According to a report by Barron’s, the SEC under the direction of its new chair Paul Atkins might scale back or eliminate the Consolidated Audit Trail (CAT), a timestamped record of all stock trades that occur in the market, from order to execution.

The CAT is administered by CAT NMS LLC, a company comprising 25 exchanges and FINRA. The CAT handles a trillion reports a day, and it costs members of those self-regulatory agencies around two cents per 1000 securities transactions to maintain.

That amounts to $250m annually, on top of the more than $1 billion already spent on CAT development costs, the article stated. Massive off-exchange market makers like Citadel Securities and Virtu bear the brunt of these costs and are now challenging them in court.

The CAT was created in response to the 2010 “Flash Crash,” where a single trader engaging in market manipulation briefly wiped out one trillion dollars from the market. Due to a lack of trade documentation at the time, it took months to pinpoint the malefactor’s identity, and questions remain to this day about who was harmed.

However, critics say the system is expensive to maintain and superfluous. Others see it as an invaluable resource to catch insider traders and market manipulators.

Without the CAT, the SEC would still be able to gather the necessary information in response to suspicious activity from various providers, though it would take longer and require more steps.

And Atkins was a contributor to Project 2025, the conservative manifesto that called for the elimination of the CAT, along with the Public Company Accounting Oversight Board (PCAOB).

But according to Barron’s, Atkins took a more conciliatory position during his confirmation hearing, stating that the CAT “needs to be reviewed. We need to look to see if it’s going to be focused on the mission that it’s trying to solve.”

PII exempt

A recent SEC decision to offer exemptions to the requirement to submit personally identifiable information (PII) to the CAT was met with plaudits from market participants and from the Securities Industry and Financial Markets Association (SIFMA).

SEC Commissioners Mark Uyeda and Hester Peirce called the CAT’s PII requirements “dystopian.” They mentioned that it would be possible to pinpoint that information through a coded system that could be used to identify individuals without retaining their PII.

A main concern was that the PII stored made a prime target for hackers, and that broker-dealers are already required to furnish that information when the SEC requests it.

But in a dissenting statement, SEC Commissioner Caroline Crenshaw stated that “de-clawing the CAT” could lead to another Flash Crash-type situation where regulators might not be able to easily locate the source of a manipulative event.