SEC May Soften Stance on U.S. Trading Database, SIFMA Says

Updated on
  • Regulator may allow reporting of proxy client data to CAT
  • Broker-dealers must start contributing data in November 2018
Pedestrians pass by a Christmas tree in front of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg

A group lobbying on behalf of big banks and brokers said it’s hopeful that regulators will soften their stance on how investor data is collected for the Securities and Exchange Commission’s far-reaching new market-surveillance system.

The SEC may agree to allow broker-dealers to submit client-trading information without revealing personal identifiers attached to each individual investor as the industry is requesting, Securities Industry and Financial Markets Association President Kenneth Bentsen told reporters today in New York.

The industry, along with stock and options exchanges, has resisted the SEC’s Consolidated Audit Trail surveillance system -- dubbed CAT -- in its current form, arguing that it raised cybersecurity issues. SIFMA supports the concept of the surveillance system while opposing the inclusion of detailed investor data in it, Bentsen said.

One possible solution would be the use of unique identifiers for the data being gathered. That would enable regulators the oversight they’re seeking without exposing sensitive information to potential breaches, Bentsen said.

The SEC had rejected requests to delay the start of the program, and data from the exchanges started flowing into CAT last month. Brokers have to begin submitting their client trading data in November 2018. Information collected from 23 different organizations and accessible by 3,000 people from across those organizations will render it vulnerable to breaches, Bentsen said, while noting that SEC Chairman Jay Clayton has signaled his agreement with those concerns.

“People are coming to realize that,” Bentsen said. “Based upon Chairman Clayton’s comments before the Senate and the House testimony, I think he understands this as well.”

Bentsen said the industry will continue working with the SEC to find ways to use the surveillance system without including personally identifiable information in the database.

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