Consolidated Audit Trail Requirements Published
February 26, 2013
The nation’s equities and options exchanges Tuesday published a request for proposals on how to build a consolidated audit trail of all market activity every night, overnight.
The system that will take in roughly 50 billion records every day and place the details of options and equities trades in a repository that will allow the Securities and Exchange Commission to monitor what is going on in the nation’s markets, on a next-day basis.
The national market system plan to create the audit trail is an outgrowth of a proposal made by former SEC chairman Mary L. Schapiro to create a database of all trade activity, in the wake of the May 6, 2010 flash crash. In that case, it took the staffs of the SEC and the Commodity Futures Trading Commission five months to recreate that one day’s activity and find a trigger that caused the Dow Jones Industrial Average to plunge 600 points in a few minutes and bounce back nearly as quickly.
Producing the document, choosing the winning bidder and ultimately developing the audit trail plan that will be submitted to the SEC are the BATS Y-Exchange, Inc.; BATS Z-Exchange, Inc.; BOX Options Exchange LLC; C2 Options Exchange, Incorporated; Chicago Board Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; International Securities Exchange, LLC; Miami International Securities Exchange, LLC; NASDAQ OMX BX, Inc.; NASDAQ OMX PHLX, Inc.; NASDAQ Stock Market LLC; National Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE Arca, Inc.; and NYSE MKT LLC. Also involved is the independent regulator of brokers, the Financial Industry Regulatory Authority.
These “self-regulatory organizations” have been charged by the SEC to come up with the plan.
But NYSE Euronext and Nasdaq OMX Group both are suppliers of technology to exchanges around the world; and FINRA operates what could be a pre-cursor to the audit trail, a collection of quotes and trade information called the Order Audit Trail System. Using an existing system and technologies, where possible. Since October, that system has kept track of trades on the Nasdaq Stock Market, the New York Stock Exchange, NYSE Arca, NYSE MKT, BATS Exchange and the Chicago Stock Exchange.
The organizations say, in the RFP, that they “are seeking a stand-alone bid that addresses all of the technology, business and operational requirements” involved in building the trail and the repository housing all details on orders, quotes and transactions.