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Saturday 29 May 2010

Operational Risk - SEC proposes consolidated audit trail system to better track market trades



The Securities and Exchange Commission has proposed a new rule that would require the self-regulatory organizations (SROs) to establish a consolidated audit trail system that would enable regulators to track information related to trading orders received and executed across the securities markets.

A consolidated audit trail system would help regulators keep pace with new technology and trading patterns in the markets. Currently, there is no single database of comprehensive and readily accessible data regarding orders and executions. Stock market regulators tracking suspicious market activity or reconstructing an unusual event must obtain and merge an immense volume of disparate data from a number of different markets and market participants. Regulators are seeking more efficient access to data through a far more robust and effective cross-market order and execution tracking system.

“If adopted, this consolidated audit trail would, for the first time ever, allow the SEC and other market regulators to track trade data across multiple markets, products and participants in real time,” said SEC Chairman Mary L. Schapiro. “It would allow us to rapidly reconstruct trading activity and quickly analyze both suspicious trading behavior and unusual market events.”

Last year, the SEC set up an agency-wide task force to carry out the audit trail initiative and begin the process of developing the rulemaking proposal recommended to the Commission today.

The SEC’s proposal seeks public comment and data on a broad range of issues relating to a consolidated audit trail. Public comments on the proposal should be received by the Commission within 60 days of its publication in the Federal Register.