Securities Regulation Daily Wrap Up, EXCHANGES AND MARKET REGULATION—SIFMA urges SEC to pay for and operate CAT itself, (Jun 25, 2026)

By Anne Sherry, J.D.

The comment letter recommends eliminating the CAT NMS Plan.

In a comment on the SEC’s comprehensive review of the Consolidated Audit Trail, SIFMA recommended that the SEC eliminate the CAT NMS Plan, directly operate the CAT, and assume sole responsibility for costs by including the amount needed to fund CAT in its annual budget request to Congress. According to SIFMA’s president, the move would mitigate “the longstanding funding and governance issues that have led to the out-of-control system costs and insulated decision-making processes that have come to define the CAT.”

In April the SEC issued a concept release seeking comments on a comprehensive review of the CAT. The SEC’s concept release noted that many developments have occurred in the ten years since the CAT NMS Plan was approved, chiefly the operation of the plan itself, and that the annual costs of maintaining and operating the plan have dwarfed 2016 estimates.

Governance issues. SIFMA notes a fact omitted from the concept release: that the SEC in May 2020 imposed Financial Accountability Milestones on the SROs to address the slow pace of CAT implementation. Really, the CAT was implemented under a tight timeframe between 2020 and 2024, resulting in a lack of focus or controls on the total cost of the system or a proper mechanism for transparency and oversight.

The group credits the Commission and SROs for reducing costs but says that significant problems are still flowing from the NMS plan governance structure. That structure completely excludes industry members and investors, who front the vast majority of the bill, from formal governance or meaningful informal input.

SIFMA considers this a problem of misaligned incentives: the SEC has no incentive to control the size or scope of the CAT, and the SROs have no incentive to include outside perspectives. The group recommends that the SEC immediately eliminate the current funding model and assume sole responsibility for costs. After it takes over funding, the agency should eliminate the CAT NMS Plan and directly operate the CAT.

The letter supports the continuation of the CAT Advisory Committee but says that a more diverse group of stakeholders should be represented, including alternative trading systems, retail brokers, market makers, and information security and technology experts.

Further cost reductions. After the SEC funds and operates the CAT, it should evaluate any modification done in the name of cost savings to ensure the move is not just shifting costs to industry members or undermining the retirement of duplicative reporting systems. SIFMA expressed concerns about a recent amendment to the CAT NMS Plan that allows the SROs to delete data older than three years.

The agency should also consider how the system could supplement or replace other regulatory reporting requirements, like those broker-dealers make under Rules 605 and 606.

Electronic Blue Sheets. The comment letter also calls for the retirement of Electronic Blue Sheets for equities and listed options. EBS retirement was one of the bases on which the SEC justified the costs of CAT, but it has not happened, resulting in significant duplication of time and costs.

As an alternative to EBS, SIFMA strongly supports a centralized request-response (R&R) system that allows all regulators to efficiently use the CCID and FDID mapping. The R&R system should include the functionality necessary to fully replace EBS, and the SEC should amend Rule 17a-25 accordingly.

If the R&R system is operated outside of CAT, it should be operated by FINRA or FINRA CAT under a contract with the SEC. SIFMA said it strongly supports FINRA’s concurrent work on an R&R system.

Cybersecurity. Finally, SIFMA said it’s been challenging (if not impossible) to understand CAT data security practices because they have never been disclosed. Based on its understanding of what is happening, though, SIFMA believes that the individual of individual SROs to download CAT data is a critical security threat. CAT data should be available outside the system only as necessary to allow regulators to extract the output of a regulatory inquiry or to analyze discrete data for further regulatory policy or rulemaking.

SIFMA also reiterated its concerns about the ability of exchanges to see trading activity occurring on other markets. While the CAT NMS Plan is still in effect, it should be amended to restrict each exchange’s access to CAT data such that an exchange can only see data for trading activity conducted on that exchange, with extramarket activity visible only for limited and well-defined regulatory purposes.

SIFMA urges the Commission to implement several of the initiatives discussed in its CAT Data Security Proposal from 2020 to ensure that regulators use the CAT transactional database consistent with the highest and most current data security standards.

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