Sept 6 (Reuters) – Wall Street’s top regulator on Wednesday approved new rules for financing a comprehensive market data monitoring system, splitting operating costs between buyers, sellers and the stock exchanges they trade with. I decided to do it.
The Securities and Exchange Commission’s decision has faced stiff opposition from the investment industry, who say it could force them to pay an unfairly large share of the resulting fees.
The decision is the latest in a decade-long effort to complete the so-called Consolidated Audit Trail (CAT), a repository of investor and trading data aimed at giving regulators comprehensive visibility into U.S. market operations. It was a difficult transition.
The five-member commission voted 3-2 in a public meeting to adopt changes proposed in recent months by the body that administers the CAT, which is made up of U.S. stock exchanges and non-governmental regulators. .
The new funding model incurs fees based on the executed volume of stocks and options. This would allow stock exchanges to recoup the hundreds of millions of dollars they have already spent over several years, moving away from a structure based on message traffic and market share.
SEC officials said the new rules aim to equalize the cost burden by one-third among exchanges, buyers and sellers.
It would also make buyers and sellers responsible for “historical” fees, which represent the investments made to date in the development of the system. Although the CAT system is partially operational, buyers and sellers have not yet started making payments, officials said before the vote.
Republican committee members objected, saying the system could expose investors to higher costs and pose undue cybersecurity and privacy risks.
The investment industry similarly strongly opposes the change, arguing that it unfairly distributes costs that are expected to rise and could be passed on to investors. The Securities Industry and Financial Markets Association told the SEC on Tuesday that costs are expected to reach $500 million by the end of 2022, rising to $240 million this year and increasing each year.
The SEC mandated the creation of CAT in 2012 in response to the 2010 “flash crash,” in which major Wall Street indexes briefly wiped out nearly $1 trillion in market capitalization within minutes.
When the system was formally adopted in 2016, then-SEC Commissioner Carla Stein called CAT a potential “Hubble Telescope” for the stock market. Officials say regulators may also be able to detect market manipulation. A year ago, the SEC opened a new door in its prosecution of an alleged $47 million front-running scheme, citing CAT data.
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Report by Douglas Gillison. Editing: Chizu Nomiyama, David Gregorio
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