What CAT Is Designed to Do
The Consolidated Audit Trail was designed by the SEC following the 2010 Flash Crash to give regulators a complete, unified view of market activity across all exchanges and trading venues. CAT requires broker-dealers, exchanges, and market makers to report order and execution data to a central repository. This allows the SEC and FINRA to reconstruct market events, detect manipulation, and assess compliance — capabilities that were fragmented across multiple systems before CAT's implementation.
CAT Reporting Obligations
Under CAT rules, market participants must report the details of every order — including origin, routing, modification, cancellation, and execution — to the CAT repository. The data must be accurate, complete, and submitted within specified time frames. For a firm like Citadel Securities, which handles extraordinary volumes of trades, CAT reporting is a major data and operational commitment.
Industry CAT Compliance Issues
Since CAT's phased implementation began, the industry has experienced significant compliance challenges. Multiple broker-dealers and exchanges have received findings or feedback from regulators regarding inaccurate or incomplete CAT reporting. These issues reflect the technical complexity of the system and the scale of data involved. CAT represents one of the most demanding regulatory data obligations ever imposed on financial market participants.
CAT and Market Manipulation Detection
A well-functioning CAT system gives regulators the ability to detect market manipulation in ways that were previously impossible or impractical. The ability to reconstruct the complete lifecycle of every order in the market — across all venues — allows for sophisticated cross-market surveillance. This is particularly relevant to detecting potential spoofing, layering, or other manipulation strategies used by sophisticated market participants.