SEC Votes to Require Consolidated Audit Trail for Markets
By Steven Sloan and Nina Mehta - Jul 12, 2012 12:01 AM ET
The Securities and Exchange Commission voted yesterday to require exchanges and a broker oversight group to build a single system to monitor and analyze trading activity across U.S. equity and options markets.
In a 3-2 vote, the SEC approved a rule requiring the exchanges and the Financial Industry Regulatory Authority, which oversees 4,400 brokers, to establish a so-called consolidated audit trail that will enable the reconstruction of market crises and expedite surveillance across 13 equity exchanges, 10 options markets and more than 200 broker-dealers that execute stock trades away from public venues. The effort is part of the agency’s response to the May 6, 2010, stock rout that temporarily erased $862 billion in U.S. equity value.
“A consolidated audit trail that accurately tracks orders throughout their lifecycle and identifies the broker-dealers handling them will provide us with an unprecedented ability to effectively oversee the markets we regulate,” said SEC Chairman Mary Schapiro. The rule is a “great leap forward,” she said.
The SEC has already implemented circuit breakers to halt trading when a company’s shares move 10 percent in five minutes and required market-makers to supply quotes closer to the best prices than was previously required. Still, Schapiro has pressed for tools that would allow faster and broader oversight of trading activity across U.S. venues. After the 2010 market disruption, a 20-person SEC team needed three months to collect and process order and transaction data that arrived in different formats from exchanges and brokers.
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