The U.S. Securities and Exchange Commission has outlined a plan to take control of the Consolidated Audit Trail, replace its funding model, and prepare a transition that could run through late 2027.
Summary
- The SEC has ordered staff to assess direct agency control of CAT and the resources required.
- A proposed rule could rescind Rule 613 while retaining CAT’s infrastructure and reporting standards.
- Funding options include congressional appropriations and Section 31 transaction fees.
- The SEC expects the proposed transition to remain underway until late 2027.
The SEC said in an Aug. 10 letter from Chair Paul Atkins to CAT Operating Committee Chair Robert Walley that staff must prepare recommendations for changing how the market surveillance system is funded, governed, and operated.
Under the plan, the agency would examine whether CAT expenses could be covered through congressional appropriations or transaction fees collected under Section 31 of the Securities Exchange Act. Staff will also calculate what personnel, technology, and other internal resources the SEC would need to manage the system.
A separate rulemaking proposal could remove Rule 613 of the Regulation National Market System, the provision that led to CAT’s creation. Rescinding the rule would not eliminate the tracking system or end reporting by market firms.
Instead, Atkins asked staff to consider requiring stock exchanges, the Financial Industry Regulatory Authority, and broker-dealers to send the same CAT data directly to the SEC or an agency-appointed operator. Existing infrastructure and technical reporting standards would remain in use, limiting disruption during the changeover.
SEC takeover would replace CAT’s current governance model
CAT records information about orders and trades across U.S. equity and options markets, giving regulators a single system for examining market activity. Rule 613, adopted in 2012, required national securities exchanges and FINRA to submit a plan for creating and maintaining the database.
Atkins said the current arrangement still has “persistent cost, governance, and funding issues,” even after the SEC reduced the system’s annual operating expenses and narrowed its data collection.
The agency achieved some of those reductions through targeted regulatory exemptions and amendments to the CAT NMS Plan, according to the letter. It also ended the requirement to report personally identifiable information to the system, reducing the amount of sensitive investor data entering the database.
Despite the changes, Atkins said the existing structure requires additional work because CAT remains managed under a joint national market system plan involving exchanges and FINRA. The proposed model would place responsibility more directly with the federal regulator that uses the data for market oversight.
“One theme emerges from the comment file: investors and market participants want the Commission to take more responsibility for managing and funding this project,” Atkins wrote.
His instruction does not transfer control immediately. SEC staff must first prepare recommendations, assess agency resources, and draft a proposal for the commission to consider. Any repeal of Rule 613 and replacement reporting requirements would need to pass through the federal rulemaking process before taking effect.
Hundreds of comments informed the CAT reform plan
The latest instructions follow an SEC concept release issued on April 16, which requested public feedback on CAT and other audit trails used to oversee U.S. securities markets.
According to Atkins, the commission received hundreds of responses, and staff reviewed them after the comment period closed. The feedback covered the system’s management, costs, data requirements, funding, and the role the SEC should play.
Among the options raised during that review was bringing CAT expenses into the SEC budget. Under such an arrangement, Congress would examine the spending through the appropriations process, while Section 31 transaction fees could provide another source of money.
Section 31 authorizes the SEC to collect fees on certain securities transactions. The agency adjusts those fees periodically based on the amount it must collect and the expected volume of covered transactions.
Atkins has asked staff to explore the option rather than adopt it, meaning the letter does not establish a replacement funding formula or determine how costs would be allocated among market participants. Congressional appropriations would also involve lawmakers because the SEC cannot approve its own federal budget.
The SEC expects several parts of the work to proceed at the same time. Since the agency must examine funding, prepare rules, and build its capacity to run CAT, Atkins said the handover would probably not finish before late 2027.
Market participants will have opportunities to comment as the process advances, according to the letter. Atkins said the agency intends to consult investors and firms both while developing the changes and after assuming responsibility, provided the commission approves the required rules.
CAT reform joins an SEC review of U.S. market rules
The CAT instructions form part of an active review of rules governing American securities trading, including provisions that could affect blockchain-based versions of U.S. stocks.
In June, the commission proposed rescinding Rules 611 and 610(e) of Regulation NMS. Rule 611 generally prevents a trading venue from executing a stock order at a worse price when another venue displays a better protected quote, while Rule 610(e) addresses locked and crossed quotations.
As crypto.news reported, Atkins said the proposal was intended to simplify equity market structure and reduce costs after two decades under Rule 611. The proposal entered the public comment process and did not change the rules immediately.
Galaxy Digital research head Alex Thorn said automated market makers may struggle to comply with Rule 611 because decentralized liquidity pools execute trades through bonding curves and cannot check every U.S. exchange before completing each swap. Thorn’s assessment concerned a possible obstacle for tokenized stocks and did not mean the SEC proposal had authorized their onchain trading.
CAT’s future could matter to firms offering tokenized securities because regulated trading venues and broker-dealers would still have federal reporting duties under the structure Atkins described. The proposed repeal of Rule 613 would change the legal and governance framework, but exchanges, FINRA, and broker-dealers would continue submitting transaction data through CAT’s existing specifications.
SEC rulemaking extends to crypto assets and broker-dealers
Digital-asset regulation is also moving through separate SEC projects. In July, crypto.news covered three proposals in the agency’s 2026 regulatory agenda involving crypto offerings, broker-dealers, and market structure.
One project considers exemptions and safe harbors for crypto asset offerings. Another examines how broker-dealer financial responsibility and recordkeeping requirements should apply to digital assets, including possible amendments to Rules 15c3-1, 15c3-3, 17a-3, and 17a-4.
The third project concerns crypto trading on national securities exchanges and alternative trading systems. Unlike the CAT plan, the projects focus on how digital assets could be issued, held, and traded within SEC-regulated markets.
Atkins also said in July that the SEC was prepared to use its existing authority if Congress did not complete the CLARITY Act. However, earlier reporting noted that agency rulemaking cannot independently grant the Commodity Futures Trading Commission nationwide authority over digital commodity spot markets.
The CAT plan does not depend on the CLARITY Act and deals with surveillance of securities orders and trades under the SEC’s existing market mandate. Any rule proposed by staff would still require commission consideration, publication for public comment, and another decision before becoming final.
According to Atkins, the SEC plans to issue regular public updates as staff develops the restructuring. The agency will also seek input from market participants during implementation and after any approved transfer of CAT governance.
