Exchanges to Ask for Extension on Creating Audit Trail
December 6, 2012
The operators of the nation’s stock and options exchanges as well as the brokerage industry’s regulatory body plan to ask the Securities and Exchange Commission for an eight-month extension on the due date for submitting a plan to create a system that will collect all quote and order details overnight.
The SEC in July gave the national securities exchanges and the Financial Industry Regulatory Authority until April 26, 2013 to submit a plan for an automated system that would establish a consolidated audit trail that would make it practical to monitor and analyze trading activity in the nation’s equities and options markets.
But the exchanges and FINRA, in posting a series of technical concepts that could be incorporated into the audit trail system, said they plan to submit an “exemption request” to the SEC that would extend the due date for filing the industry’s plan until December 2013.
The extension is needed, the industry’s working group said in its concept release, “given the significant work and analysis that is required to develop” the plan.
The group includes NYSE Euronext, Nasdaq OMX Group, BATS Global Markets, Direct Edge, the National Stock Exchange, the Boston Options Exchange, the International Securities Exchange, the Chicago Board Options Exchange, the Chicago Stock Exchange and FINRA, the independent regulator of brokers.
If the extension is granted, the group says it will publish a request for proposals by mid-February 2013 and its plan for the new National Market System audit trail of quotes and orders by the end of December of next year.
Based on that timeline, the self-regulatory organizations charged with creating the system “anticipate formal selection of a bidder would occur sometime in 2014,’’ not 2013.
In October, the group said it expected to put out a request by mid-December for technical proposals to create that system.
The audit trail system was proposed in May 2010, shortly after the Flash Crash that saw the Dow Jones Industrial Average plunge nearly 1,000 points. The staffs of the SEC and the Commodity Futures Trading Commission, using existing resources, took five months to deliver their report on what caused the crash.
A nightly-updated central repository of all trading data would allow regulators to recreate market activity more swiftly and analyze the information for causes of market disruptions or abuse.
The industry group is planning to review its concept document with market participants this coming Monday, December 10, at the Marriott Downtown in New York.