Broker-dealers to carry costs of US CAT NMS rules

SIFMA has questioned the justification for broker-dealers bearing financial burden of CAT NMS plans in the US.

The Securities Industry and Financial Markets Association (SIFMA) has objected to the funding structure of US regulators’ proposed consolidated audit trail (CAT) on the National Market System (NMS) rules.

The CATS NMS plan - proposed by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) – will see broker-dealers carrying the cost.

SIFMA wrote to the SEC and explained: “The CAT NMS Plan proposes to impose the vast majority of CAT-related costs to broker-dealers without providing any detailed analysis or justification.”

It added: “Has there been sufficient justification offered in the CAT Plan to require broker-dealers to bear any of the financial burden of funding the CAT…”

The trade association has urged the SEC to require self-regulatory organisations (SROs), “to engage and make publicly available an independent audit and review of the SROs’ current regulatory revenues and how that money is allocated.”

It also said any fees charged for CAT should be calculated and decided by an independent, third party as SROs “have a conflict of interests to determine these fees.”

The SEC voted to adopt the CAT NMS rules in 2012, which requires firms to create, implement and maintain a CAT submitted through an NMS to regulators.

SIFMA said its members support the development of CAT, given its potential to enhance data provided to regulators, and its promotion of fair markets, although it added that the issues it outlined must be addressed before implementation.