Avoid the Audit:
Achieve CAT Compliance with Cloudreach
The SEC’s Consolidated Audit Trail (CAT) regulation went into effect in early 2020. It poses a challenge to exchanges, brokers, and dealers who must find a way to extract their trading data, ensure it adheres to format requirements, and submit it daily to the CAT database of all equity and option trades executed on U.S. exchanges.
Instead of the manual, slow, and costly approach to process this data many finserv firms have had to quickly establish to meet the SEC deadline, Cloudreach has built a scalable solution, using Azure native services, for enterprises to adhere to the regulation enforced by the Financial Industry Regulatory Authority (FINRA) in the US.
Cloudreach CAT Solution + Azure
automates the intake and processing of data, which will help reduce errors, provide a documented audit trail, and quickly and securely deal with the onslaught of data.
How does it work?
Cloudreach has built a scalable solution using Azure native services, that helps you to adhere to the CAT regulation. The data requirements are immense and include the following:
Extract
Securities exchanges, large broker-dealers, and small broker-dealers are required to submit the relevant information to CAT, including customer PII, the date/time of the order event, and the security symbol, price, size, order type, and other material terms of the order.
Transform
Cloudreach creates a transformation engine within your Azure environment to automatically transform your data from your trading systems into the required format for CAT.
Load
Send the data to FINRA by 8am ET on the trading day following the reportable event.
CHALLENGE: Integration
1.
Broker-dealers have disparate trade capture and customer management systems. There’s no consistency in how the data is organized and stored, but FINRA requires specific data formats.
2.
Cloudreach solves for this by visually integrating data sources without requiring the heavy lifting of coding or maintenance that usually accompany data integration projects. Cloudreach fits the scale, infrastructure, compatibility of your systems.
3.
Cloudreach knows how important it is to focus on what and how clients are doing and offer customized solutions accordingly. Every customer’s data is different, and Cloudreach protects customer data rules in general, transforming the data to the CAT format.
CHALLENGE: Storage
1.
Broker-dealers face storage constraints for CAT data. Some firms are trading thousands and even millions of records, in some cases.
2.
Cloudreach CAT Solution + Azure can continuously match capacity on demand, and effortlessly grow without having to upgrade local storage capabilities for future data capture requirements – such as additional asset classes to be reported.
3.
Microsoft has invested in dedicated circuits to the FINRA solution, so once you have uploaded the data into Azure, you don't need to bring it back to your location to securely transmit it to FINRA. You can leverage the investment that Microsoft has made - hundreds of gigabytes of pipe that are much faster and more efficient compared to what firms have in their data centers. Another advantage is that Cloudreach also holds your data for 30 days in case resubmission is required.
CHALLENGE: Compliance
1.
To meet SEC deadlines for the CAT regulation, compliance has not necessarily been the primary focus of firms, because the focus has been to just get the data to FINRA however they can. Broker-dealers are also facing increased operational costs due to a greater number of regulatory requirements, and they often have to manage compliance with third-party vendors, which can create consistency issues.
2.
The Cloudreach solution takes a more proactive approach, with established governance if trade data fails to reach FINRA. Azure functionality is harnessed to check data on the way to FINRA, any error responses from FINRA, and correct the errors through its user interface.
3.
The Microsoft solution has been built with the regulatory requirements of CAT in mind – and Azure already has the largest global footprint and compliance portfolio of any cloud service provider.
CHALLENGE: Security
1.
Broker-dealers must report sensitive customer information as part of CAT reporting requirements. Once populated, the CAT will be the world’s largest data repository of securities transactions, maintaining data on more than 100 million customer accounts and their trading information, making it a valuable target for criminals, nation-states, and other potential bad actors.
2.
Cloudreach CAT Solution + Azure provides a comprehensive set of security capabilities for reporting customer PII information and trade data to CAT. And Cloudreach’s solution taps into your own security posture – Identity & Access Management systems, for instance – which means your security is our security.
3.
With all matters of compliance and security, Microsoft’s position is that it's a joint responsibility. Everything is done within Azure’s compliance and security framework – so you’re already most of the way there. Your physical security has been taken care of, your logical security has been taken care of, and your infrastructure and hardware security has been taken care of.
CHALLENGE: Reporting
1.
Managers need visibility into what’s happening, as well as being able to identify, investigate and analyze potential trouble spots, bad actors, and measure trading strategies.
2.
Cloudreach specializes in Azure tools to create reporting capabilities/metrics, such as the number of trades sent, errors received, or errors remediated to management.
3.
Financial institutions can drive economics of scale as trade volume increases over time and decommission legacy reporting platforms such as platforms used for the Order Audit Trail System (OATS).
