SEC Seeks Public Input on Consolidated Audit Trail Cost Reduction

The U.S. Securities and Exchange Commission (SEC) has initiated a public consultation aimed at reducing the costs and scope of data collection associated with the Consolidated Audit Trail (CAT). Established following the 2010 “flash crash,” which resulted in a temporary loss of nearly $1 trillion in U.S. stock value, the CAT serves as a critical tool for real-time market monitoring. However, the financial industry has long criticized the system for its high costs and extensive data requirements.

Bloomberg

The SEC's Chairman, Paul Atkins, acknowledged the necessity of addressing various aspects of the CAT, emphasizing the importance of public feedback in the ongoing comprehensive review. The annual costs for maintaining the CAT have surged to over $248 million, largely due to increased retail trading activity in options. In response to these concerns, the CAT consortium has projected a reduced annual cost of $156 million for fiscal year 2026, following recent adjustments aimed at limiting the data collected.

Bloomberg

Industry stakeholders, including Citadel Securities and the American Securities Association, have expressed their support for the SEC's review. They argue that the current CAT model is outdated and excessively priced. Liam Smith, chief strategy officer at Optiver, stated, “Regulators need the right tools and data to effectively oversee markets, but the current CAT falls short.”

Bloomberg

In February 2025, the SEC made significant changes by eliminating certain customer data reporting requirements, a decision that former SEC Commissioner Caroline Crenshaw warned could hinder the agency's ability to investigate suspicious trading activities. The SEC's director of the Trading and Markets Division, Jamie Selway, highlighted the need for input on less frequently discussed issues, including governance and security, particularly in light of emerging technologies such as artificial intelligence.

Bloomberg

Despite the SEC's efforts to streamline the CAT, critics remain concerned about the implications of reduced data collection on market oversight. The petition filed by Citadel Securities and the American Securities Association for a federal appeals court review of the SEC and CAT consortium's funding plan underscores ongoing tensions regarding the funding structure and operational efficacy of the CAT.

Bloomberg

The SEC plans to incorporate public feedback into a forthcoming rulemaking proposal, which is expected to outline the necessary information for the CAT. This review represents a pivotal opportunity to reassess the system's framework, aiming to create a more efficient and future-ready model for market oversight.

Bloomberg

• “The Commission is aware of the need to address many aspects of the CAT, and public comment is a crucial piece of the comprehensive review currently under way,” — Paul Atkins, SEC Chairman

Bloomberg

• “This review is an opportunity to reset and build something simpler, more efficient, and fit for the future.” — Liam Smith, Chief Strategy Officer, Optiver

Bloomberg