with the last report to be accepted on September 16, 2021, for activities pre-dating retirement on September 1, 2021. Existing OATS guidance to remain posted and will be available on FINRA’s website for a period.

SEC Filing
On June 23, 2021, the SEC filed a notice of FINRA OATS retirement, immediate effectiveness.

Effective Date
On June 25, 2021, FINRA published a new version of Rule 5320, effective date of September 1, 2021.

For more information, visit www.finra.org.

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