Looking Into SEC’s Equity Markets Structure Committee at MarketWatch

One of the really great things about my new role at MarketWatch is that I can do long as well as short, fast news as well as the kind that takes some time to digest, and everyone has to do something in-depth once and a while.  My first assignment, shortly after I arrived mid-May, was to look into the activities of the SEC’s new Equity Market Structure Advisory Committee.

(Grow and change, stretch and bend…)

My piece, spanning several online pages, is now out. It focuses on the Committee members and their priorities, as well as another initiative running in the background–the Consolidated Audit Trail (CAT).  (See, there’s always an “audit” somewhere.)

There is nothing about the Big Four in this piece, although there is a whole lot I could have said, if time and space had permitted, about Deloitte’s role as project manager of the CAT.  The consulting side of the firm is in the catbird seat, and Deloitte is charged with wrangling the herd of cats that is all of the members of the CAT group, not the same as the SEC Advisory Group, but with some overlap.  I spoke to the Deloitte Director in charge and, it seems, they are doing as well as they can under these circumstances.

The CAT initiative steering committee is interesting because it consists of all the Self-Regulatory Organizations – the exchanges– plus FINRA, the regulator, trying to develop the largest repository of market data outside of the government for use by regulators like the SEC to monitor and hopefully prevent another market “Flash Crash.”  Yes, you heard that. The foxes are in the henhouse, creating the structure that will be used by the SEC to monitor their activity,  and have to chip in each month to pay the bills of Deloitte and a law firm to help them not strangle each other.  Oh, and did I mention FINRA is one of the entities bidding to build the system? I will probably go into that part of the story in a second piece but suffice to say that the most important part of taming the market has miles to go before we can sleep soundly…

In the meantime, you can learn more, as I did, about where the SEC gets its advice on policy decisions that affect your investments, your retirement, and your children’s college funds.

SEC Commissioner Kara Stein has expressed frustration with the delays in getting the consolidated audit trail, or CAT, up and running. “Unfortunately, development of the CAT has been bogged down by administrative hurdles. Development has yet to begin, and implementation is still years away,” she said in an April speech.

The initiative is running in the background while the Equity Market Structure Advisory Committee proceeds. It is estimated that when implemented, the consolidated audit trail will collect more than 58 billion records each day, covering all market participants across several asset classes. The repository will be one of the largest managed outside of a federal government agency.

Three years later after the SEC voted to create it, there’s only an amended plan for how this will be accomplished and a not yet completed process to select a vendor to get it done.

Read, “SEC’s panel still at a loss over how to fix ‘broken market’” at MarketWatch.