MFA Urges SEC to Reconsider CAT Funding Structure

The Managed Funds Association ("MFA") urged the SEC to pay for the Consolidated Audit Trail ("CAT") itself rather than have broker-dealers and investors bear the cost.

In a comment letter in response to a concept release on CAT and related funding mechanisms, the MFA said the cost of the market-surveillance system had grown far beyond its original projections. MFA said annual operating costs once estimated at about almost $56 million had risen above $248 million with broker-dealers bearing most of the burden.

MFA said those costs are passed through to investors through higher trading costs, wider spreads, and reduced liquidity, and that fees tied to trading activity functioned as "a tax on market transactions" that discouraged participation in U.S. markets. Because the CAT is a regulatory tool designed mainly for the SEC's use, the MFA said, the SEC should fully fund it.