# Consolidated Audit Trail: a renewed sense of urgency Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2019-11-21 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Preparing for the FINRA-led Consolidated Audit Trail: Next Steps Meta Description: Stay informed on the latest updates regarding the FINRA CAT processor and the implementation of the consolidated audit trail project for US equity and options URL: https://financedigest.com/consolidated-audit-trail-a-renewed-sense-of-urgencyhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/harshad-1736838983919-compressed.jpg) #### After a hiatus earlier this year over who would orchestrate the consolidated audit trail (CAT) – a new comprehensive database for US equity and options trades–the project is back on track, with Financial Industry Regulatory Authority (FINRA) at the helm. So what should Capital Market participants do now to prepare? Harshad Pitkar, an independent CAT expert and board member at Inforalgo, advises on next steps. In January this year, when Thesys, the originally chosen consolidated audit trail (CAT) processor, was pulled from the major new US equity and options trading database project, the news received a mixed reaction. Unsurprisingly, Capital Markets participants are becoming jaded by all of the added administration and IT expense that keeps coming their way each time there is a new set of regulatory reporting requirements. So now that FINRA is the confirmed choice of CAT processor, what if anything has changed, and what should market participants do next to prepare for the known requirements? Here’s the latest information, as confirmed at recent networking events: - **No [changes are planned to industry](https://www.financedigest.com/a-mindset-change-is-needed-in-the-financial-services-industry.html "A mindset change is needed in the financial services industry") member technical specifications** FINRA CAT will continue to use the final industry member technical specifications published in October 2018 (version 1.0). No material [changes to the specifications are expected](https://www.financedigest.com/rapidly-changing-fashion-lifestyle-is-expected-to-spur-demand-for-clothes-closets-market.html "Rapidly Changing Fashion Lifestyle Is Expected To Spur Demand For Clothes Closets Market") outside of resolution of outstanding issues. - **Error feedback and correction mechanism to be included** The need for a mechanism to facilitate error feedback and correction has been acknowledged. - **Updated roll-out plan** A revised roll-out plan for **phase 2 A and 2B for large broker-dealers** has been scheduled, which further breaks down the implementation for these two phases into 4 sub-phases, as follows: **Phase****Sub-phase****Testing Start Date****Go-live date****2A Equity**File Submission & [Data Integrity](https://www.financedigest.com/can-banks-compete-in-the-digitisation-race-without-effective-data-integrity.html "Can banks compete in the digitisation race without effective data integrity?")December 16,2019April 2020Intra-Firm LinkageApril 2020July 2020Inter-Firm LinkageJuly 2020October 2020Exchange and TRF LinkageSeptember 2020October 2020**2B Options**File Submission & Data IntegrityDecember 16,2019May 2020Intra-Firm LinkageApril 2020August 2020Inter-Firm LinkageJuly 2020October 2020Exchange and TRF LinkageSeptember 2020December 2020 **Figure II: Updated phasing for large broker-dealers** _More details on the above phases and dates can be found on the CAT NMS Plan website (_ _https://www.catnmsplan.com/wpcontent/uploads/2019/02/CAT\_Industry\_Webcast\_02.20.2019\_vF.pdf_ _)_ Given these changes, a ‘Regulatory conformance period’ is no longer deemed necessary. Details relating to Phase 2C and 2D, and updated timelines for small broker-dealers, have not yet been communicated, so watch this space. - **No further delays [expected but reintroduction of the conformance period](https://www.financedigest.com/valve-seat-inserts-market-was-estimate-to-be-valued-at-us-5-bn-in-2019-and-expected-to-grow-at-a-cagr-of-4-during-the-forecast-period-of-2019-2029.html "Valve Seat Inserts Market was estimate to be valued at ~US$ 5 Bn in 2019, and expected to grow at a CAGR of ~4% during the forecast period of 2019-2029") is highly likely** On September 9th, 2019 the SEC proposed Transparency and Financial [Accountability amendments to the CAT NMS plan](https://www.financedigest.com/how-accountants-can-improve-financial-planning-and-results-through-open-banking-to-help-smes.html "How accountants can improve financial planning and results through Open Banking to help SMEs") which rule out any formal extension / delays to the timeline. However, a reintroduction of the conformance period is highly likely, as the transition to FINRA CAT will be complex and there remain some unanswered questions – for instance around the eventual technology assets that will be used. Expedited resolution of [key issues will be critical](https://www.financedigest.com/aquaponics-market-critical-insights-key-trends-global-outlook-forecast-till-2031.html "Aquaponics Market Critical Insights, Key Trends, Global Outlook & Forecast Till 2031") too, in enabling the development effort to be completed in a timely fashion, and it will take time to establish a decent error correction and feedback mechanism. **4 things to do right now** Because the new reporting requirements will be inevitably complex, it will take time to get to grips with everything, so time is of the essence. This would seem to be the best strategy currently: - **Proceed as planned for Phase 2a,with increased focus on 2b** Although proposals to make the roll-out more gradual [relieve some of the pressure](https://www.financedigest.com/how-communication-technology-can-help-relieve-pressure-on-staff-in-the-financial-services-sector.html "How communication technology can help relieve pressure on staff in the financial services sector "), the CAT go-live dates remain aggressive. Firms should therefore [continue development as planned](https://www.financedigest.com/the-case-for-continuous-planning-in-a-world-turned-upside-down.html "The case for continuous planning in a world turned upside down") for Phase 2a and 2b. - **Forma strong control framework** Given the increased volumes and complex requirements for CAT, issues and breaks already seen with existing [reporting will be magnified without robust controls](https://www.financedigest.com/global-compressor-controllers-market-outlook-2021-pricing-strategy-industry-latest-news-research-report-analysis-and-share-by-forecast-2028.html "Global Compressor Controllers Market Outlook 2021, Pricing Strategy, Industry Latest News, Research Report Analysis And Share By Forecast 2028"). A strong control framework will greatly reduce breaks and errors, and speed up testing. - **Prioritise simple flows for now** Irrespective of the [type and size](https://www.financedigest.com/industrial-degreaser-market-2022-by-global-key-players-types-applications-countries-industry-size-and-forecast-to-2030.html "Industrial Degreaser Market 2022 by Global Key Players, Types, Applications, Countries, Industry Size and Forecast to 2030") of firm, simple order flows will account for the highest volume of transactions (eg where an order is routed away without any splitting or bunching, or is crossed internally etc), so handling these successfully will be a big win. More complex order flows ( _eg_ multiple entity / desk / system hops, splitting / bunching _etc_), which typically account for only 10-20% of overall volumes, can be dealt with later. - **Take the opportunity to participate and voice concerns** [Industry participants should aim to use the latest CAT developments](https://www.financedigest.com/bev-automotive-oil-filter-market-recent-industry-developments-and-growth-strategies-adopted-by-players.html "BEV Automotive Oil Filter Market: Recent Industry Developments and Growth Strategies Adopted by Players") as an opportunity to address any residual concerns they might have about the impending new requirements. This is a good chance to participate proactively in industry forums (FIF, SIFMA _etc_), and make heard any concerns and requests relating to outstanding issues and desired functionality. - **_For further details, download an eBook on the run-up to CAT here_** [**_https://inforalgo.com/consolidated-audit-trail-ebook/_**](https://inforalgo.com/consolidated-audit-trail-ebook/) **_About the author_** _Harshad Pitkar is an independent CAT expert and a board member of Inforalgo, the Capital [Markets data integration & smart automation solutions](https://www.financedigest.com/automated-intralogistics-material-handling-solutions-market-estimates-the-market-to-expand-at-14-cagr-through-2031.html "Automated Intralogistics Material Handling Solutions Market Estimates The Market to Expand at 14% CAGR through 2031") provider._ [_www.inforalgo.com_](http://www.inforalgo.com) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---