A Broker-Dealer’s Guide to Mastering CAT Compliance

 In today’s securities landscape, achieving compliance with the **Rule 613-mandated Consolidated Audit Trail (CAT) is not optional — it’s foundational. At Capital Market Solutions, we understand the complexities firms face with CAT implementation and ongoing reporting. This guide unpacks how you can ensure robust CAT compliance, align with the regulatory expectations from Financial Industry Regulatory Authority (FINRA) via the “Finra CAT” framework, and turn compliance into a competitive advantage.

1. What is the Consolidated Audit Trail (CAT)?

The CAT is a comprehensive regulatory initiative launched under SEC Rule 613 to provide regulators with a seamless, cross-market view of all orders, modifications, cancellations and executions in U.S. equities and options markets.
This means every event from an order’s origination to its final execution — and beyond — must be reported, enabling regulators to trace the full lifecycle of transactions across all participating venues.

When discussing CAT compliance, you’ll also hear references to “Finra CAT.” Essentially, FINRA (via its subsidiary or designated plan-processor) plays a key role in the CAT ecosystem: as a reporting agent, standard-setter and enforcement partner.

2. Why CAT Compliance Matters for Broker-Dealers

Failing to comply is no longer a theoretical risk. Firms can face financial penalties, operational disruptions, and reputational damage when reporting is late, inaccurate, or incomplete. For example:

• The CAT Rules (under FINRA’s 6800 Series) specify rigorous obligations around accuracy, timeliness, process controls and clock synchronization.
• The scale and scope of CAT reporting are immense: the system is designed to handle billions of discrete events daily, making even minor data gaps visible.
• Regulators increasingly view CAT compliance as a marker of operational maturity and risk management capability. Firms that integrate compliance and reporting into their workflows reduce incremental cost and exposure.

From the compliance team’s perspective, this means CAT isn’t just another checklist — it’s a transformational opportunity to tighten controls, streamline data flows, and improve transparency. At CMS, we help firms convert CAT compliance from a burden into a strategic differentiator.

3. Key Compliance Components: Finra CAT & CAT Reporting Essentials

Here are the top compliance components firms must address:

a. Reporting obligations and scope
Each industry member (broker-dealer, executing firm, etc.) must adhere to the CAT NMS Plan and relevant FINRA CAT rules.
This includes transactional events (orders, modifications, cancellations) and customer/account information (via CAIS — Customer & Account Information System).

b. Clock synchronization & timestamping
One of the most critical technical requirements: firms must ensure clock synchronization (within specified tolerance) and timestamp precision (often milliseconds) for order events.
Failing this creates audit-trail gaps and regulatory scrutiny.

c. Data completeness, accuracy and review processes
Your internal controls must identify who’s responsible, how you review reported data, how often and how discrepancies are handled. FINRA expects documented review procedures.

d. Connectivity, data transmission & infrastructure
You must ensure reliable connectivity to the CAT reporter portal (or via a reporting agent), with processes for monitoring transmission failures, latency, error handling, and reconciliation.

e. Governance, oversight and evidence of compliance
Your Written Supervisory Procedures (WSPs) must reflect CAT responsibilities, including periodic reviews, evidenced controls and audit-trail logs. Finra emphasises the need for self-review and demonstrable oversight.

4. Common Reporting Challenges (and How to Avoid Them)

Data integration misalignment: Many firms still rely on legacy order-management or execution systems that weren’t built for CAT’s granularity. The result: gaps, data drop-offs and reconciliation headaches.
Dual-reporting burden: Some firms must still report under older systems (like OATS) while bridging to CAT. This creates complexity, risk of duplication and cost inefficiency.
Clock/timestamp failures: Even minor discrepancies in timestamping can trigger regulatory escalation and root-cause investigation.
Vendor/reporting agent oversight: Outsourcing reporting is common, but ultimate accountability lies with the firm. Ensure rigorous oversight of any third-party provider.
Scale and processing demands: As transaction volumes rise, firms must anticipate infrastructure upgrades, error-handling capacity and data-validation resources.

At CMS, our approach emphasises a “first-mile to last-mile” perspective — not just getting data into CAT, but ensuring that your internal systems and controls are aligned end-to-end, reducing post-reporting remediation.

5. Our Approach: How CMS Supports Your Path to CAT Compliance
   At Capital Market Solutions, we deliver a structured, end to end framework that helps broker-dealers navigate CAT and FINRA CAT obligations with clarity and confidence.

Compliance Assessment and Gap Review
We start with a comprehensive evaluation of your order-management, trade-flow and reporting environments to pinpoint CAT gaps, timestamp inconsistencies, vendor oversight risks and weaknesses in reporting processes.

Workflow Design and System Integration
Our team helps you build precise procedures for data capture, validation, submission, error handling and reconciliation. This includes OMS/EMS workflows, routing and execution systems, post-trade processes and internal governance structures.

Controls, Documentation and Audit Evidence
We assist in developing WSPs, review cycles, access controls, reporting-agent oversight protocols and detailed audit-trail documentation aligned with FINRA CAT requirements.

Testing, Training and Ongoing Monitoring
CAT compliance isn’t a one-time event. CMS helps firms deploy monitoring dashboards, analyze error trends, establish remediation workflows and run periodic drill-tests to stay aligned with regulatory updates.

Reporting Agent and Vendor Oversight
For firms that rely on reporting agents, we provide guidance on oversight practices, SLA development, data-validation steps and vendor risk-monitoring frameworks to ensure accurate, timely CAT reporting.

6. Getting Started: Practical Next Steps

1. Schedule an initial CAT readiness review — Identify your current state, major gaps and priority remediation paths.
2. Map your data-flows — From order origination to execution and routing, track how each event will be captured, validated and reported into the CAT.
3. Set up controls and documentation — Ensure your WSPs include CAT-specific responsibilities, review timelines and audit-trail logs.
4. Run test submissions and end-to-end mocks — Simulate late/incorrect reporting, timestamp issues and vendor-failover scenarios.
5. Monitor, analyze and refine — Implement dashboards for minor delays, high-error rates or significant reporting gaps.
6. Stay ahead of evolving Finra CAT/CAIS developments — The regulatory environment is dynamic; build a process for periodic review and change-management.

8. Conclusion

Achieving secure, reliable compliance with the Consolidated Audit Trail (CAT) and the Finra CAT rule set is both a regulatory imperative and an operational advantage. With clear workflows, strong controls, robust technology and expert support, broker-dealers can confidently meet the demands of CAT while freeing resources to focus on growth.

At Capital Market Solutions, we’re committed to guiding you through each phase of your CAT compliance journey — from readiness review to ongoing monitoring — ensuring you’re not just compliant, but ahead of the curve.

📞 Contact us today at capmarketsolutions.com to arrange your CAT compliance consultation and get the assurance your firm needs in the rapidly evolving securities-regulation environment.