WASHINGTON (CN) – Securities exchanges must work with the Securities and Exchange Commission to develop a national market system for consolidated order tracking and auditing of trading across all exchange systems, under a proposed new rule by the commission.
The rule would apply to national securities exchanges and self-regulatory exchanges.
In the introduction to the proposed rule, the commission stated that it believes, “That with today’s electronic, interconnected markets, there is a heightened need for regulators to have efficient access to a more robust and effective cross-market order and execution tracking system.”
While most of the national exchanges have audit trail rules and systems to track trading information, the commission said that it finds the existing system to be too limited in scope and effectiveness to allow timely surveillance of the exchanges to track compliance with federal securities laws and regulations.
The proposed rule would require a consolidated audit trail to capture certain information about each order for a security, including the identity of the customer placing the order and the routing, modification, cancellation or execution of the order, in real time. In effect, the proposal would create a time-stamped electronic audit trail record or report for every order, and each market participant that touches the order would be required to report information about certain reportable events, such as routing or execution of the order.
Such a system would constitute a National Market System that would unify reporting requirements and simplify compliance with federal securities laws and regulations in real time.