There’s More Than One Way to Skin a CAT

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I've never been a big fan of regulators imposing technology platforms on the industry. Typically, such platforms aren't aligned with the technological realities of the Street. So when the US Securities and Exchange Commission (SEC) released in May its proposed Rule 613 for Regulation NMS, which mandates that the Financial Industry Regulatory Authority (Finra) and the self-regulatory organizations (SROs) build and maintain a consolidated audit trail (CAT) platform, I felt that familiar feeling in the pit of my stomach—the Intermarket Trading System (ITS) is about to be reincarnated.

The SEC says it would take a few years to get the CAT off the ground and would carry a price tag of only about $4 billion in its first year and $2.1 billion in the subsequent years.

Given the scope of the project and the number of organizations involved, the estimated budget and proposed schedule all seem a bit optimistic.

Earlier this week, market access provider FTEN filed a comment with the SEC suggesting that the regulator should look to off-the-shelf technology that is already being used in the industry rather that constructing an expensive bespoke offering.

According to the filing, FTEN claims that if it followed its proposed four-phase implementation plan, it could have 73 percent of the market covered within the first 30 days the remaining 27 percent of the market covered by the end of 12 months without affecting end-users’ trading experience.

Ted Myerson, CEO of FTEN, is a bit coy on how much a vendor-supplied system would cost the industry, saying that this isn't the proper stage to discuss price. Considering FTEN's current offerings and footprint in the industry, it makes an attractive option.

Now that FTEN has raised one possible alternative to a custom CAT platform, it shouldn't be long until other vendors start proposing their own alternatives.

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