Overview
In November 2016, the Securities and Exchange Commission approved a national market system (NMS) plan that required national securities exchanges and national securities associations ("SROs") to create a single, comprehensive database known as the Consolidated Audit Trail (CAT) that it stated will enable regulators to more efficiently and thoroughly track all trading activity in U.S. equity and options markets. FINRA has been selected as the processor for CAT.
To learn more about the requirements visit: https://catnmsplan.com/index.html.
Some important milestones on the SEC’s current schedule for implementing CAT are as follows:
| Event | Date |
|---|---|
| CAT Registration by Industry Members | March 18, 2019 – June 27, 2019 |
| Annual Clock Synchronization and Certification | March 15 of Each Year |
| Industry Testing and Validation for Equities | December 2019 |
| Equity Go-Live | April 2020 |
| Industry Testing and Data Validation for Options | December 2019 |
| Options Go-Live | May 2020 |
What IBKR Clients Need to Know
An IBKR client falls under the rule and is obligated to report to CAT if they are a member of a U.S. national securities exchange or a U.S. national securities association that handles orders or quotes in NMS equity securities, OTC equity securities or listed options. Unlike the current OATS reporting obligation, the CAT reporting obligations extend the scope of covered instruments to options too.
We recommend that such clients become familiar with the rules that are available on the regulator’s website: https://catnmsplan.com/index.html.
Please note that the CAT Rules do not provide for any firms to be excluded or exempted from the CAT reporting obligation.
IBKR will offer CAT reporting services for its clients that are obligated to CAT report.
Although the CAT Industry Member Technical Specifications continue to be amended and revised, IBKR is working to comply with the requirements outlined so far.
We will provide additional information about testing and CAT reporting efforts as it becomes available.
On June 5, 2019, the Securities and Exchange Commission (SEC) adopted a package of rulemakings and interpretations designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products. Specifically, these actions include new Regulation Best Interest (Reg BI), the new Form CRS Relationship Summary (Form CRS), and two separate interpretations under the Investment Advisers Act of 1940.
According to the SEC, these actions are designed to enhance and clarify the standards of conduct applicable to broker-dealers and investment advisers, help retail investors better understand and compare the services offered and make an informed choice of the relationship best suited to their needs and circumstances, and foster greater consistency in the level of protections provided by each regime, particularly at the point in time that a recommendation is made.
A copy of IBKR’s Form CRS and responses to the conversation starters in the Form CRS are publicly available here:
Introducing Brokers and Financial Advisors
The Form CRS above is specific to IBKR and addresses the nature and scope of services provided by IBKR, the types of fees customers of IBKR will incur, potential conflicts of interest, and IBKR’s disciplinary history. The document does not address compliance and legal obligations of IBKR’s clients that have their own customers (e.g. introducing brokers, financial advisors, registered investment advisors, etc.).
At this time, IBKR does not provide a regulatory solution for introducing brokers and financial advisors to meet their Reg BI and Form CRS obligations.
IBKR clients with underlying clients of their own should consult with independent counsel to determine their obligations under Reg BI and Form CRS.