U.S. SEC Delay – FINRA CAT Replacement OATS

On 21 November, SEC designated longer period to take action, ending 27 January 2018.


On 15 May, FINRA proposed rules for retiring OATS due to CAT system.


  • To eliminate order audit trail system (OATS) in FINRA Rule 7400, for CAT reporting.
  • Amend FINRA electronic blue sheet (EBS) Rules 8211, 8213 to meet CAT standards.
  • Follows FINRA final rule on consolidated audit trail (CAT) compliance.
  • Requirements make necessary to eliminate old OATS system, and further changes.

CAT NMS Plan Changes

  • Report consolidated data source of customer, order information in NMS, OTC equity.
  • Once CAT reports has met specific reliability standard, eliminate duplicate systems.
  • Proposed rule change deletes Rule 7400 series, and Rule 4554 from FINRA rulebook.
  • Added new supplementary material to FINRA EBS rules, Rules 8211, 8213 standards.

Accuracy and Reliability

  • CAT error rates are the main but not sole metric, to determine if retire as duplicate.
  • if 5% error rate on initial or pre-correction data, FINRA to measure more granularly.
  • Also based on the minimum error rate of post-correction, option, equity separately.
  • Before retiring OATS, need 180 days of 5%, on pre-correction or as-submitted basis,
    and 2% or lower on a post-correction basis to be sustained as measured over period.
  • Rejection rates must be equivalently low, and sustained over 180-day period as well.
  • Data links, includes intra-firm, inter-firm, and order linkages, subject to error rates.

Small Member Data

  • Small industry reporters report two years after effective date, rather than three.
  • Burden on current OATS Reporters that are small industry members not significant
    if firms are required to report to CAT beginning in November 2018, instead of 2019.
  • For those not currently reporting to OATS, is no acceleration, and will stay at 2019.

EBS Rules

  • Automated submission of trading data to FINRA upon request, use the EBS system.
  • CAT, will contain most data participants would otherwise have requested using EBS.
  • Will not need EBS for NMS or OTC equity securities, after CAT reporting is in place.
  • No complete elimination, remains in use for non-CAT securities, e.g. fixed-income.

FINRA Effectiveness

  • On June 1, 2017, FINRA published in federal register, comment period until June 22.
  • FINRA will announce the implementation date of rule change in a regulatory notice.
  • Publish notice after FINRA concludes thresholds on accuracy and reliability are met.

Parallel Exchange Rules

  • Exchanges including NYSE MKT and ISE, issued parallel rules to implement change.
  • On May 15, 2017, Nasdaq, and May 30, 2017, NASDAQ PHLX also parallel CAT rule.
  • On June 1, 2017, NYSE Arca, IEX, Jun. 2, NYSE and NYSE Arca issued parallel rules.
  • On June 12, 2017, NYSE MKT issued final rules on OATS, in Jun. 16 federal register.
  • On July 14, 2017, NYSE, Phlx, NYSE Arca and 2017-57 deferred action until August 30.
  • On August 2, 2017, NYSE filed UTP rule in federal register, effective quarter 4, 2017.
  • On August 25, 2017, ISE issued Amendment No. 2 material, on submitting trade data.
  • How ISE will request data under Rule 1404 after members are reporting to the CAT.

August 2017 SEC Response

  • On August 30, 2017, SEC provided notice of grounds it is considering for disapproval.
  • On Sep. 6, 2017, exchange notice in federal register, comment until September 27, 2017.
  • Asked SROs to respond to issues from four comment letters, and estimate of costs.