SEC Proposes Consolidated Audit Trail

The Securities and Exchange Commission has proposed a new rule requiring self-regulatory organizations (SROs) to create a consolidated audit trail that would greatly improve regulators' ability to track trading information.

"If adopted, this consolidated audit trail would, for the first time ever, allow the SEC and other market regulators to track trade data across multiple markets, products and participants in real time," said SEC Chairman Mary Schapiro. "It would allow us to rapidly reconstruct trading activity and quickly analyze both suspicious trading behavior and unusual market events."

Currently there is no single database of readily accessible data for orders and executions. The SEC said investigators tracking suspicious market activity must obtain and merge enormous amounts of data from a range of different markets and market participants.

“One of the challenges we face in recreating the events of May 6 is the reality that technologies used for market oversight and surveillance have not kept pace with the technology and trading patterns of the rapidly evolving and expanding securities markets,” Schapiro said recently before the Senate banking committee. “A consolidated audit trail would be invaluable to enhance the ability to detect and monitor aberrant and illegal activity across multiple markets.”

The SEC is seeking public comments on the proposal for the next 60 days.