Earlier this year, the SEC approved a key amendment to the Customer and Account Information System (CAIS) component of the Consolidated Audit Trail (CAT). The change established a more secure link between trading activity and customer account data. Rather than storing names, addresses, and other PII, CAIS will ultimately rely on encoded identifiers (CCIDs) to track customers, an attempt to protect sensitive customer information. For the industry, the approval of the amendment marks a meaningful step toward regulatory reporting that is more secure, more aligned, and ultimately more useful for market oversight.
The CAT system was formulated out of necessity to solve a very real gap in the regulatory oversight of US financial markets. After the 2010 Flash Crash, U.S. regulators struggled to effectively reconstruct the disaster across fragmented U.S. markets. The data existed, but it was incomplete, compartmentalized, and inconsistent across markets. Rule 613 of Regulation NMS created CAT as a single, comprehensive consolidated audit trail capable of accurately tracking an order from start to finish across all U.S. equity and option markets.
“The Commission adopted Rule 613 to create a comprehensive consolidated audit trail that would allow regulators to efficiently and accurately track all activity throughout the U.S. markets in National Market System (NMS) securities.”
When CAT replaced OATS reporting, it fundamentally changed the game. Firms were no longer submitting fragmented data, but rather feeding standardized data into a single regulatory database. The margin for sloppy data quickly disappeared as regulators intensified their focus on CAT data accuracy and lifecycle integrity.
CAIS was designed to extend the transaction reporting framework to enable market surveillance and enforcement while preserving a connection to the underlying customer. The CAIS component of CAT has raised real and valid concerns among industry participants. The collection and storage of sensitive customer data gave rise to industry concerns regarding cybersecurity, privacy and operational risk.
The SEC’s recent amendment to CAIS addresses these concerns. Names, addresses, years of birth, and other direct identifiers will no longer be reported to CAT. Instead, regulators will rely on CCIDs, FDIDs, and encoded identifiers that maintain a level of regulatory oversight without exposing sensitive customer data. CAIS is evolving from a full customer database to a reference layer, with firms providing detailed customer information or trade data only when requested by regulators. This reduces risk and simplifies operations without compromising regulatory oversight.
This shift places greater importance on data alignment, lifecycle integrity, and satisfying regulatory intent when responding to regulatory inquiries.
Novatus Global helps organizations meet these expectations across the regulatory reporting landscape – not just CAT and CAIS – ensuring their data is accurate, aligned and defensible when it matters most.
