(CN) - Securities exchanges must work with the Securities and Exchange Commission to develop a plan to create a national market system to audit trades across all markets and exchanges under new a rule adopted by the commission.
The new rule sets the guidelines for a national consolidated audit trail system and the process for creating a plan to build it, but the self-regulatory organizations are responsible for developing the actual plan.
While SROs, like the Financial Industry Regulatory Authority have their own tracking systems, the SEC said these systems lack the scope to track trades as they move across different markets and consistent data sets to make regulatory auditing possible.
The SEC says that as a result it has to "cobble together disparate data from a variety of existing information systems lacking in completeness, accuracy, accessibility, and/or timeliness - a model that neither supports the efficient aggregation of data from multiple trading venues nor yields the type of complete and accurate market activity data needed for robust market oversight."
The goal of the new national market system is to create a time-stamped electronic audit trail record or report for every order including the identity of the customer placing the order and the routing, modification, cancellation or execution of the order, the SEC said.
The new system would require reporting of all order event data to a central data repository by 8:00 of the next trading day. Originally the SEC wanted real-time reporting but acquiesced to daily reports after the industry pushed back against the estimated $4 billion price tag of such a system.
The SEC also dropped its original goal of a uniform electronic format for data submissions to the repository in favor of a requirement that the final system allow regulators to view the submitted data in a uniform format.
The plan must include provisions to eliminate redundant tracking systems and reporting rules once the new national system is in place, as well as a mechanism for periodically reviewing the new system to make sure it remains efficient and technologically current.
Because each SRO and exchange can used their existing reporting mechanisms to build up the new system the SEC says the national market system will probably cost much less than its original estimate.
The SRO's have 270 days to develop the plan and present it to the SEC for approval.