What Is FINRA CAT and Why It Matters

 

In the complex world of capital markets, regulatory compliance is critical — and one of the most transformative initiatives in this space is the FINRA CAT, or Consolidated Audit Trail. Created to increase transparency and improve regulatory oversight, FINRA CAT represents the largest and most detailed market surveillance system ever built in the U.S.

Let’s break down what FINRA CAT is, why it exists, and how broker-dealers can meet their compliance obligations effectively.

What Is FINRA CAT?

FINRA CAT (Consolidated Audit Trail) is a centralized database that captures order and trade lifecycle events for all National Market System (NMS) securities across U.S. markets. It was introduced by the Financial Industry Regulatory Authority (FINRA) in collaboration with the SEC to ensure better monitoring of market activity and protect investors.

This system collects billions of records daily, linking all phases of an order — from origination to execution — across multiple venues and systems.

Objectives of the FINRA CAT

The FINRA CAT was developed with the following key objectives:

  • Market Transparency: To track and reconstruct market events and identify manipulative trading behaviors.
  • Regulatory Efficiency: To help regulators detect and respond to market abuse and systemic risks faster.
  • Investor Protection: To improve surveillance and support fair trading environments.
  • Data Accuracy: To unify the audit trail process with standardized reporting.

Who Must Comply with FINRA CAT?

All U.S.-registered broker-dealers that handle orders in NMS securities, including equities and options, are required to report to the FINRA CAT system. This includes:

  • Clearing firms
  • Introducing brokers
  • Proprietary trading firms
  • Alternative Trading Systems (ATS)

Missing CAT reporting deadlines or submitting inaccurate data can lead to penalties, so proactive compliance is critical.

What Does FINRA CAT Reporting Include?

Broker-dealers must report:

  • Customer information (including customer identifiers for CAT CAIS)
  • Order lifecycle events — order received, routed, modified, canceled, or executed
  • Linkages between orders and trades across systems and parties
  • Clock synchronization to ensure timestamp precision
  • Intraday submissions and corrections as necessary

These reports must meet daily submission deadlines and accuracy thresholds defined by the CAT NMS Plan.

FINRA CAT Compliance Challenges

Despite its regulatory importance, FINRA CAT compliance presents significant challenges:

  • Managing large volumes of data with precision
  • Ensuring accurate clock synchronization
  • Meeting daily reporting deadlines
  • Staying up to date with evolving CAT regulations and specifications
  • Correcting errors quickly to avoid non-compliance penalties

Many firms struggle with legacy systems, siloed data, and lack of in-house resources to manage these complex requirements.

How Capital Market Solutions Helps You Stay CAT-Compliant

At Capital Market Solutions, we understand how demanding FINRA CAT compliance can be. Our RegTech solutions are designed to simplify and automate CAT reporting so that broker-dealers can:

  • Validate, format, and submit CAT files effortlessly
  • Reduce error rates with pre-submission QA tools
  • Monitor CAT reporting health with real-time dashboards
  • Stay compliant with CAT CAIS (Customer and Account Information System)
  • Get end-to-end audit support during regulatory reviews

Our CAT solution ensures broker-dealers meet the FINRA CAT obligations with accuracy, speed, and minimal disruption to operations.

Why FINRA CAT Is the Future of Market Surveillance

With trillions of dollars traded daily across U.S. exchanges, regulators need comprehensive surveillance tools to protect the integrity of financial markets. The FINRA Consolidated Audit Trail is not just a compliance requirement — it’s a foundational part of modern financial infrastructure.

Firms that embrace FINRA CAT not only reduce their regulatory risk but also improve internal trade surveillance, data governance, and operational efficiency.

Conclusion

FINRA CAT is a regulatory game-changer, reshaping how broker-dealers and regulators track trading activity. With detailed reporting requirements and tight deadlines, compliance isn’t optional — it’s essential.

Capital Market Solutions is here to help your firm master FINRA CAT compliance with robust, scalable, and cost-effective tools tailored to your needs.

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