SIFMA Urges SEC to Disapprove Revised CAT Funding Model

SIFMA urged the SEC to disapprove a joint self-regulatory organization ("SRO") proposal to establish a revised funding model for the Consolidated Audit Trail ("CAT").

In a supplemental comment letter, SIFMA said that the proposal does not meet the applicable standards governing SRO fees under the Exchange Act. Specifically, SIFMA said that allocating two-thirds of the fee cost to industry members is unfair because CAT participants are equally responsible for complexity of trading activity, and accordingly, there should be a more even split. SIFMA also objected to assigning certain historical CAT costs to industry members and encouraged the SROs to adopt an independent review mechanism to ensure future CAT fees are allocated and assessed fairly.

Additionally, SIFMA criticized the process through which the revised funding model was established and later amended, arguing that the brief comment periods prohibited industry experts from providing comprehensive feedback. SIFMA also criticized the decision to allow the SROs to "significantly and materially amend" the proposal through a partial amendment, as opposed to re-proposing the model, as well as the decision to institute a 21-day comment period instead of the longer comment periods typically offered. SIFMA also said that industry members were not able to provide feedback on certain parts of the proposal due to a lack of clarity as to defined terms and an unclear process for assessing fees on trades initiated through an alternative trading system.